Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Mar. 31, 2014 | Jun. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'PRESSURE BIOSCIENCES INC | ' | ' |
Entity Central Index Key | '0000830656 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Public Float | ' | ' | $3,640,182 |
Entity Common Stock, Shares Outstanding | ' | 12,624,267 | ' |
. | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
CONSOLIDATED_CONDENSED_BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
ASSETS | ' | ' |
Cash and cash equivalents | $31,417 | $1,461 |
Accounts receivable | 147,635 | 216,265 |
Inventories, net of reserves of $50,000 at December 31, 2013 and December 31, 2012 | 736,676 | 923,362 |
Prepaid income taxes | 7,381 | 7,381 |
Prepaid expenses and other current assets | 85,573 | 83,435 |
Total current assets | 1,008,682 | 1,231,904 |
PROPERTY AND EQUIPMENT, NET | 58,102 | 30,282 |
Deposits | ' | 6,472 |
Intangible assets, net | 36,498 | 85,130 |
TOTAL ASSETS | 1,103,282 | 1,353,788 |
LIABILITIES AND STOCKHOLDERS' DEFICIT | ' | ' |
Accounts payable | 1,102,772 | 1,199,846 |
Accrued employee compensation | 149,333 | 119,338 |
Accrued professional fees and other | 615,244 | 267,936 |
Deferred revenue | 28,189 | 46,466 |
Promissory note | 75,000 | 75,000 |
Dividend liability | ' | 60,000 |
Related party debt | 25,182 | 98,675 |
Convertible debt, net of debt discount of $331,806 at December 31, 2013 and $0 at December 31, 2012 | 281,796 | 863,004 |
Other debt | 89,989 | ' |
Conversion option liability | 356,197 | ' |
Warrant derivative liability | 344,570 | 160,812 |
Total current liabilities | 3,068,272 | 2,891,077 |
LONG TERM LIABILITIES | ' | ' |
Deferred revenue | 2,785 | 2,487 |
TOTAL LIABILITIES | 3,071,057 | 2,893,564 |
STOCKHOLDERS' DEFICIT | ' | ' |
Series D convertible preferred stock, $.01 par value; 850 shares authorized; 300 shares issued and outstanding on December 31, 2013 and December 31, 2012 (Liquidation value of $300,000) | 3 | 3 |
Series G convertible preferred stock, $.01 par value; 240,000 shares authorized;Â Â 145,320 shares issued and outstanding on December 31, 2013 and December 31, 2012 | 1,453 | 1,453 |
Series H convertible preferred stock $.01 par value 10,000 shares authorized; 10,000 shares issued and outstanding on December 31, 2013 and  0  at December 31, 2012 | 100 | ' |
Series J convertible preferred stock $.01 par value 6,250 shares authorized; 5,087.5 shares issued and outstanding on December 31, 2013 and 0 at December 31, 2012 | 51 | ' |
Series K convertible preferred stock $.01 par value 15,000 shares authorized; 4,000 shares issued and outstanding on December 31, 2013 and 0 at December 31, 2012 | 40 | ' |
Common Stock, $.01 par value; 50,000,000 and 20,000,000 shares authorized; 12,024,267 and 12,149,267 shares issued and outstanding on December 31, 2013 and December 31, 2012, respectively | 120,243 | 121,493 |
Warrants to acquire preferred stock and common stock | 4,267,402 | 3,015,996 |
Additional paid-in capital | 19,509,921 | 15,940,818 |
Accumulated deficit | -25,866,988 | -20,619,539 |
Total stockholders' deficit | -1,967,775 | -1,539,776 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $1,103,282 | $1,353,788 |
CONSOLIDATED_CONDENSED_BALANCE1
CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Assets | ' | ' |
Reserve for inventories, net | $50,000 | $50,000 |
Liabilities | ' | ' |
Convertible debt, net | $331,806 | $0 |
LIABILITIES AND STOCKHOLDERS' DEFICIT | ' | ' |
Series D convertible preferred stock, Par value | $0.01 | $0.01 |
Series D convertible preferred stock, Shares authorized | 850 | 850 |
Series D convertible preferred stock, Shares Issued | 300 | 300 |
Series D convertible preferred stock, Shares Outstanding | 300 | 300 |
Series G convertible preferred stock, Par value | $0.01 | $0.01 |
Series G convertible preferred stock, Shares authorized | 240,000 | 240,000 |
Series G convertible preferred stock, Shares Issued | 145,320 | 145,320 |
Series G convertible preferred stock, Shares Outstanding | 145,320 | 145,320 |
Series H convertible preferred stock, Par value | $0.01 | $0.01 |
Series H convertible preferred stock, Shares authorized | 10,000 | 10,000 |
Series H convertible preferred stock, Shares Issued | 10,000 | 0 |
Series H convertible preferred stock, Shares Outstanding | 10,000 | 0 |
Series J convertible preferred stock, Par value | $0.01 | $0.01 |
Series J convertible preferred stock, Shares authorized | 6,250 | 6,250 |
Series J convertible preferred stock, Shares Issued | 5,087.50 | 0 |
Series J convertible preferred stock, Shares Outstanding | 5,087.50 | 0 |
Series K convertible preferred stock, Par value | $0.01 | $0.01 |
Series K convertible preferred stock, Shares authorized | 15,000 | 15,000 |
Series K convertible preferred stock, Shares Issued | 4,000 | 0 |
Series K convertible preferred stock, Shares Outstanding | 4,000 | 0 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 12,024,267 | 12,149,267 |
Common stock, shares outstanding | 12,024,267 | 12,149,267 |
CONSOLIDATED_CONDENSED_STATEME
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenue: | ' | ' |
PCT products, services, other | $1,046,678 | $809,308 |
Grant revenue | 456,610 | 428,909 |
Total revenue | 1,503,288 | 1,238,217 |
Costs and expenses: | ' | ' |
Cost of PCT products and services | 567,828 | 416,415 |
Research and development | 1,035,426 | 965,623 |
Selling and marketing | 752,288 | 714,635 |
General and administrative | 2,474,938 | 2,605,186 |
Total operating costs and expenses | 4,830,480 | 4,701,859 |
Operating loss | -3,327,192 | -3,463,642 |
Other income (expense): | ' | ' |
Interest expense, net | -339,818 | -133,417 |
Other income (expense), net | -531,130 | ' |
Change in fair value of warrant derivative liability | 113,713 | 144,840 |
Total other income (expense) | -757,235 | 11,423 |
Loss before income taxes | -4,084,427 | -3,452,219 |
Income tax benefit | ' | 2,014 |
Net loss | -4,084,427 | -3,450,205 |
Accrued and deemed dividends on convertible preferred stock | -1,163,022 | -950,010 |
Net loss applicable to common shareholders | ($5,247,449) | ($4,400,215) |
Net loss per share attributable to common stockholders - basic and diluted | ($0.44) | ($0.43) |
Weighted average common stock shares outstanding used in the basic and diluted net loss per share calculation | 11,821,870 | 10,154,175 |
CONSOLIDATED_STATEMENTS_OF_CHA
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (USD $) | Series C Preferred Stock | Series D Preferred Stock | Series E Preferred Stock | Series G Preferred Stock | Series H Preferred Stock | Series J Preferred Stock | Series K Preferred Stock | Common Stock | Stock Warrants | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance - Amount at Dec. 31, 2011 | $881 | $7 | ' | ' | ' | ' | ' | $67,240 | $2,203,101 | $13,823,875 | ($16,503,440) | ($408,336) |
Beginning Balance - Shares at Dec. 31, 2011 | 88,098 | 743 | ' | ' | ' | ' | ' | 6,723,993 | ' | ' | ' | ' |
Stock-based compensation | ' | ' | ' | ' | ' | ' | ' | ' | ' | 133,193 | ' | 133,193 |
Issuance of Series E convertible preferred stock, Shares | ' | ' | 500 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Issuance of Series E convertible preferred stock, Amount | ' | ' | 5 | ' | ' | ' | ' | ' | ' | 499,995 | ' | 500,000 |
Issuance of Series G convertible preferred stock, Shares | ' | ' | ' | 120,680 | ' | ' | ' | ' | ' | ' | ' | ' |
Issuance of Series G convertible preferred stock, Amount | ' | ' | ' | 1,207 | ' | ' | ' | ' | 104,301 | 497,867 | ' | 603,375 |
Fair value of common stock issued for services, Shares | ' | ' | ' | ' | ' | ' | ' | 1,125,000 | ' | ' | ' | ' |
Fair value of common stock issued for services, Amount | ' | ' | ' | ' | ' | ' | ' | 11,250 | ' | 343,297 | ' | 354,547 |
Offering costs for issuance of preferred stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | -194,367 | ' | -194,367 |
Issuance of warrants in connection short-term loans | ' | ' | ' | ' | ' | ' | ' | ' | 45,156 | ' | ' | 45,156 |
Issuance of warrants for services, Shares | ' | ' | ' | 24,640 | ' | ' | ' | ' | ' | ' | ' | ' |
Issuance of warrants for services, Amount | ' | ' | ' | 246 | ' | ' | ' | ' | 11,883 | ' | ' | 11,883 |
Issuance of Series G preferred stock in lieu of cash for Board of Director fees, Amount | ' | ' | ' | ' | ' | ' | ' | ' | 20,596 | 102,358 | ' | 123,200 |
Warrant modifications | ' | ' | ' | ' | ' | ' | ' | ' | 323,556 | ' | -190,891 | 132,665 |
Conversion of preferred stock to common stock, Shares | -88,098 | -443 | -500 | ' | ' | ' | ' | 2,723,540 | ' | ' | ' | ' |
Conversion of preferred stock to common stock, Amount | -881 | -4 | -5 | ' | ' | ' | ' | 27,235 | ' | -24,549 | ' | ' |
Common stock paid-in-kind dividends earned | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -278,184 | -278,184 |
Series E dividend paid in cash | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -196,819 | -196,819 |
Issuance of common stock in private placement, Shares | ' | ' | ' | ' | ' | ' | ' | 971,867 | ' | ' | ' | ' |
Issuance of common stock in private placement, Amount | ' | ' | ' | ' | ' | ' | ' | 9,719 | 307,403 | 482,878 | ' | 800,000 |
Issuance of common stock for dividends paid-in-kind, Shares | ' | ' | ' | ' | ' | ' | ' | 604,867 | ' | ' | ' | ' |
Issuance of common stock for dividends paid-in-kind, Amount | ' | ' | ' | ' | ' | ' | ' | 6,049 | ' | 276,271 | ' | 284,116 |
Net loss | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -3,450,205 | -3,450,205 |
Ending Balance, Amount at Dec. 31, 2012 | ' | 3 | ' | 1,453 | ' | ' | ' | 121,493 | 3,015,996 | 15,940,818 | -20,619,539 | -1,539,776 |
Ending Balance, Shares at Dec. 31, 2012 | ' | 300 | ' | 145,320 | ' | ' | ' | 12,149,267 | ' | ' | ' | ' |
Stock-based compensation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 136,796 |
Fair value of common stock issued for services, Shares | ' | ' | ' | ' | ' | ' | ' | 875,000 | ' | ' | ' | ' |
Fair value of common stock issued for services, Amount | ' | ' | ' | ' | ' | ' | ' | 8,750 | ' | 467,962 | ' | 476,712 |
Offering costs for issuance of preferred stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | -67,739 | ' | -67,739 |
Issuance of warrants in connection short-term loans | ' | ' | ' | ' | ' | ' | ' | ' | 73,647 | ' | ' | 73,676 |
Issuance of warrants for services, Amount | ' | ' | ' | ' | ' | ' | ' | ' | 21,028 | ' | ' | 21,028 |
Beneficial conversion of issued preferred stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,002,602 | -1,002,602 | ' |
Common stock paid-in-kind dividends earned | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -160,420 | -160,420 |
Issuance of Series H convertible preferred stock, Shares | ' | ' | ' | ' | ' | ' | ' | -1,000,000 | ' | ' | ' | ' |
Issuance of Series H convertible preferred stock, Amount | ' | ' | ' | ' | ' | ' | ' | -10,000 | ' | 9,900 | ' | ' |
Issuance of Series J convertible preferred stock, Shares | ' | ' | ' | ' | ' | 5,088 | ' | ' | ' | ' | ' | ' |
Issuance of Series J convertible preferred stock, Amount | ' | ' | ' | ' | ' | 51 | ' | ' | 885,309 | 1,149,340 | ' | 2,034,700 |
Issuance of Series K convertible preferred stock, Shares | ' | ' | ' | ' | ' | ' | 4,000 | ' | ' | ' | ' | ' |
Issuance of Series K convertible preferred stock, Amount | ' | ' | ' | ' | ' | ' | 40 | ' | 271,422 | 728,538 | ' | 1,000,000 |
Reclassification of conversion option liabilities | ' | ' | ' | ' | ' | ' | ' | ' | ' | 141,704 | ' | 141,704 |
Net loss | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -4,084,427 | -4,084,427 |
Ending Balance, Amount at Dec. 31, 2013 | ' | $3 | ' | $1,453 | $100 | $51 | $40 | $120,243 | $4,267,402 | $19,509,921 | ($25,866,988) | ($1,967,775) |
Ending Balance, Shares at Dec. 31, 2013 | ' | 300 | ' | 145,320 | 10,000 | 5,088 | 4,000 | 12,024,267 | ' | ' | ' | ' |
CONSOLIDATED_CONDENSED_STATEME1
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | ($4,084,427) | ($3,450,205) |
Adjustments to reconcile net loss to net cash used in operating activities | ' | ' |
Depreciation and amortization | 79,563 | 107,519 |
Accretion of interest and amortization of debt issue costs | 708,729 | 91,315 |
Stock-based compensation expense | 136,796 | 133,193 |
Amortization of third party fees paid in restricted common stock | 480,492 | 489,605 |
Net change in inventory reserves | ' | 50,000 |
Change in fair value of warrant derivative liability | -113,713 | -144,840 |
Recovery of bad debt expense | ' | -9,600 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | 68,630 | 84,988 |
Inventories | 186,686 | 95,651 |
Accounts payable | -97,074 | 309,170 |
Accrued employee compensation | 29,995 | -61,099 |
Deferred revenue and other accrued expenses | 257,387 | 119,403 |
Prepaid expenses and other current assets | 4,333 | 20,099 |
Net cash used in operating activities | -2,342,603 | -2,164,801 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Purchases of property and equipment | -58,749 | ' |
Net cash used in investing activities | -58,749 | ' |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Borrowings on convertible debt, net of issuance costs | 1,374,297 | 1,394,000 |
Borrowings on related party and other debt, net of issuance costs | 222,000 | 98,675 |
Repayment of related party and other debt | -180,304 | ' |
Repayment of convertible debt | -350,000 | -101,556 |
Payment of dividends | -60,000 | -196,818 |
Net proceeds from the issuance of common stock | ' | 377,453 |
Net proceeds from the issuance of preferred stock | 1,425,315 | 371,733 |
Net cash provided by financing activities | 2,431,308 | 1,943,487 |
Change in cash and cash equivalents | 29,956 | -221,314 |
Cash and cash equivalents, beginning of period | 1,461 | 222,775 |
Cash and cash equivalents, end of period | 31,417 | 1,461 |
SUPPLEMENTAL INFORMATION: | ' | ' |
Income taxes paid in cash | ' | 1,900 |
Issuance of common stock dividends on preferred stock | ' | 284,116 |
Convertible debt exchanged for common stock | 0 | 387,547 |
Debt and accrued interest exchanged for preferred stock | 1,503,530 | 586,873 |
Fair value of common stock issued for services | 467,964 | 354,547 |
Issuance of preferred stock for board fees | 38,126 | 123,200 |
Warrant modifications | ' | 190,891 |
Beneficial conversion feature on convertible preferred stock | 1,002,602 | ' |
Dividends earned on preferred stock | $160,420 | $27,584 |
1_Business_Overview_Liquidity_
1. Business Overview, Liquidity and Management Plans | 12 Months Ended | |
Dec. 31, 2013 | ||
Notes to Financial Statements | ' | |
1. Business Overview, Liquidity and Management Plans | ' | |
We are focused on solving the challenging problems inherent in biological sample preparation, a crucial laboratory step performed by scientists worldwide working in biological life sciences research. Sample preparation is a term that refers to a wide range of activities that precede most forms of scientific analysis. Sample preparation is often complex, time-consuming, and in our belief, one of the most error-prone steps of scientific research. It is a widely-used laboratory undertaking, the requirements of which drive what we believe is a large and growing worldwide market. We have developed and patented a novel, enabling technology platform that can control the sample preparation process. It is based on harnessing the unique properties of high hydrostatic pressure. This process, called pressure cycling technology, or PCT, uses alternating cycles of hydrostatic pressure between ambient and ultra-high levels (35,000 psi or greater) to safely, conveniently and reproducibly control the actions of molecules in biological samples, such as cells and tissues from human, animal, plant, and microbial sources. | ||
Our pressure cycling technology uses internally developed instrumentation that is capable of cycling pressure between ambient and ultra-high levels - at controlled temperatures and specific time intervals - to rapidly and repeatedly control the interactions of bio-molecules, such as DNA, RNA, proteins, lipids, and small molecules. Our laboratory instrument, the Barocycler®, and our internally developed consumables product line, including PULSE (Pressure Used to Lyse Samples for Extraction) Tubes, other processing tubes, and application specific kits (which include consumable products and reagents) together make up our PCT Sample Preparation System, or PCT SPS. | ||
We have experienced negative cash flows from operations with respect to our pressure cycling technology business since our inception. As of December 31, 2013, we did not have adequate working capital resources to satisfy our current liabilities. Based on our current projections, including equity financing subsequent to December 31, 2013, we believe our current cash resources will enable us to extend our cash until August 2014. | ||
As a result, the audit report issued by our independent registered public accounting firm on our audited financial statements for the fiscal year ended December 31, 2013 contains an explanatory paragraph regarding our ability to continue as a going concern due to the risk that we may not have sufficient cash and liquid assets at December 31, 2013 to cover our operating and capital requirements for the next twelve-month period; and if sufficient cash cannot be obtained, we would have to substantially alter, or possibly even discontinue, operations. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. | ||
The conditions described above could adversely affect our ability to obtain additional financing on favorable terms, if at all, and may cause investors to have reservations about our long-term prospects, and may adversely affect our relationships with customers. There can be no assurance that our auditing firm will not qualify its opinion in the future. If we cannot successfully continue as a going concern, our stockholders may lose their entire investment in us. Although we have successfully completed equity financings and reduced expenses in the past, we cannot assure you that our plans to address these matters in the future will be successful. If we are not successful there is substantial doubt that we can continue as a going concern. | ||
Management has developed a plan to continue operations. This plan includes further reductions in expenses and obtaining equity or debt financing including our most recently completed financing in January and February 2014, our Series K financing round, in which we sold units consisting of convertible preferred shares of and warrants to purchase shares of Common Stock for net aggregate proceeds of approximately $1,849,110 of which approximately $392,750 was from the conversion of outstanding indebtedness and accrued board of directors’ fees and $1,456,360 in cash. Although we have successfully completed equity financings and reduced expenses in the past, we cannot assure that our plans to address these matters in the future will be successful. Additional financing may not be available to us on a timely basis, if at all, or on terms acceptable to us. In the event we are unable to raise sufficient funds on terms acceptable to us, we may be required to: | ||
● | severely limit or cease our operations or otherwise reduce planned expenditures and forego other business opportunities, which could harm our business. The accompanying financial statements do not include adjustments that may be required in the event of the disposal of assets or the discontinuation of the business; | |
● | obtain financing with terms that may have the effect of diluting or adversely affecting the holdings or the rights of the holders of our capital stock; or | |
● | obtain funds through arrangements with future collaboration partners or others that may require us to relinquish rights to some or all of our technologies or products. | |
Our Common Stock is listed on the Over-the-Counter exchange. | ||
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||||
2. Summary of Significant Accounting Policies | ' | ||||||||||||||||||
i. | Principles of Consolidation | ||||||||||||||||||
The consolidated financial statements include the accounts of Pressure BioSciences, Inc., and its wholly-owned subsidiary PBI BioSeq, Inc. All intercompany accounts and transactions have been eliminated in consolidation. | |||||||||||||||||||
ii. | Use of Estimates | ||||||||||||||||||
To prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we are required to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates were made in projecting future cash flows to quantify impairment of assets, deferred tax assets, the costs associated with fulfilling our warranty obligations for the instruments that we sell, and the estimates employed in our calculation of fair value of stock options awarded and warrant derivative liability. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from the estimates and assumptions used. | |||||||||||||||||||
iii. | Revenue Recognition | ||||||||||||||||||
Revenue is recognized when realized or earned when all the following criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred and risk of loss has passed to the customer; the seller’s price to the buyer is fixed or determinable; and collectability is reasonably assured. | |||||||||||||||||||
Our current instruments, the Barocycler NEP3229 and NEP2320, require a basic level of instrumentation expertise to set-up for initial operation. To support a favorable first experience for our customers, we send a highly trained technical representative to the customer site to install every Barocycler that we sell, lease, or rent through our domestic sales force. The installation process includes uncrating and setting up the instrument, followed by introductory user training. Product revenue related to current Barocycler instrumentation is recognized upon the completion of the installation and introductory training process of the instrumentation at the customer location, for domestic installations. Product revenue related to sales of PCT instrumentation to our foreign distributors is recognized upon shipment through a common carrier. We provide for the expected costs of warranty upon the recognition of revenue for the sales of our instrumentation. Our sales arrangements do not provide our customers with a right of return. Product revenue related to the HUB440 and our consumable products such as PULSE Tubes, MicroTubes, and application specific kits is recorded upon shipment through a common carrier. Shipping costs are included in sales and marketing expense. Any shipping costs billed to customers are recognized as revenue. | |||||||||||||||||||
We account for our lease agreements under the operating method. We record revenue over the life of the lease term and we record depreciation expense on a straight-line basis over the thirty-six month estimated useful life of the Barocycler instrument. The depreciation expense associated with assets under lease agreement is included in the “Cost of PCT products and services” line item in our consolidated statements of operations. Many of our lease and rental agreements allow the lessee to purchase the instrument at any point during the term of the agreement with partial or full credit for payments previously made. We pay all maintenance costs associated with the instrument during the term of the leases. | |||||||||||||||||||
Revenue from government grants is recorded when expenses are incurred under the grant in accordance with the terms of the grant award. | |||||||||||||||||||
Revenue from service contracts is recorded ratably over the length of the contract. | |||||||||||||||||||
Our transactions sometimes involve multiple elements (i.e., products and services). Revenue under multiple element arrangements is recognized in accordance with FASB ASC 605-25 Multiple-Element Arrangements (“ASC 605”). When vendor specific objective evidence or third party evidence of selling price for deliverables in an arrangement cannot be determined, the Company develops a best estimate of the selling price to separate deliverables and allocates arrangement consideration using the relative selling price method. If an arrangement includes undelivered elements that are not essential to the functionality of the delivered elements, we defer the fair value of the undelivered elements to such time as they are delivered. Fair value is determined based upon the price charged when the element is sold separately. If there is not sufficient evidence of the fair value of the undelivered elements the Company uses its best estimate of the value of those items and recognizes revenues based on the relative values of the delivered and undelivered items. We provide certain customers with extended service contracts with revenue recognized ratably over the life of the contract. | |||||||||||||||||||
iv. | Cash and Cash Equivalents | ||||||||||||||||||
Our policy is to invest available cash in short-term, investment grade interest-bearing obligations, including money market funds, and bank and corporate debt instruments. Securities purchased with initial maturities of three months or less are valued at cost plus accrued interest, which approximates fair value, and are classified as cash equivalents. | |||||||||||||||||||
v. | Research and Development | ||||||||||||||||||
Research and development costs, which are comprised of costs incurred in performing research and development activities including wages and associated employee benefits, facilities, consumable products and overhead costs that are expensed as incurred. In support of our research and development activities we utilize our Barocycler instruments that are capitalized as fixed assets and depreciated over their expected useful life. | |||||||||||||||||||
vi. | Inventories | ||||||||||||||||||
Inventories are valued at the lower of cost (average cost) or market (sales price). The cost of Barocyclers consists of the cost charged by the contract manufacturer. The cost of manufactured goods includes material, freight-in, direct labor, and applicable overhead. The composition of inventory as of December 31, 2013 and 2012 is as follows: | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Raw materials | $ | 147,290 | $ | 183,655 | |||||||||||||||
Finished goods | 639,386 | 789,707 | |||||||||||||||||
Inventory reserve | (50,000 | ) | (50,000 | ) | |||||||||||||||
Total | $ | 736,676 | $ | 923,362 | |||||||||||||||
vii. | Property and Equipment | ||||||||||||||||||
Property and equipment are stated at cost, less accumulated depreciation. For financial reporting purposes, depreciation is recognized using the straight-line method, allocating the cost of the assets over their estimated useful lives of three years for certain laboratory equipment, from three to five years for management information systems and office equipment, and three years for all PCT finished units classified as fixed assets. | |||||||||||||||||||
viii. | Intangible Assets | ||||||||||||||||||
We have classified as intangible assets, costs associated with the fair value of acquired intellectual property. Intangible assets, including patents, are being amortized on a straight-line basis over sixteen years. We perform an annual review of our intangible assets for impairment. When impairment is indicated, any excess of carrying value over fair value is recorded as a loss. An impairment analysis of intangible assets was performed as of December 31, 2013. Based on this analysis, we have concluded that no impairment of intangible assets had occurred. | |||||||||||||||||||
ix. | Long-Lived Assets and Deferred Costs | ||||||||||||||||||
The Company’s long-lived assets and other assets are reviewed for impairment in accordance with the guidance of the FASB ASC 360-10-05, Property, Plant, and Equipment, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Through December 31, 2013, the Company had not experienced impairment losses on its long-lived assets. While our current and historical operating losses and cash flow are indicators of impairment, we performed an impairment test at December 31, 2013 and determined that such long-lived assets were not impaired. | |||||||||||||||||||
x. | Concentrations | ||||||||||||||||||
Credit Risk | |||||||||||||||||||
Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents and trade receivables. We have cash investment policies which, among other things, limit investments to investment-grade securities. We perform ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the fact that many of our customers are government institutions and university labs. Allowances are provided for estimated amounts of accounts receivable which may not be collected. At December 31, 2013 and 2012, we determined that no allowance against accounts receivable was necessary. | |||||||||||||||||||
The following table illustrates the level of concentration of the below two groups within revenue as a percentage of total revenues during the years ended December 31, 2013 and 2012: | |||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Top Five Customers | 53 | % | 50 | % | |||||||||||||||
Federal Agencies | 33 | % | 41 | % | |||||||||||||||
The following table illustrates the level of concentration of the below two groups within accounts receivable as a percentage of total accounts receivable balance as of December 31, 2012 and 2011: | |||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Top Five Customers | 86 | % | 34 | % | |||||||||||||||
Federal Agencies | 16 | % | 32 | % | |||||||||||||||
Product Supply | |||||||||||||||||||
BIT Group USA, formerly Source Scientific, LLC, has been our sole contract manufacturer for all of our PCT instrumentation. Until we develop a broader network of manufacturers and subcontractors, obtaining alternative sources of supply or manufacturing services could involve significant delays and other costs and challenges, and may not be available to us on reasonable terms, if at all. The failure of a supplier or contract manufacturer to provide sufficient quantities, acceptable quality and timely products at an acceptable price, or an interruption of supplies from such a supplier could harm our business and prospects. | |||||||||||||||||||
xi. | Computation of 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 by dividing loss available to common shareholders by the weighted average number of common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. For purposes of this calculation, convertible preferred stock, common stock dividends, warrants to acquire preferred stock convertible into common stock, and warrants and options to acquire common stock, are all considered common stock equivalents in periods in which they have a dilutive effect and are excluded from this calculation in periods in which these are anti-dilutive. The following table illustrates our computation of loss per share for the years ended December 31, 2013 and 2012. | |||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Numerator: | |||||||||||||||||||
Net loss | $ | (4,084,427 | ) | $ | (3,450,205 | ) | |||||||||||||
Accrued dividend for Preferred Stock paid in common stock | - | (278,184 | ) | ||||||||||||||||
Deemed dividend on warrant modifications | - | (190,891 | ) | ||||||||||||||||
Issuance of common stock for dividends paid in kind | - | (284,116 | ) | ||||||||||||||||
Beneficial conversion feature for preferred stock | (1,002,602 | ) | - | ||||||||||||||||
Preferred dividends accrued | (160,420 | ) | - | ||||||||||||||||
Preferred dividends accrued and paid in cash | - | (196,819 | ) | ||||||||||||||||
Net loss applicable to common shareholders | $ | (5,247,449 | ) | $ | (4,400,215 | ) | |||||||||||||
Denominator for basic and diluted loss per share: | |||||||||||||||||||
Weighted average common shares outstanding | 11,821,870 | 10,154,175 | |||||||||||||||||
Loss per common share - basic and diluted | $ | (0.44 | ) | $ | (0.43 | ) | |||||||||||||
The following table presents securities that could potentially dilute basic loss per share in the future. For all periods presented, the potentially dilutive securities were not included in the computation of diluted loss per share because these securities would have been anti-dilutive. | |||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Stock options | 1,771,708 | 1,605,750 | |||||||||||||||||
Convertible debt | 2,242,024 | - | |||||||||||||||||
Common stock warrants | 15,012,327 | 6,687,099 | |||||||||||||||||
Preferred stock warrants | - | - | |||||||||||||||||
Convertible preferred stock: | |||||||||||||||||||
Series A Convertible Preferred | - | - | |||||||||||||||||
Series B Convertible Preferred | - | - | |||||||||||||||||
Series C Convertible Preferred | - | - | |||||||||||||||||
Series D Convertible Preferred | 750,000 | 750,000 | |||||||||||||||||
Series E Convertible Preferred | - | - | |||||||||||||||||
Series G Convertible Preferred | 1,453,200 | 1,453,200 | |||||||||||||||||
Series H Convertible Preferred | 1,000,000 | - | |||||||||||||||||
Series J Convertible Preferred | 5,087,500 | - | |||||||||||||||||
Series K Convertible Preferred | 4,000,000 | - | |||||||||||||||||
31,316,759 | 10,496,049 | ||||||||||||||||||
xii. | Accounting for Income Taxes | ||||||||||||||||||
We account for income taxes under the asset and liability method, which requires recognition of deferred tax assets, subject to valuation allowances, and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. The Company considers many factors when assessing the likelihood of future realization of our deferred tax assets, including recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carry-forward periods available to us for tax reporting purposes, and other relevant factors. A valuation allowance is established if it is more likely than not that all or a portion of the net deferred tax assets will not be realized. If substantial changes in the company’s ownership should occur, as defined in Section 382 of the Internal Revenue Code, there could be significant limitations on the amount of net loss carry forwards that could be used to offset future taxable income. | |||||||||||||||||||
xiii. | Accounting for Stock-Based Compensation | ||||||||||||||||||
We maintain equity compensation plans under which incentive stock options and non-qualified stock options are granted to employees, independent members of our Board of Directors and outside consultants. We recognize equity compensation expense over the requisite service period using the Black-Scholes formula to estimate the fair value of the stock options on the date of grant. | |||||||||||||||||||
Determining Fair Value of Stock Option Grants | |||||||||||||||||||
Valuation and Amortization Method - The fair value of each option award is estimated on the date of grant using the Black-Scholes pricing model based on certain assumptions. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the vesting period, which generally is over three years. | |||||||||||||||||||
Expected Term - The Company uses the simplified calculation of expected life, described in the FASB ASC 718, Compensation-Stock Compensation, as the Company does not currently have sufficient historical exercise data on which to base an estimate of expected term. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted. | |||||||||||||||||||
Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the award. | |||||||||||||||||||
Risk-Free Interest Rate - The Company bases the risk-free interest rate used in the Black-Scholes valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term. | |||||||||||||||||||
Forfeitures - As required by FASB ASC 718, Compensation-Stock Compensation, the Company records stock-based compensation expense only for those awards that are expected to vest. The Company estimated a forfeiture rate of 5% for awards granted based on historical experience and future expectations of options vesting. We used this historical rate as our assumption in calculating future stock-based compensation expense. | |||||||||||||||||||
The following table summarizes the assumptions we utilized for grants of stock options to the three sub-groups of our stock option recipients during the twelve months ended December 31, 2013 and 2012: | |||||||||||||||||||
Assumptions | Non-Employee Board Members | CEO, other Officers and Employees | |||||||||||||||||
Expected life | 2.0-5.0 (yrs) | 6.0 (yrs) | |||||||||||||||||
Expected volatility | 55.66%-134.75% | 55.66%-124.89% | |||||||||||||||||
Risk-free interest rate | 1.00%-4.94% | 0.50%-4.94% | |||||||||||||||||
Forfeiture rate | 0.00%-5.00% | 2.00%-5.00% | |||||||||||||||||
Expected dividend yield | 0.00% | 0.00% | |||||||||||||||||
On August 15, 2012, the Board of Directors approved the immediate re-pricing of certain outstanding stock options (approximately 1,555,500 shares) held by current officers, employees and board members with outstanding stock options to $1.00 per share, a 200% premium to the closing market price on August 15, 2012 of $0.32, for original stock options with an exercise price above $1.00, to $0.60 per share, a 88% premium to the closing market price on August 15, 2012 of $0.32, for original stock options with an exercise price below $1.00 but above $0.60. The compensation value created by the re-pricing, as determined under the Black-Scholes method, was approximately $62,000 and under current accounting rules results in a non-cash expense in current and future periods, not to exceed the vesting periods of the stock options. | |||||||||||||||||||
Assumptions for re-pricing of the options were: | |||||||||||||||||||
Assumptions | Awards re-priced during the year ended | ||||||||||||||||||
December 31, | |||||||||||||||||||
2012 | |||||||||||||||||||
Expected life (in years) | 6 | ||||||||||||||||||
Weighted average expected volatility | 124.9 | % | |||||||||||||||||
Risk-free interest rate | 0.7 | % | |||||||||||||||||
Weighted average re-priced Black-Scholes calculated fair value | 0.32 | ||||||||||||||||||
We recognized stock-based compensation expense of $136,796 and $133,193 for the years ended December 31, 2013 and 2012, respectively. The following table summarizes the effect of this stock-based compensation expense within each of the line items within our accompanying Consolidated Statements of Operations: | |||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Research and development | $ | 53,509 | $ | 30,034 | |||||||||||||||
Selling and marketing | 26,551 | 28,944 | |||||||||||||||||
General and administrative | 56,736 | 74,215 | |||||||||||||||||
Total stock-based compensation expense | $ | 136,796 | $ | 133,193 | |||||||||||||||
During the years ended December 31, 2013 and 2012, the total fair value of stock options awarded was $128,642 and $116,816, respectively. | |||||||||||||||||||
As of December 31, 2013, the total estimated fair value of unvested stock options to be amortized over their remaining vesting period was $65,953. The non-cash, stock based compensation expense associated with the vesting of these options will be $45,598 in 2014, $18,575 in 2015, and $1,780 in 2016. | |||||||||||||||||||
xiv. | Fair Value of Financial Instruments | ||||||||||||||||||
Due to their short maturities, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their fair value. Short-term and long-term liabilities are primarily related to liabilities transferred under contractual arrangements with carrying values that approximate fair value. | |||||||||||||||||||
xv. | Advertising | ||||||||||||||||||
Advertising costs are expensed as incurred. During 2013 we did not spend anything on advertising. We incurred $500 in advertising expense in 2012. | |||||||||||||||||||
xvi. | Fair Value Measurements | ||||||||||||||||||
The Company follows the guidance of FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) as of June 30, 2012, as it related to all financial assets and financial liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. | |||||||||||||||||||
The Company generally defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. | |||||||||||||||||||
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company has determined that it does not have any financial assets measured at fair value and that its financial liabilities are currently all classified within Level 3 in the fair value hierarchy. | |||||||||||||||||||
The following tables set forth the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of December 31, 2013 and December 31, 2012. The assumptions used to determine fair value of the warrants are contained in the table in Note 7 of the accompanying consolidated financial statements. The development of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management. | |||||||||||||||||||
Fair value measurements at December 31, 2013 using: | |||||||||||||||||||
December 31, | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||||
2013 | (Level 3) | ||||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 344,570 | $ | - | $ | - | $ | 344,570 | |||||||||||
Fair value measurements at December 31, 2012 using: | |||||||||||||||||||
December 31, | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||||
2012 | (Level 3) | ||||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 160,812 | $ | - | $ | - | $ | 160,812 | |||||||||||
January 1, | Change in Fair Value | December 31, | |||||||||||||||||
2013 | 2013 | ||||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 160,812 | $ | 183,758 | $ | 344,570 | |||||||||||||
January 1, | Change in Fair Value | December 31, | |||||||||||||||||
2012 | 2012 | ||||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 231,200 | $ | (70,388 | ) | $ | 160,812 | ||||||||||||
Fair value measurements at December 31, 2013 using: | |||||||||||||||||||
December 31, | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||||
2013 | (Level 3) | ||||||||||||||||||
April 11, 2013 note, conversion option | $ | 130,734 | - | - | $ | 130,734 | |||||||||||||
June 26, 2013 note, conversion option | 55,307 | - | - | 55,307 | |||||||||||||||
December 4, 2013 note, conversion option | 98,129 | - | - | 98,129 | |||||||||||||||
December 23, 2013 note, conversion option | 72,027 | - | - | 72,027 | |||||||||||||||
Embedded conversion options | $ | 356,197 | - | - | $ | 356,197 | |||||||||||||
January 1, | Issuance date fair value | Change in fair | Reclassification | December 31, | |||||||||||||||
2013 | value | into equity | 2013 | ||||||||||||||||
April 11, 2013 note, conversion option | - | $ | 274,840 | $ | (144,106 | ) | $ | - | $ | 130,734 | |||||||||
May 24, 2013 note, conversion option | - | 122,223 | (18,702 | ) | (103,521 | ) | - | ||||||||||||
June 6, 2013 note, conversion option | - | 158,715 | (120,535 | ) | (38,180 | ) | - | ||||||||||||
June 26, 2013 note, conversion option | - | 84,146 | (28,839 | ) | - | 55,307 | |||||||||||||
December 4, 2013 note, conversion option | - | 90,444 | 7,685 | - | 98,129 | ||||||||||||||
December 23, 2013 note, conversion option | - | 65,033 | 7,024 | - | 72,027 | ||||||||||||||
Embedded conversion options | - | $ | 795,371 | $ | (297,471 | ) | $ | (141,701 | ) | $ | 356,197 | ||||||||
The assumptions for the binomial pricing model are represented in the table below for the conversion options reflected on a per share common stock equivalent basis. | |||||||||||||||||||
Assumptions | April 11, | Conversion options revalued at | |||||||||||||||||
2013 | December 31, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 12 | 4 | |||||||||||||||||
Expected volatility | 206.2 | % | 149.9 | % | |||||||||||||||
Risk-free interest rate | 0.1 | % | 0.04 | % | |||||||||||||||
Exercise price | $ | 0.14 | $ | 0.14 | |||||||||||||||
Fair value per conversion option | $ | 0.29 | $ | 0.13 | |||||||||||||||
Assumptions | May 24, | Conversion options revalued at | |||||||||||||||||
2013 | November 22, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 24 | 18 | |||||||||||||||||
Expected volatility | 170 | % | 181.8 | % | |||||||||||||||
Risk-free interest rate | 0.27 | % | 0.35 | % | |||||||||||||||
Exercise price | $ | 0.25 | $ | 0.17 | |||||||||||||||
Fair value per conversion option | $ | 0.31 | $ | 0.17 | |||||||||||||||
Assumptions | June 6, | Conversion options revalued at | |||||||||||||||||
2013 | December 26, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 12 | 5 | |||||||||||||||||
Expected volatility | 209.7 | % | 132.9 | % | |||||||||||||||
Risk-free interest rate | 0.13 | % | 0.07 | % | |||||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | |||||||||||||||
Fair value per conversion option | $ | 0.25 | $ | 0.06 | |||||||||||||||
Assumptions | June 26, | Conversion options revalued at | |||||||||||||||||
2013 | December 31, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 12 | 6 | |||||||||||||||||
Expected volatility | 189.2 | % | 136.5 | % | |||||||||||||||
Risk-free interest rate | 0.13 | % | 0.07 | % | |||||||||||||||
Exercise price | $ | 0.17 | $ | 0.14 | |||||||||||||||
Fair value per conversion option | $ | 0.26 | $ | 0.14 | |||||||||||||||
Assumptions | December 4, | Conversion options revalued at | |||||||||||||||||
2013 | December 31, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 24 | 23 | |||||||||||||||||
Expected volatility | 170.3 | % | 170.3 | % | |||||||||||||||
Risk-free interest rate | 0.3 | % | 0.38 | % | |||||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | |||||||||||||||
Fair value per conversion option | $ | 0.16 | $ | 0.18 | |||||||||||||||
Assumptions | December 23, | Conversion options revalued at | |||||||||||||||||
2013 | December 31, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 36 | 36 | |||||||||||||||||
Expected volatility | 151.4 | % | 152.5 | % | |||||||||||||||
Risk-free interest rate | 0.77 | % | 0.78 | % | |||||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | |||||||||||||||
Fair value per conversion option | $ | 0.17 | $ | 0.19 | |||||||||||||||
Deferred Fiancing Costs: We evaluate the proper classification of our equity instruments that embody an unconditional obligation requiring the issuer to redeem it by transferring assetss at a determinable date or that contain certain conditional obligations, typically classified as equity, be classified as a liability. We record financing costs associated with our capital raising efforts in our statements of operations. These include amortization of debt issue costs such as cash, warrants and other securities issued to finders and placement agents, and amortization of preferred stock discount created by in-the-money conversion features on convertible debt and allocates the proceeds amongst the securities based on relative fair values or based upon the residual method. We based our estimates and assumptions on the best information available at the time of valuation, however, changes in these estimates and assumptions could have a material effect on the valuation of the underlying instruments. | |||||||||||||||||||
3_Property_and_Equipment_net
3. Property and Equipment, net | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
3. Property and Equipment, net | ' | ||||||||
Property and equipment as of December 31, 2013 and 2012 consisted of the following components: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Laboratory and manufacturing equipment | $ | 226,081 | $ | 172,560 | |||||
Office equipment | 142,323 | 137,093 | |||||||
Leasehold improvements | 8,117 | 8,117 | |||||||
PCT collaboration, demonstration and leased systems | 461,858 | 461,858 | |||||||
Total property and equipment | 838,379 | 779,628 | |||||||
Less accumulated depreciation | (780,277 | ) | (749,346 | ) | |||||
Net book value | $ | 58,102 | $ | 30,282 | |||||
Depreciation expense for the years ended December 31, 2013 and 2012 was $30,931 and $58,889, respectively. | |||||||||
4_Intangible_Assets_net
4. Intangible Assets, net | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
4. Intangible Assets, net | ' | ||||||||
Intangible assets as of December 31, 2013 reflect the purchase price attributable to patents in connection with the 1998 acquisition of BioSeq, Inc. and the PCT business. Acquired PCT patents are being amortized to expense on a straight line basis at the rate of $48,632 per year over their estimated remaining useful lives of approximately 1 year. We performed a review of our intangible assets for impairment. When impairment is indicated, any excess of carrying value over fair value is recorded as a loss. An impairment analysis of intangible assets was performed as of December 31, 2013. We have concluded that there is no impairment of intangible assets. Intangible assets at December 31, 2013 and 2012 consisted of the following: | |||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
PCT Patents | $ | 778,156 | $ | 778,156 | |||||
Less accumulated amortization | (741,658 | ) | (693,026 | ) | |||||
Net book value | $ | 36,498 | $ | 85,130 | |||||
Amortization expense for each of the years ended December 31, 2013 and 2012 was $48,632 and is expected to be $36,498 in 2014, at which time the assets will be fully amortized. | |||||||||
5_Retirement_Plan
5. Retirement Plan | 12 Months Ended |
Dec. 31, 2013 | |
Compensation and Retirement Disclosure [Abstract] | ' |
5. Retirement Plan | ' |
We provide all of our employees with the opportunity to participate in our retirement savings plan. Our retirement savings plan has been qualified under Section 401(k) of the Internal Revenue Code. Eligible employees are permitted to contribute to the plan through payroll deductions within statutory limitations and subject to any limitations included in the plan. During 2013 and 2012 we contributed $10,377 and $12,458, respectively, in the form of discretionary Company-matching contributions. | |
6_Income_Taxes
6. Income Taxes | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
6. Income Taxes | ' | ||||||||
The components of the benefit for income taxes are as follows: | |||||||||
We did not record an income tax benefit or provision for the year ended December 31, 2013. We recorded a $2,014 income tax benefit for the year ended December 31, 2012. | |||||||||
Significant items making up the deferred tax assets and deferred tax liabilities as of December 31, 2013 and December 31, 2012 are as follows: | |||||||||
December 31, | |||||||||
Current deferred taxes | 2013 | 2012 | |||||||
Inventories | $ | 19,640 | $ | 19,723 | |||||
Accounts Receivable allowance | - | - | |||||||
Other accruals | 23,050 | 45,053 | |||||||
Less: valuation allowance | (42,690 | ) | (64,776 | ) | |||||
Total current deferred tax assets | $ | - | $ | - | |||||
Long term deferred taxes: | |||||||||
Accelerated tax depreciation | $ | 29,511 | $ | 32,686 | |||||
Non-cash, stock-based compensation, nonqualified | 387,708 | 388,506 | |||||||
Goodwill and intangibles | (14,337 | ) | (33,580 | ) | |||||
Operating loss carry forwards and tax credits | 8,938,681 | 7,643,661 | |||||||
Less: valuation allowance | (9,341,563 | ) | (8,031,273 | ) | |||||
Total long term deferred tax assets (liabilities), net | - | - | |||||||
Total net deferred tax liabilities | $ | - | $ | - | |||||
A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. Accordingly, a valuation allowance was established in 2013 and 2012 for the full amount of our deferred tax assets due to the uncertainty of realization. We believe based on our projection of future taxable operating income for the foreseeable future, it is more likely than not that we will not be able to realize the benefit of the deferred tax asset at December 31, 2013. | |||||||||
We have net operating loss carry-forwards for federal income tax purposes of $17,668,501 as of December 31, 2013. Included in these numbers are loss carry-forwards that were obtained through the acquisition of BioSeq, Inc. and are subject to Section 382 NOL limitations. These net operating loss carry-forwards expire at various dates from 2014 through 2033. | |||||||||
We had net operating loss carry-forwards for state income tax purposes of approximately $19,959,028 at December 31, 2013. These net operating loss carry-forwards expire at various dates from 2014 through 2033. | |||||||||
We have research | |||||||||
We have research and development tax credit carryforwards for federal income tax purposes of approximately $940,000 as of December 31, 2013, and research and development tax credit carryforwards for state income tax purposes of approximately $140,000 as of December 31, 2013. The federal credit carryforwards expire at various dates from 2014 through 2033. The state credit carryforwards expire at various dates from 2014 through 2028. | |||||||||
In addition, we have federal alternative minimum tax credit carryforwards for federal income tax purposes of approximately $217,000 as of December 31, 2013. These credits do not expire. | |||||||||
Our effective income tax (benefit) provision rate was different than the statutory federal income tax (benefit) provision rate as follows: | |||||||||
For the Year Ended | |||||||||
December 31, | |||||||||
2012 | 2012 | ||||||||
Federal tax (benefit) provision rate | 34 | % | 34 | % | |||||
Permanent differences | (3 | ) % | (1 | ) % | |||||
State tax expense | 0 | % | 0 | % | |||||
Refundable AMT and R&D tax credit | 0 | % | 0 | % | |||||
Net operating loss carry back | 0 | % | 0 | % | |||||
Valuation allowance | (31 | ) % | (33 | ) % | |||||
Effective income tax (benefit) provision rate from continuing operations | 0 | % | 0 | % | |||||
7_Commitments_and_Contingencie
7. Commitments and Contingencies | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
7. Commitments and Contingencies | ' | ||||
Operating Leases | |||||
Our corporate office is currently located at 14 Norfolk Avenue, South Easton, Massachusetts 02375. We are currently paying approximately $4,800 per month for our corporate office. On December 31, 2013 the lease was amended to extend the expiration date to December 31, 2014 at the rate of $4,800 per month. | |||||
Effective January 1, 2010, we entered into a three-year lease agreement with the University of Massachusetts in Boston, pursuant to which we are leasing laboratory and office space on campus at the university for research and development activities. We paid $5,000 per month for the use of these facilities. On September 26, 2012, the lease was amended to extend the expiration date to December 31, 2014 at a rate of $5,500 per month. | |||||
Following is a schedule by years of future minimum rental payments required under operating leases with initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2013: | |||||
Year ending | |||||
December 31: | |||||
2014 | $ | 123,600 | |||
Thereafter | - | ||||
Total minimum payments required | $ | 123,600 | |||
Royalty Commitments | |||||
BioMolecular Assays, Inc. | |||||
In 1996, we acquired our initial equity interest in BioSeq, Inc., which at the time was developing our original pressure cycling technology. BioSeq, Inc. acquired its pressure cycling technology from BioMolecular Assays, Inc. under a technology transfer and patent assignment agreement. In 1998, we purchased all of the remaining outstanding capital stock of BioSeq, Inc., and at such time, the technology transfer and patent assignment agreement was amended to require us to pay BioMolecular Assays, Inc. a 5% royalty on our sales of products or services that incorporate or utilize the original pressure cycling technology that BioSeq, Inc. acquired from BioMolecular Assays, Inc. We are also required to pay BioMolecular Assays, Inc. 5% of the proceeds from any sale, transfer or license of all or any portion of the original pressure cycling technology. These payment obligations terminate in 2016. During the fiscal years ended December 31, 2013 and 2012, we incurred $23,785 and $23,635 in royalties, respectively. | |||||
In connection with our acquisition of BioSeq, Inc., we licensed certain limited rights to the original pressure cycling technology back to BioMolecular Assays, Inc. This license is non-exclusive and limits the use of the original pressure cycling technology by BioMolecular Assays, Inc. solely for molecular applications in scientific research and development and in scientific plant research and development. BioMolecular Assays, Inc. is required to pay us a royalty equal to 20% of any license or other fees and royalties, but not including research support and similar payments, it receives in connection with any sale, assignment, license or other transfer of any rights granted to BioMolecular Assays, Inc. under the license. BioMolecular Assays, Inc. must pay us these royalties until the expiration of the patents held by BioSeq, Inc. in 1998, which we anticipate will be 2016. We have not received any royalty payments from BioMolecular Assays, Inc. under this license. | |||||
Battelle Memorial Institute | |||||
In December 2008, we entered into an exclusive patent license agreement with the Battelle Memorial Institute ("Battelle"). The licensed technology is described in the patent application filed by Battelle on July 31, 2008 (US serial number 12/183,219). This application includes subject matter related to a method and a system for improving the analysis of protein samples, including through an automated system utilizing pressure and a pre-selected agent to obtain a digested sample in a significantly shorter period of time than current methods, while maintaining the integrity of the sample throughout the preparatory process. Pursuant to the terms of the agreement, we paid Battelle a non-refundable initial fee of $35,000. In addition to royalty payments on net sales on “licensed products”, we are obligated to make minimum royalty payments for each year that we retain the rights outlined in the patent license agreement and we are required to have our first commercial sale of the licensed products within one year following the issuance of the patent covered by the licensed technology. After re-negotiating the contract in 2013 our only obligation for 2013 was a minimum royalty payment of $4,025. The minimum annual royalty was $10,000 for 2012. | |||||
Target Discovery Inc. | |||||
In March 2010, we signed a strategic product licensing, manufacturing, co-marketing, and collaborative research and development agreement with Target Discovery Inc. (“TDI”). Under the terms of the agreement, we have been licensed by TDI to manufacture and sell a highly innovative line of chemicals used in the preparation of tissues for scientific analysis ("TDI reagents"). The TDI reagents were designed for use in combination with our pressure cycling technology. The companies believe that the combination of PCT and the TDI reagents can fill an existing need in life science research for an automated method for rapid extraction and recovery of intact, functional proteins associated with cell membranes in tissue samples. We did not incur any royalty obligation under this agreement in 2013 or 2012. | |||||
Severance and Change of Control Agreements | |||||
Each of Mr. Schumacher, and Drs. Ting, Lazarev, and Lawrence, executive officers of the Company, are entitled to receive a severance payment if terminated by us without cause. The severance benefits would include a payment in an amount equal to one year of such executive officer’s annualized base salary compensation plus accrued paid time off. Additionally, the officer will be entitled to receive medical and dental insurance coverage for one year following the date of termination. | |||||
Each of these executive officers, other than Mr. Schumacher, is entitled to receive a change of control payment in an amount equal to one year of such executive officer’s annualized base salary compensation, accrued paid time off, and medical and dental coverage, in the event of a change of control of the Company. In the case of Mr. Schumacher, this payment would be equal to two years of annualized base salary compensation, accrued paid time off, and two years of medical and dental coverage. The severance payment is meant to induce the aforementioned executives to remain in the employ of the Company, in general; and particularly in the occurrence of a change in control, as a disincentive to the control change. | |||||
Promissory Note | |||||
On November 4, 2011, the Company entered into an agreement with a former placement agent, pursuant to which the Company and the placement agent released each other of their respective obligations under a prior investment banking agreement. In connection with this agreement, the Company issued the placement agent a promissory note with an original principal amount of $150,000 and a maturity date of May 4, 2012. The promissory note was interest free until May 4, 2012. On November 15, 2012, $75,000 of principal and $16,125 of accrued and unpaid interest were converted into 18,225 shares of the Company’s Series G Convertible Preferred Stock. The $75,000 principal balance remaining as of December 31, 2013 earns interest at a rate of 18% per year. The entire note balance along with all accrued interest was paid off in February 2014. | |||||
Convertible Debt | |||||
Loans in the aggregate amount of $155,000 were received from two individuals in 2013. We accrued interest at a rate of 6% on the loans. These loans, along with $863,000 of other prior outstanding loans and unpaid interest, were converted to the Company’s Series J Convertible Preferred Shares in February 2013. | |||||
On April 11, 2013, we signed a promissory note in the amount of $275,000. The lender paid $125,000, net of $12,500 of original issue discount, upon closing of the note. The lender paid an additional $50,000, net of $5,000 original issue discount, on June 26, 2013. The balance of the Consideration shall be paid in the amounts and the dates as the lender chooses. The note and unpaid interest on the note are due and payable one year from the effective date of each payment. The Company has the right to repay the notes at any time within six months of the effective date of each closing. If the Company repays the note within 90 days of the effective date interest is 0%. If the note is not repaid within the 90 days a onetime interest charge of 12% will be applied. The Company has reserved at least 6,000,000 shares of common stock for conversion under this note. The Company evaluated the terms of this note in accordance with ASC 815-40, Derivatives and Hedging Contracts in Entity’s Own Stock. The lender has the right to convert all or part of the unpaid principal and interest into common stock at a conversion price of 60% of the lowest trade price in the 25 trading days prior to conversion after six months from the effective date of each closing. The Company determined that the conversion feature met the definition of a liability and therefore, bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the change in fair value is recorded as other expense or income in the statement of operations. The fair value of the conversion feature was $186,041 at December 31, 2013 and reflected in the conversion option liability line in the consolidated balance sheet. On October 10, 2013, this note was amended to change the lenders right to convert and the borrower’s right to repay to December 10, 2013. On December 10, 2013, this note was amended to change the lenders right to convert and the borrower’s right to repay to February 10, 2014. | |||||
The proceeds from the convertible debt issued on April 11, 2013, were allocated between the host debt instrument and the convertible option based on the residual method. The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $274,840 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the entire gross proceeds of $137,500 was offset by a debt discount of $137,500 which will be amortized to interest expense over the twelve month life of the debt. The additional $149,840 adjustment between the convertible option liability and the debt discount was charged directly to other expense. | |||||
The proceeds from the convertible debt issued on June 26, 2013, were allocated between the host debt instrument and the convertible option based on the residual method. The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $84,146 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the entire gross proceeds of $55,000 was offset by a debt discount of $55,000 which will be amortized to interest expense over the twelve month life of the debt. The additional $34,146 adjustment between the convertible option liability and the debt discount was charged directly to other expense. | |||||
So long as the note is outstanding, the Company shall notify the lender of the issuance of any security with a term more favorable to the holder, and the lender may at its option, include the terms as a part of the transaction documents. Both the April 11, 2013 note and the June 26, 2013 note were paid off in February 2014. | |||||
On May 24, 2013, we entered into a Convertible Redeemable Note. The lender paid $97,500, net of $2,500 in legal fees, on the closing date. The note does not bear interest. The $100,000 principal is due on May 24, 2015. The Company shall have the right to redeem the note at 120% of the unpaid principal if paid within 90 days of the issuance day, 130% of the unpaid principal if repaid between 91 and 180 days following the issuance day and 150% at any time thereafter. The Company has reserved 1,000,000 shares of common stock for conversion under this note. At any time six months after the closing date, the lender at its option may convert part, or all, of the note then outstanding into shares of the Company’s common stock at a conversion price of 70% of the average weighted average price of the common stock for the 10 trading days preceding the conversion date. The Company determined that the conversion feature met the definition of a liability and therefore, bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the change in fair value is recorded as other expense or income in the statement of operations. | |||||
The proceeds from the convertible debt issued on May 24, 2013, were allocated between the host debt instrument and the convertible option based on the residual method. The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $122,223 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the entire gross proceeds of $100,000 is offset by a debt discount of $100,000 which will be amortized to interest expense over the twenty-four month life of the debt. The additional $24,723 adjustment between the convertible option liability and the debt discount was charged directly to other expense. | |||||
The entire balance of the debt was repaid on November 22, 2013 and the fair value of the conversion option liability remaining on the balance sheet in the amount of $103,521 was reclassified to additional paid in capital. | |||||
On June 6, 2013, we signed a convertible debenture in the amount of $500,000. The lender paid an initial payment of $213,000 net of a “finder’s fee” discount of $25,000 and $12,000 in legal fees, on the closing date. The lender has the right, any time after six months from the issue date to convert any or part of the outstanding and unpaid principal into shares of the Company’s common stock at a price of $0.40 per share subject to adjustments for stock splits, stock dividends or rights offerings. The Company has the right to prepay the debenture for a payment of 120% of the outstanding principal plus accrued and unpaid interest. The Company is required to reserve at least 2.5 times the number of shares actually issuable upon full conversion of this debenture. The Company determined that the conversion feature met the definition of a liability in accordance with ASC 815-40 and therefore bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the difference in fair value is recorded as other expense or income in the statement of operations. | |||||
The proceeds from the convertible debt issued on June 6, 2013, were allocated between the host debt instrument and the convertible option based on the residual method. The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $158,715 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the gross proceeds of $250,000 was offset by a debt discount of $195,715 which will be amortized to interest expense over the twelve month life of the debt. | |||||
On December 26, 2013 the Company entered into a settlement agreement with the lender resulting in the Company paying the lender $300,000 in full satisfaction of the original debenture. The conversion option liability remaining on the balance sheet in the amount of $38,180 was reclassified to additional paid in capital. | |||||
On August 8, 2013 and October 10, 2013, we received $160,000 and $250,000, respectively in a six-month note from an existing shareholder. Terms of the note include 18% annual interest, a right to convert the note into the next equity transaction of the Company, at the conversion rate of the equity offering, and a three-year warrant to acquire 160,000 shares of common stock and 250,000 shares of common stock, respectively at $0.40 per share. The relative fair value of the warrants was determined to be $28,722 and $33,824, respectively, which was accounted for as a debt discount and amortized to interest expense over the six-month life of the note. Both of these notes and the accrued interest were converted to our Series K Convertible Preferred Stock on December 12, 2013. | |||||
On December 4, 2013, we signed a convertible debenture in the amount of $223,000. The lender paid an initial payment of $200,000 net of a “original issue” discount of $20,000 and $3,000 in legal fees, on the closing date. The lender has the right at any time from the issue date to convert all or part of the outstanding and unpaid principal into shares of the Company’s common stock at a price of $0.40 per share subject to adjustments for stock splits, stock dividends or rights offerings. The Company has the right to prepay the debenture for a payment of 120% of the outstanding principal plus accrued and unpaid interest. The Company is required to reserve at least 4 times the number of shares actually issuable upon full conversion of this debenture. The Company determined that the conversion feature met the definition of a liability in accordance with ASC 815-40 and therefore bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the difference in fair value is recorded as other expense or income in the statement of operations. The fair value of the conversion feature was $98,129 at December 31, 2013 and reflected in the conversion option liability line in the consolidated balance sheet. In addition the lender received a warrant to purchase 70,000 shares of the Company’s common stock at an exercise price of $0.3125 per share. The warrants were valued at $11,100 which was allocated to debt discount and will be amortized to interest expense over the twenty-four month life of the debt. | |||||
The proceeds from the convertible debt issued on December 4, 2013, were allocated between the host debt instrument and the convertible option based on the residual method. The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $90,444 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the gross proceeds of $223,000 was offset by a debt discount of $111,488 which will be amortized to interest expense over the twelve month life of the debt. | |||||
On December 23, 2013, we signed a convertible debenture in the amount of $150,000. The lender paid an initial payment of $125,000 net of a “original issue” discount of $15,000 and $10,000 in legal fees, on the closing date. The lender has the right, any time from the issue date, to convert any or part of the outstanding and unpaid principal into shares of the Company’s common stock at a price of $0.40 per share subject to adjustments for stock splits, stock dividends or rights offerings. The Company shall have the right to prepay the debenture for a payment of 120% of the outstanding principal plus accrued and unpaid interest. The Company is required to reserve at least 3 times the number of shares actually issuable upon full conversion of this debenture. The Company determined that the conversion feature met the definition of a liability in accordance with ASC 815-40 and therefore bifurcated the conversion feature as a derivative liability. The derivative liability is measured at the end of each reporting period and the change in fair value is recorded as other expense or income in the statement of operations. The fair value of the conversion feature was $72,027 at December 31, 2013 and reflected in the conversion option liability line in the consolidated balance sheet. In addition the lender received 75,000 shares of Company restricted common stock, of which the fair value of $17,250 was charged to debt discount and will be amortized to interest expense over the thirty-six month life of the debt. | |||||
The proceeds from the convertible debt issued on December 23, 2013, were allocated between the host debt instrument and the convertible option based on the residual method. The estimated fair value of the convertible option was determined using a binomial formula, resulting in an allocation of $65,003 to the convertible option and accounted for as a liability in the Company’s consolidated balance sheet. In accordance with the provisions of ASC 815-40, the gross proceeds of $150,000 was offset by a debt discount of $102,153 which will be amortized to interest expense over the thirty-six month life of the debt. | |||||
Other Notes | |||||
On August 23, 2013, we signed a Merchant Agreement with Strategic Funding Source, Inc. (SFS). Under the agreement we received $75,000 in exchange for rights to all customer receipts until SFS is paid $99,000, to be collected at the rate of $849 per business day. The payments are secured by essentially all tangible assets of the Company. On August 29, 2013 the agreement was modified to give the Company the right to pre-pay the note at any time prior to January 21, 2014; if pre-paid, the Company will receive a discount based on the date of pre-payment after the funding date. Discounts range from $16,500, if pre-paid within 30 days of funding to $1,500, if pre-paid within 150 days of funding. The note was pre-paid on December 10, 2013. | |||||
On December 10, 2013, we signed a Merchant Agreement with Scripline LLC. Under the agreement we received $96,000 in exchange for rights to all customer receipts until Scripline LLC is paid $126,700, to be collected at the rate of $874 per business day. The payments are secured by essentially all tangible assets of the Company. The outstanding balance is recorded as Other debt on the balance sheet. | |||||
8_Transactions_with_Related_Pe
8. Transactions with Related Persons | 12 Months Ended |
Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
8. Transactions with Related Persons | ' |
From time to time Mr. Richard T. Schumacher, the Company’s President and CEO, makes loans to the Company to provide the Company with operating cash. The balance of these loans at December 31, 2013 was $25,182 and is recorded as related party debt in the accompanying consolidated balance sheet as of December 31, 2013. | |
On February 6, 2013, Mr. Schumacher invested $25,200 in our Series J Offering of Convertible Preferred Stock and warrants to purchase shares of Common Stock, for 63 shares of convertible Preferred Stock (convertible into 63,000 shares of Common Stock) and a Warrant to purchase 63,000 shares of Common Stock at an exercise price of $0..40 per share. | |
On February 6, 2013, Mr. Jeffrey Peterson, chairman of the Company’s Board of Directors, invested $25,508 of existing loans and interest and $7,292 in board of director fees in our Series J Private Placement of Convertible Preferred Stock and warrants to purchase shares of Common Stock, for 82 shares of convertible Preferred Stock (convertible into 82,000 shares of Common Stock) and a Warrant to purchase 82,000 shares of Common Stock at an exercise price of $0.40 per share. | |
On February 6, 2013, Mr. Vito Mangiardi, member of the Company’s Board of Directors, invested $25,000 in cash and $4,167 in board of director fees in our Series J Private Placement of Convertible Preferred Stock and warrants to purchase shares of Common Stock, for 73 shares of convertible Preferred Stock (convertible into 73,000 shares of Common Stock) and a Warrant to purchase 73,000 shares of Common Stock at an exercise price of $0.40 per share. | |
On February 6, 2013, Mr. Kevin Pollack member of the Company’s Board of Directors, invested $15,000 in cash, $25,233 in existing loans and $4,167 in board of directors fees in our Series J Offering of Convertible Preferred Stock and warrants to purchase shares of Common Stock, for 111 shares of convertible Preferred Stock (convertible into 111,000 shares of Common Stock) and a Warrant to purchase 111,000 shares of Common Stock at an exercise price of $0.40 per share. | |
On February 6, 2013, Dr. Mickey Urdea member of the Company’s Board of Directors, invested $22,500 in board of director fees, in our Series J Offering of Convertible Preferred Stock and warrants to purchase shares of Common Stock, for 57 shares of convertible Preferred Stock (convertible into 57,000 shares of Common Stock) and a Warrant to purchase 57,000 shares of Common Stock at an exercise price of $0.40 per share. | |
On December 12, 2013, Mr. Schumacher invested $30,335 in our Series K Offering of Convertible Preferred Stock and warrants to purchase shares of Common Stock, for 122 shares of convertible Preferred Stock (convertible into 122,000 shares of Common Stock) and a Warrant to purchase 61,000 shares of Common Stock at an exercise price of $0.3125 per share. | |
On December 12, 2013, Mr. Jeffrey Peterson, invested $25,875 in our Series K Offering of Convertible Preferred Stock and warrants to purchase shares of Common Stock, for 103 shares of convertible Preferred Stock (convertible into 103,000 shares of Common Stock) and a Warrant to purchase 51,500 shares of Common Stock at an exercise price of $0..3125 per share. | |
On December 12, 2013, Mr. Vito Mangiardi, invested $22,500 in our Series K Offering of Convertible Preferred Stock and warrants to purchase shares of Comon Stock, for 90 shares of convertible Preferred Stock (convertible into 90,000 shares of Common Stock) and a Warrant to purchase 45,000 shares of Common Stock at an exercise price of $0.3125 per share. | |
On December 12, 2013, Mr. Kevin Pollack, invested $22,500 in our Series K Offering of Convertible Preferred Stock and warrants to purchase shares of Common Stock, for 90 shares of convertible Preferred Stock (convertible into 90,000 shares of Common Stock) and a Warrant to purchase 45,000 shares of Common Stock at an exercise price of $0.3125 per share. | |
On December 12, 2013, Dr. Mickey Urdea, invested $32,500 in our Series K Offering of Convertible Preferred Stock and warrants to purchase shares of Common Stock, for 130 shares of convertible Preferred Stock (convertible into 130,000 shares of Common Stock) and a Warrant to purchase 65,000 shares of Common Stock at an exercise price of $0.3125 per share. | |
9_Stockholders_Deficit
9. Stockholdersb (Deficit) | 12 Months Ended | |||||||||||||||||||||||||
Dec. 31, 2013 | ||||||||||||||||||||||||||
Equity [Abstract] | ' | |||||||||||||||||||||||||
9. Stockholdersb (Deficit) | ' | |||||||||||||||||||||||||
Preferred Stock | ||||||||||||||||||||||||||
We are authorized to issue 1,000,000 shares of preferred stock with a par value of $0.01. Of the 1,000,000 shares of preferred stock: | ||||||||||||||||||||||||||
1) | 20,000 shares have been designated as Series A Junior Participating Preferred Stock (“Junior A”) | |||||||||||||||||||||||||
2) | 313,960 shares have been designated as Series A Convertible Preferred Stock (“Series A”) | |||||||||||||||||||||||||
3) | 279,256 shares have been designated as Series B Convertible Preferred Stock (“Series B”) | |||||||||||||||||||||||||
4) | 88,098 shares have been designated as Series C Convertible Preferred Stock (“Series C”) | |||||||||||||||||||||||||
5) | 850 shares have been designated as Series D Convertible Preferred Stock (“Series D”) | |||||||||||||||||||||||||
6) | 500 shares have been designated as Series E Convertible Preferred Stock (“Series E”) | |||||||||||||||||||||||||
7) | 240,000 shares have been designated as Series G Convertible Preferred Stock (“Series G”) | |||||||||||||||||||||||||
8) | 10,000 shares have been designated as Series H Convertible Preferred Stock (“Series H”) | |||||||||||||||||||||||||
9) | 6,250 shares have been designated as Series J Convertible Preferred Stock (“Series J”) | |||||||||||||||||||||||||
10) | 15,000 shares have been designated as Series K Convertible Preferred Stock (“Series K”) | |||||||||||||||||||||||||
As of December 31, 2013, there were no shares of Junior A, and Series A, B, C, E, and H issued and outstanding. | ||||||||||||||||||||||||||
Series A Convertible Preferred Stock | ||||||||||||||||||||||||||
On February 12, 2009, we completed a private placement, pursuant to which we sold an aggregate of 156,980 units (the “Series A Units”) for a purchase price of $11.50 per unit (the “Series A Purchase Price”), resulting in gross proceeds to us of $1,805,270 (the “Series A Private Placement”). Each Series A Unit consisted of (i) one share of Series A Convertible Preferred Stock convertible into 10 shares of our Common Stock, (ii) a warrant to purchase one share of Series A Convertible Preferred Stock at an exercise price equal to $12.50 per share, with a term expiring 15 months after the date of closing (“15-Month Series A Preferred Stock Warrant”); and (iii) a warrant to purchase 10 shares of Common Stock at an exercise price equal to $2.00 per share, with a term expiring 30 months after the date of closing (the “30-Month Common Stock Warrants”). | ||||||||||||||||||||||||||
As a result of the issuance of Common Stock in connection with dividends paid on the Series A Preferred Stock and the Series B Preferred Stock, the exercise price of the 30-Month Common Stock Warrants has been adjusted from $2.00 to $1.72 in accordance with the terms of the 30-Month Common Stock Purchase Warrants. | ||||||||||||||||||||||||||
On or about August 10, 2011, holders of 30-Month Common Stock Warrants to purchase 1,569,800 shares of Common Stock entered into an amendment to the 30-Month Common Stock Warrants which extended the expiration date of the warrants to August 11, 2012. On or about September 30, 2011, 30-Month Common Stock Warrants to purchase 1,556,750 shares of Common Stock were further amended to reduce the exercise price from $1.74 to $0.90 and to extend the term until August 12, 2016 and, with respect to affiliates, August 12, 2015. A 30-Month Common Stock Warrant to purchase 13,050 shares of Common Stock was not amended and was further adjusted by Common Stock dividends issued in October 2011 resulting in an effective exercise price of $1.72 per share, subject to future adjustment, with a term expiring on August 11, 2012. | ||||||||||||||||||||||||||
Each share of Series A Convertible Preferred Stock received a cumulative dividend at the rate of 5% per annum of the Series A Purchase Price, payable semi-annually on June 30 and December 31, commencing on June 30, 2009 (with the first payment being pro-rated based on the number of days occurring between the date of issuance and June 30, 2009). The Company was permitted to pay dividends in cash or in shares of Common Stock at our option, subject to certain conditions.. The Board approved the final payment to Series A holders in the form of Common Stock for accrued dividends through September 30, 2011. | ||||||||||||||||||||||||||
On or about September 30, 2011, all 47 holders of both the outstanding Series A Convertible Preferred Stock and Series A 30-Month Common Stock Purchase Warrants, issued in the Series A Convertible Preferred Stock financing completed by the Company in February 2009, voluntarily converted an aggregate of 247,187 shares of Series A Preferred Stock into 2,471,870 shares of the Company’s Common Stock. | ||||||||||||||||||||||||||
Series B Convertible Preferred Stock | ||||||||||||||||||||||||||
On November 18, 2009, we sold an aggregate of 62,039 units (the “Series B Units”) for a purchase price of $18.80 per unit (the “Series B Purchase Price”), resulting in gross proceeds to us of $1,166,333. This was the first tranche of a $2.5 million private placement. The second tranche closed on March 18, 2010 for the sale of 26,672 Series B Units with gross proceeds of $501,434 (collectively the two tranches are referred to as the “Series B Private Placements”). Each Series B Unit consisted of (i) one share of Series B Convertible Preferred Stock convertible into 10 shares of our Common Stock and (ii) a warrant to purchase one share of Series B Convertible Preferred Stock at an exercise price equal to $23.80 per share for warrants issued in November 2009 and at an exercise price of $28.80 for warrants issued in March 2010, in each case with a term expiring on August 11, 2011 (the “Series B Warrant”). | ||||||||||||||||||||||||||
On or about August 10, 2011, holders of the Series B Warrants to purchase 887,110 shares of Common Stock entered into an amendment to the Series B Warrants which extended the expiration date of the Series B Warrants to August 11, 2012 and provided that they would be issuable for the equivalent number of shares of Common Stock at a proportionate exercise price. On or about September 30, 2011, Series B Warrants to purchase 887,110 shares of Common Stock were further amended to reduce the exercise price from $2.38 to $1.43, for Series B Warrants issued in November 2009, and from $2.88 to $1.75, for Series B Warrants issued in March 2010. Series B Warrants also extended the term of the Series B Warrants until August 12, 2016 and until August 12, 2015 with respect to affiliates. All of the Series B Warrants are no longer exercisable for shares of Series B Convertible Preferred Stock. | ||||||||||||||||||||||||||
On or about September 30, 2011, all of the outstanding shares of Series B Convertible Preferred Stock were voluntarily converted into shares of Common Stock. | ||||||||||||||||||||||||||
Each share of Series B Convertible Preferred Stock received a cumulative dividend at the rate of 5% per annum of the Series B Purchase Price, payable semi-annually on June 30 and December 31, commencing on December 31, 2009 (with the first payment being pro-rated based on the number of days occurring between the date of issuance and December 31, 2009). The Company was permitted to pay dividends in cash or in shares of Common Stock at our option, subject to certain conditions. The shares of Series B Convertible Preferred Stock were also entitled to a liquidation preference, such that in the event of any voluntary or involuntary liquidation, dissolution or winding up of our Company, the holders of Series B Convertible Preferred Stock would have been paid out of the assets of the Company available for distribution to our stockholders before any payment was paid to the holders of Common Stock, an amount per share equal to the Series B Purchase Price, plus accrued and unpaid dividends. The Series B Convertible Preferred Stock would have been treated on an equivalent basis with the holders of the Series A Convertible Preferred Stock and Series C Convertible Preferred Stock with respect to payments made in connection with a liquidation. The Board approved the method of payment in the form of Common Stock for the dividends payable with respect to December 31, 2009 and the June 30, 2010 (to the holders of Series B Convertible Preferred Stock issued in November 2009). The Board approved the method of payment in the form of cash for the dividends payable with respect to June 30, 2010 (to the holders of Series B Convertible Preferred Stock issued in March 2010), December 31, 2010 and for all dividends accrued through December 31, 2012. | ||||||||||||||||||||||||||
Each share of Series B Convertible Preferred Stock was convertible into 10 shares of Common Stock at any time at the option of the holder, subject to adjustment for stock splits, stock dividends, recapitalizations and similar transactions (the “Series B Conversion Ratio”). Each share of Series B Convertible Preferred Stock would have been automatically converted into shares of Common Stock at the Series B Conversion Ratio then in effect: (i) if, after 12 months from the closing of the applicable tranche of the Series B Private Placement, the Common Stock traded on the OTC Market (or other primary trading market or exchange on which the Common Stock was then traded) at a price equal $5.64 for 20 out of 30 consecutive trading days with average daily trading volume of at least 10,000 shares; or (ii) upon a registered public offering by the Company at a per share price equal to $5.64, with aggregate gross proceeds to the Company of not less than $10 million. Unless waived under certain circumstances by the holder of the Series B Convertible Preferred Stock, such holder’s Series B Convertible Preferred Stock could not have been converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. | ||||||||||||||||||||||||||
Series B Warrants | ||||||||||||||||||||||||||
The Series B Warrants issued in November 2009 originally had an exercise price equal to $23.80 and the Series B Warrants issued in March 2010 originally had an exercise price equal to $28.80, in each case with a term expiring on August 11, 2011. The Series B Warrants currently have an exercise price of $1.43 for Series B Warrants issued in November 2009, and $1.75 for Series B Warrants issued in March 2010, in each case with a term expiring on August 12, 2016 and, with respect to affiliates, August 12, 2015. The Series B Warrants are currently exercisable for shares of Common Stock. The Series B Warrants permit the holder to conduct a “cashless exercise” at any time the holder of the Series B Warrant is an “affiliate” (as defined in the Securities Purchase Agreement) of the Company. | ||||||||||||||||||||||||||
Series C Convertible Preferred Stock | ||||||||||||||||||||||||||
On April 8, 2011 and April 12, 2011, we completed the first tranche of a private placement, pursuant to which we sold an aggregate of 55,048 units for a purchase price of $15.00 per unit, resulting in gross proceeds to us of $825,720 (the “Series C Private Placement”). This was the first tranche of the Series C Private Placement. In connection with the second tranche, the purchase price was reduced to $12.50 per unit and we issued an additional 11,011 units to the purchasers who participated in the first tranche, without any additional gross proceeds to us. | ||||||||||||||||||||||||||
The second tranche closed on June 20, 2011 for the sale of 22,039 Series C Units (as defined below) for a purchase price of $12.50 per unit with gross proceeds of $275,485. Each unit (“Series C Unit”) consisted of (i) one share of Series C Convertible Preferred Stock, $0.01 par value per share (the “Series C Convertible Preferred Stock”) convertible into 10 shares of our Common Stock, (subject to adjustment for stock splits, stock dividends, recapitalization, etc.); and (ii) a three-year warrant to purchase 10 shares of our Common Stock at a per share exercise price equal to the sum of (i) the Common Stock equivalent of the Series C Purchase Price (ii) plus $0.88 (the “Series C Warrant”). The Series C Warrants are exercisable until the close of business on the third anniversary of the applicable closing date. | ||||||||||||||||||||||||||
We engaged an investment banker (the “Investment Banker”) to assist with the Series C Private Placement. The Company paid the Investment Banker a cash retainer fee of $50,000 and issued a warrant to the Investment Banker to purchase 100,000 shares of Common Stock at an exercise price of $3.00 per share. In connection with the Series C Private Placement, we paid the Investment Banker a fee of (i) approximately $66,000 cash, (ii) an expense allowance of approximately $16,500, (iii) a warrant to purchase 61,638 shares of Common Stock exercisable at a purchase price of $1.50, and (iv) a warrant to purchase 61,638 shares of Common Stock exercisable at a purchase price of $2.38. | ||||||||||||||||||||||||||
The proceeds from the sale of each Series C Unit were allocated between the Series C Convertible Preferred Stock and the Series C Warrants based on the residual method. The estimated fair value of the Series C Warrants was determined using a binomial formula, resulting in an allocation of the gross proceeds of $583,250 to the total warrants issued. The allocation of the gross proceeds to the Series C Convertible Preferred Stock was $517,958. In accordance with the provisions of ASC 470-20, an additional adjustment between Additional Paid in Capital and Accumulated Deficit of $476,434 was recorded to reflect an implicit non-cash dividend related to the allocation of proceeds between the stock and warrants issued. The $476,434 represents the value of the adjustment to additional paid in capital related to the beneficial conversion feature of the Series C Convertible Preferred Stock. The value adjustment was calculated by subtracting the fair market value of the underlying Common Stock on April 7 and June 20 issuable upon conversion of the Series C Convertible Preferred Stock from the fair market value of the Series C Convertible Preferred Stock as determined when the Company performed a fair market value allocation of the proceeds to the Series C Convertible Preferred Stock and warrants. We used a binomial formula since the warrants have down-round protection and are recorded as a liability. See “Warrant Derivative Liability” section within this note. | ||||||||||||||||||||||||||
Each share of Series C Convertible Preferred Stock will receive a cumulative dividend at the rate of 5% per annum of the respective tranche purchase price, payable semi-annually on June 30 and December 31, commencing on June 30, 2011 with the first payment being pro-rated based on the number of days occurring between the date of issuance and June 30, 2011. Dividends may be paid in cash or in shares of Common Stock at our option, subject to certain conditions. The shares of Series C Convertible Preferred Stock also are entitled to a liquidation preference, such that in the event of any voluntary or involuntary liquidation, dissolution or winding up of our Company, the holders of Series C Convertible Preferred Stock will be paid out of the assets of the Company available for distribution to our stockholders before any payment shall be paid to the holders of Common Stock, an amount per share equal to the Series C Purchase Price, plus accrued and unpaid dividends. Prior to the conversion of all of the outstanding shares of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock was treated on an equivalent basis with the Series A Convertible Preferred Stock and Series C Preferred Stock with respect to payments made in connection with a liquidation. The Company elected to pay the dividend payable on June 30, 2011 in cash. | ||||||||||||||||||||||||||
Each share of Series C Convertible Preferred Stock is convertible into 10 shares of Common Stock at any time at the option of the holder, subject to adjustment for stock splits, stock dividends, recapitalizations and similar transactions (the “Series C Conversion Ratio”). Each share of Series C Convertible Preferred Stock will automatically be converted into shares of Common Stock at the Series C Conversion Ratio then in effect: (i) if, after 12 months from the closing of the applicable tranche of the Series C Private Placement, the Common Stock trades on the OTC Market, or other primary trading market or exchange on which the Common Stock is then traded, at a price equal to three-tenths of the Series C Unit purchase price for 20 out of 30 consecutive trading days with average daily trading volume of at least 10,000 shares or (ii) upon a registered public offering by the Company at a per share price equal to at least three-tenths of the Series C Unit purchase price, with aggregate gross proceeds to the Company of not less than $10 million. Unless waived under certain circumstances by the holder of the Series C Convertible Preferred Stock, such holder’s Series C Convertible Preferred Stock may not be converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. | ||||||||||||||||||||||||||
The holders of Series C Convertible Preferred Stock are not entitled to vote on any matters presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company, or by written consent of stockholders in lieu of meeting, except that the holders of Series C Convertible Preferred Stock may vote separately as a class on any matters that would amend, alter or repeal any provision of our Restated Articles of Organization, as amended, in a manner that adversely affects the powers, preferences or rights of the Series C Convertible Preferred Stock and such holders may also vote on any matters required by law. | ||||||||||||||||||||||||||
If we consummate an equity financing (other than the exercise of employee stock options under the Company’s stock option plans, the Series C Private Placement or the exercise of any Series C Warrants, or the exercise or conversion of any currently outstanding Common Stock equivalents) within twelve months after the initial Closing and the gross proceeds to the Company from the sale of the Units are less than $4 million, then each holder of Series C Units may exchange all, but not less than all, of his, her or its Series C Units for the equity securities issued in such next financing and shall become subject to the terms and conditions of such next financing; provided that the exchange of the purchaser’s Series C Units for next financing securities is permitted under the rules and regulations of the NASDAQ Trading Market then in effect. The number of next financing securities into which a purchaser’s Series C Units may be exchanged shall be determined by dividing (a) the aggregate per unit purchase price at which the Series C Units being exchanged were issued, by (b) the price per next financing security at which such securities were issued in the next financing. The requisite holders of the Series C Units waived such right with respect to the Company’s recently completed equity financing. At any time after February 12, 2014, upon 30 days written notice, we have the right to redeem the outstanding shares of Series C Convertible Preferred Stock at a price equal to the Series C Unit purchase price, plus all accrued and unpaid dividends thereon. The redemption price may be paid in two annual installments. All holders of Series C Convertible Preferred Stock will be treated on an equivalent basis with respect to payments made in connection with redemption. | ||||||||||||||||||||||||||
Series C Warrants | ||||||||||||||||||||||||||
The Series C Warrants have an exercise price equal to $2.13 with a term expiring on the third anniversary of the deal closing. The Series C Warrants permit the holder to conduct a “cashless exercise” at any time the holder of the Series C Warrant is an “affiliate” (as defined in the Securities Purchase Agreement) of the Company. | ||||||||||||||||||||||||||
The Series C Warrant exercise price and/or number of shares issuable upon exercise of the Series C Warrant will be subject to adjustment for stock dividends, stock splits or similar capital reorganizations, as set forth in the Series C Warrants. | ||||||||||||||||||||||||||
Subject to the terms and conditions of the Series C Warrants, the Company has the right to call for cancellation the Series C Warrants if the volume weighted average price of our Common Stock on the OTC Market (or other primary trading market or exchange on which our Common Stock is then traded) equals or exceeds two times the per common share exercise price for either (i) 10 consecutive trading days or (ii) 15 out of 25 consecutive trading days. | ||||||||||||||||||||||||||
On April 5, 2012, all 11 holders of outstanding Series C Convertible Preferred Stock and Series C Common Stock Purchase Warrants voluntarily converted an aggregate of 88,098 shares of Series C Preferred Stock into 1,372,247 shares of the Company’s Common Stock, and Series C Warrants to purchase an aggregate of 880,980 shares of the Company’s Common Stock to warrants to purchase 686,125 shares of Common Stock in the Company. | ||||||||||||||||||||||||||
Series D Convertible Preferred Stock | ||||||||||||||||||||||||||
On November 11, 2011, we completed a registered direct offering, pursuant to which we sold an aggregate of 843 units for a purchase price of $1,000 per unit, resulting in gross proceeds to us of $843,000 (the “Series D Placement”). Each unit (“Series D Unit”) consisted of (i) one share of Series D Convertible Preferred Stock, $0.01 par value per share (the “Series D Convertible Preferred Stock”) convertible into 1,538.46 shares of our Common Stock, (subject to adjustment for stock splits, stock dividends, recapitalization, etc.) and (ii) one five-year warrant to purchase approximately 614 shares of our Common Stock at a per share exercise price of $0.81, subject to adjustment as provided in the Warrants (“Series D Warrant”). The Series D Warrants will be exercisable beginning on May 11, 2012 and until the close of business on the fifth anniversary of the initial exercise date. | ||||||||||||||||||||||||||
We engaged an investment banker to assist with the Series D Placement. In connection with the Series D Placement, we paid the investment banker a fee of approximately $67,000 cash. | ||||||||||||||||||||||||||
The proceeds from the sale of each Series D Unit were allocated between the Series D Convertible Preferred Stock and the Series D Warrants based on the residual method. The estimated fair value of the Series D Warrants was determined using a binomial formula, resulting in an allocation of the gross proceeds of $283,725 to the total warrants issued. The allocation of the gross proceeds to the Series D Convertible Preferred Stock was $559,275. In accordance with the provisions of ASC 470-20, an additional adjustment between Additional Paid in Capital and Accumulated Deficit of $530,140 was recorded to reflect an implicit non-cash dividend related to the allocation of proceeds between the stock and warrants issued. The $530,140 represents the value of the adjustment to additional paid in capital related to the beneficial conversion feature of the Series D Convertible Preferred Stock. The value adjustment was calculated by subtracting the fair market value of the underlying Common Stock on November 10, 2011 issuable upon conversion of the Series D Convertible Preferred Stock from the fair market value of the Series D Convertible Preferred Stock as determined when the Company performed a fair market value allocation of the proceeds to the Series D Convertible Preferred Stock and warrants. The warrants are recorded as a liability. See “Warrant Derivative Liability” below. | ||||||||||||||||||||||||||
The Series D Convertible Preferred Stock will rank senior to the Company’s Common Stock and Series C Convertible Preferred Stock with respect to payments made upon liquidation, winding up or dissolution. Upon any liquidation, dissolution or winding up of the Company, after payment of the Company’s debts and liabilities, and before any payment is made to the holders of any junior securities, the holders of Series D Convertible Preferred Stock will first be entitled to be paid $1,000 per share subject to adjustment for accrued but unpaid dividends. | ||||||||||||||||||||||||||
We may not pay any dividends on shares of Common Stock unless we also pay dividends on the Series D Convertible Preferred Stock in the same form and amount, on an as-if-converted basis, as dividends actually paid on shares of our Common Stock. Except for such dividends, no other dividends may be paid on the Series D Convertible Preferred Stock. | ||||||||||||||||||||||||||
Each share of Series D Convertible Preferred Stock is convertible into 1,538.46 shares of Common Stock (based upon an initial conversion price of $0.65 per share) at any time at the option of the holder, subject to adjustment for stock splits, stock dividends, combinations, and similar recapitalization transactions (the “Series D Conversion Ratio”). Subject to certain exceptions, if the Company issues any shares of Common Stock or Common Stock equivalents at a per share price that is lower than the conversion price of the Series D Convertible Preferred Stock, the conversion price will be reduced to the per share price at which such shares of Common Stock or Common Stock equivalents are issued. Each share of Series D Convertible Preferred Stock will automatically be converted into shares of Common Stock at the Series D Conversion Ratio then in effect if, after six months from the closing of the Series D Placement, the Common Stock trades on the OTC Market (or other primary trading market or exchange on which the Common Stock is then traded) at a price equal to at least 300% of the then effective Series D Convertible Preferred Stock conversion price for 20 out of 30 consecutive trading days with each trading day having a volume of at least $50,000. Unless waived under certain circumstances by the holder of the Series D Convertible Preferred Stock, such holder’s Series D Convertible Preferred Stock may not be converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. | ||||||||||||||||||||||||||
In addition, in the event we consummate a merger or consolidation with or into another person or other reorganization event in which our shares of Common Stock are converted or exchanged for securities, cash or other property, or we sell, lease, license or otherwise dispose of all or substantially all of our assets or we or another person acquire 50% or more of our outstanding shares of Common Stock, then following such event, the holders of the Series D Convertible Preferred Stock will be entitled to receive upon conversion of the Series D Convertible Preferred Stock the same kind and amount of securities, cash or property which the holders of the Series D Convertible Preferred Stock would have received had they converted the Series D Convertible Preferred Stock immediately prior to such fundamental transaction. | ||||||||||||||||||||||||||
The holders of Series D Convertible Preferred Stock are not entitled to vote on any matters presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), except that the holders of Series D Convertible Preferred Stock may vote separately as a class on any matters that would (i) amend, our Restated Articles of Organization, as amended, in a manner that adversely affects the rights of the Series D Convertible Preferred Stock, (ii) alter or change adversely the powers, preferences or rights of the Series D Convertible Preferred Stock or alter or amend the certificate of designation, (iii) authorize or create any class of shares ranking as to dividends, redemption or distribution of assets upon liquidation senior to, or otherwise pari passu with, the Series D Convertible Preferred Stock, or (iv) increase the number of authorized shares of Series D Convertible Preferred Stock. | ||||||||||||||||||||||||||
If, within 12 months of the initial issuance of the Series D Convertible Preferred Stock, we issue any Common Stock, Common Stock equivalents, indebtedness or any combination thereof (a “Subsequent Financing”), the holders of Series D Convertible Preferred Stock will have the right to participate on a pro-rata basis in up to 50% of such Subsequent Financing. | ||||||||||||||||||||||||||
During the year ended December 31, 2012, 443 shares of Series D Convertible Preferred Stock were converted to 681,538 shares of Common Stock. | ||||||||||||||||||||||||||
Series D Warrants | ||||||||||||||||||||||||||
The Series D Warrants originally had an exercise price equal to $0.81 per share of common stock. The number of Series D Warrants increased by 530,406 to a total of 1,047,875 and each Series D Warrant currently has an exercise price equal to $0.40 per share of common stock. These adjustments were made in connection with our April 2012 registered direct offering in accordance with the Series D Warrant. The Series D Warrant are exercisable beginning on the six-month anniversary of the date of issuance and expire five years from the initial exercise date. The Series D Warrants permit the holder to conduct a "cashless exercise" at any time a registration statement, or the prospectus contained herein, is not available for the issuance of shares of common stock issuable upon exericise of the Series D Warrant, and under certain circumstances at the expiration of the Series D Warrants. The exericise price and/or number of shares of common stock issuable upon exercise of the Series D Warrants are subject to adjustment for certain stock dividends, stock splits or similar capital reorganizations, as set forth in the Warrants. The exercise price and/or number of shares of common stock issuable upon exercise of the Series D Warrants are also subject to adjustment in the event that we issue any shares of common stock or common stock equivalents at a per share price that is lower than the exercise price for the Series D Warrants then in effect. Upon any such issuance, subject to certain exceptions, the exercise price will be reduced to the per share price at which such shares of common stock or common stock equivalents are issued and number of Series D Warrant shares issuable thereunder shall be increased such that the aggregate exercise price payable thereunder, after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price prior to such adjustment. Unless waived under certain circumstance by the holder of a Series D Warrant, such holder may not exercise the Series D Warrant if upon such exercise the holder's beneficial ownership of the Company's common stock would exceed certain thresholds. | ||||||||||||||||||||||||||
In the event we consummate a merger or consolidation with or into another person or other reorganization event in which our shares of Common Stock are converted or exchanged for securities, cash or other property, or we sell, lease, license or otherwise dispose of all or substantially all of our assets or we or another person acquire 50% or more of our outstanding shares of Common Stock, then following such event, the holders of the Series D Warrants will be entitled to receive upon exercise of the Series D Warrants the same kind and amount of securities, cash or property which the holders would have received had they exercised the Series D Warrants immediately prior to such fundamental transaction. | ||||||||||||||||||||||||||
Series E Convertible Preferred Stock | ||||||||||||||||||||||||||
On April 9, 2012, we completed a registered direct offering with Ironridge Global IV Ltd. (“Ironridge”), pursuant to which we sold an aggregate of 500 shares of our Series E Convertible Preferred Stock to Ironridge for a purchase price of $1,000 per share or an aggregate purchase price of $500,000 (“Series E Preferred Stock”). Each share of Series E Preferred Stock was convertible into approximately 980 shares of our Common Stock. The Series E Preferred Stock was entitled to a yearly dividend at a rate of 10.5% per year, subject to a credit risk and make-whole adjustment, and was payable in cash or shares of Common Stock at our election. Under certain conditions and subject to certain limitations, we could have required Ironridge to convert their Series E Convertible Preferred Stock into Common Stock. In connection with this registered direct offering, our investment banker received a fee of $40,000. The make-whole dividends were payable any time after the closing on April 9, 2012 at the option of the holder; therefore, we recognized the full value of $262,500 as a current liability and charged this amount immediately to accumulated deficit. We adjusted the value as of September 30, 2012 based on the closing bid on September 28, 2012. We paid $128,402 of make-whole dividends in the Company’s Common Stock and $67,500 in cash. Ironridge converted all 500 shares of Series E Preferred Stock into 490,196 common shares in 2012. | ||||||||||||||||||||||||||
The Series E Preferred Stock ranked senior to the Company’s Common Stock for so long as at least 250 shares of Series E Preferred Stock remained outstanding and pari passu thereafter and junior to the Series D Preferred Stock with respect to payments made upon liquidation, winding up or dissolution. Upon any liquidation, dissolution or winding up of the Company, after payment of the Company’s debts and liabilities, and before any payment was made to the holders of any junior securities, the holders of Series E Convertible Preferred Stock were first entitled to be paid $1,000 per share subject to adjustment for accrued but unpaid dividends. | ||||||||||||||||||||||||||
We were not allowed to pay any dividends on shares of Common Stock so long as any shares of Series E Preferred Stock were outstanding. | ||||||||||||||||||||||||||
Each share of Series E Preferred Stock was convertible into 980.39 shares of Common Stock (based upon an initial conversion price of $1.02 per share) at any time at the option of the holder, subject to adjustment for stock splits, stock dividends, combinations, and similar recapitalization transactions (the “Series E Conversion Ratio”). At our option, each share of Series E Preferred Stock could have been converted into shares of Common Stock at the Series E Conversion Ratio then in effect if, the Common Stock trades on the OTC Capital Market (or other primary trading market or exchange on which the Common Stock was then traded) at a price equal to at least $2.00 for 20 out of 25 consecutive trading days. Unless waived under certain circumstances by the holder of the Series E Preferred Stock, such holder’s Series E Preferred Stock may not have been converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. | ||||||||||||||||||||||||||
Subject to the rights of the holders of Series D Preferred Stock, for so long as at least 250 shares of Series E Preferred Stock remained outstanding, upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (each a “Liquidation Event”), after payment or provision for payment of debts and other liabilities of the Company, the holders of Series E Preferred Stock would have been entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount with respect to each share of Series E Preferred Stock equal to $1,000, plus any accrued but unpaid dividends thereon (the “Series E Liquidation Value”), before any distribution or payment would have been made to the holders of Common Stock. Subject to the rights of the holders of Series D Preferred Stock, at any time that fewer than 250 shares of Series E Preferred Stock remained outstanding, upon the occurrence of any Liquidation Event, after payment or provision for payment of debts and other liabilities of the Company, pari passu with any distribution or payment made to the holders of Common Stock by reason of their ownership thereof, the holders of Series E Preferred Stock would have been entitled to be paid out of the assets of the Company available for distribution to its stockholders the Series E Liquidation Value. For so long as at least 250 shares of Series E Preferred Stock remained outstanding, if, upon the occurrence of any Liquidation Event, the amounts payable with respect to the shares of Series E Preferred Stock are not paid in full, the holders of shares of Series E Preferred Stock would have shared equally and ratably with each other in any distribution of assets of the Company in proportion to the Series E Liquidation Value, if any, to which each such holder was entitled, before any distribution or payment shall have been made to holders of Common Stock. At any time that fewer than 250 shares of Series E Preferred Stock remained outstanding, if, upon the occurrence of any Liquidation Event, the amounts payable with respect to the shares of Series E Preferred Stock were not paid in full, the holders of shares of Series E Preferred Stock would have received the Series E Liquidation Value per share of Series E Preferred Stock on a proportionate and pari passu basis with the holders of Common Stock. | ||||||||||||||||||||||||||
The holders of Series E Preferred Stock were not entitled to vote on any matters presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), except that the holders of Series E Preferred Stock may have voted separately as a class on any matters that would (i) amend our Restated Articles of Organization, as amended, in a manner that adversely affects the rights of the Series E Preferred Stock, (ii) alter or change adversely the powers, preferences or rights of the Series E Preferred Stock or alter or amend the certificate of designation, (iii) authorize or create any class of shares ranking as to dividends, redemption or distribution of assets upon liquidation senior to, or otherwise pari passu with, the Series E Preferred Stock, or (iv) increase the number of authorized shares of Series E Preferred Stock. | ||||||||||||||||||||||||||
No shares of Series E Convertible Preferred Stock remained outstanding as of December 31, 2012. | ||||||||||||||||||||||||||
Series G Convertible Preferred Stock | ||||||||||||||||||||||||||
On July 6 and November 15, 2012, we completed a private placement, pursuant to which we sold an aggregate of 145,320 units for a purchase price of $5.00 per unit (the “Series G Purchase Price”), resulting in gross proceeds to us of $726,600 (the “Series G Private Placement”). Each unit (“Series G Unit”) consists of (i) one share of Series G Convertible Preferred Stock, $0.01 par value per share (the “Series G Preferred Stock”) convertible into 10 shares of our Common Stock, (subject to adjustment for stock splits, stock dividends, recapitalization, etc.) and (ii) a three-year warrant to purchase 5 shares of our Common Stock at a per share exercise price of $0.50 (the “Series G Warrant”). The Series G Warrants will be exercisable until the close of business on the third anniversary of the applicable closing date of the Series G Private Placement. Of the $726,600 invested in the Series G Private Placement, $31,100 was received in cash and $695,500 was from the conversion of outstanding indebtedness and accrued board of directors’ fees. | ||||||||||||||||||||||||||
Each share of Series G Preferred Stock will receive a cumulative dividend at the annual rate of (i) four percent (4%) on those shares of Series G Preferred Stock purchased from the Company by an individual purchaser with an aggregate investment of less than $100,000, (ii) six percent (6%) on those shares of Series G Preferred Stock purchased from the Company by an individual purchaser with an aggregate investment of at least $100,000 but less than $250,000, and (iii) twelve percent (12%) on those shares of Series G Preferred Stock purchased from the Company by an individual purchaser with an aggregate investment of at least $250,000. Dividends accruing on the Series G Preferred Stock shall accrue from day to day until, and shall be paid within fifteen (15) days of, the first anniversary of, the original issue date of the Series G Preferred Stock; provided, however, if any shares of the Company’s Series E Preferred Stock are outstanding at such time, payment of the accrued dividends on the Series G Preferred Stock shall be deferred until no such shares of Series E Convertible Preferred Stock remain outstanding. The Company may pay accrued dividends on the Series G Preferred Stock in cash or in shares of its Common Stock equal to the volume weighted average price of the Common Stock as reported by the OTC QB Market for the ten (10) trading days immediately preceding the Series G’s first anniversary. | ||||||||||||||||||||||||||
At the election of the Company and upon required advanced notice, each share of Series G Preferred Stock will automatically be converted into shares of Common Stock at the Conversion Ratio then in effect: (i) if, after 6 months from the original issuance date of the Series G Preferred Stock, the Common Stock trades on the OTC QB Market (or other primary trading market or exchange on which the Common Stock is then traded) at a price equal to at least $0.75, for 7 out of 10 consecutive trading days with average daily trading volume of at least 10,000 shares, (ii) on or after the first anniversary of the original issuance date of the Series G Preferred Stock or (iii) upon completion of a firm-commitment underwritten registered public offering by the Company at a per share price equal to at least $0.75, with aggregate gross proceeds to the Company of not less than $2.5 million. Unless waived under certain circumstances by the holder of the Series G Preferred Stock, such holder’s Series G Preferred Stock may not be converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. | ||||||||||||||||||||||||||
The holders of Series G Preferred Stock are not entitled to vote on any matters presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), except as required by law. | ||||||||||||||||||||||||||
Series G Warrants | ||||||||||||||||||||||||||
The Series G Warrants issued in the Series G Private Placement have an exercise price equal to $0.50 per share, with a term expiring on July 6, 2015. The Series G Warrants also permit the holder to conduct a “cashless exercise” at any time the holder of the Series G Warrant is an affiliate of the Company. The exercise price and/or number of shares issuable upon exercise of the Series G Warrants will be subject to adjustment for stock dividends, stock splits or similar capital reorganizations, as set forth in the Series G Warrants. | ||||||||||||||||||||||||||
Subject to the terms and conditions of the Series G Warrants, at any time commencing six months from the closing date the Company has the right to call for cancellation of the Series G Warrants if the volume weighted average price of its Common Stock on the OTC QB Market (or other primary trading market or exchange on which our Common Stock is then traded) equals or exceeds three times the per share exercise price of the Warrants for either (i) 10 consecutive trading days or (ii) 15 out of 25 consecutive trading days. | ||||||||||||||||||||||||||
In connection with our sale of Series G Units, we agreed that for each share of Series G Preferred Stock purchased by an investor, the exercise price of one warrant to purchase one share of Common Stock, previously issued to the investor in prior offerings by the Company to purchase Common Stock of the Company held of record by such investor, shall be reduced to $0.60 per share and will remain at such reduced exercise price until the expiration date of the warrants. | ||||||||||||||||||||||||||
In connection with the sale of Series G Units, we treated the reduction in exercise price as a warrant amendment and calculated the fair value of 1,495,022 warrants with the reduced exercise price of $0.60, as described above, using the Black-Scholes model with the below assumptions. The Company has determined that the fair value of the amended warrants increased as compared with the fair value of the original warrants immediately prior to amendment. | ||||||||||||||||||||||||||
In connection with the warrant amendments, we calculated the fair value of the warrants, as described above, using a Black-Scholes model with the below assumptions. | ||||||||||||||||||||||||||
Assumptions | Series A | Series A | Series B | Series C | Aug/Sep 2011 | Feb-12 | ||||||||||||||||||||
(Affiliates) | Notes | PIPE | ||||||||||||||||||||||||
Contractual life, in years | 4.1 | 3.1 | 3.1 | 5.1 | 2.1 | 4.6 | ||||||||||||||||||||
Expected volatility | 132 | % | 114.1 | % | 114.1 | % | 121.9 | % | 126.6 | % | 126.6 | % | ||||||||||||||
Risk-free interest rate | 0.4 | % | 0.4 | % | 0.4 | % | 0.4 | % | 0.4 | % | 0.4 | % | ||||||||||||||
Exercise price | $ | 0.6 | $ | 0.6 | $ | 0.6 | $ | 0.6 | $ | 0.6 | $ | 0.6 | ||||||||||||||
Fair value per warrant | $ | 0.03 | $ | 0.03 | $ | 0.03 | $ | 0.03 | $ | 0.03 | $ | 0.03 | ||||||||||||||
We recorded an increased incremental value of $5,347 for the warrant amendment and treated the excess of fair value of the warrants as a deemed dividend for the year ended December 31, 2012. | ||||||||||||||||||||||||||
Series H Convertible Preferred Stock | ||||||||||||||||||||||||||
On December 28, 2012 the Company amended the Articles of Incorporation to authorize 10,000 shares of Series H Convertible Preferred Stock. On January 4, 2013, the Company reported that it had entered into a securities purchase and exchange agreement with an investor, pursuant to which the Company agreed to exchange 1,000,000 shares of the Company’s common stock, par value $0.01 per share of common stock held by the investor for an aggregate of 10,000 shares of a newly created series of preferred stock, designated Series H Convertible Preferred Stock, par value $0.01 per share (the “Series H Preferred Stock”) in a non-cash transaction. The investor originally purchased the common stock from the Company for $0.8025 per share. The exchange ratio was 100 shares of common stock per share of Series H Preferred Stock at a stated conversion price of $0.8025 per share. | ||||||||||||||||||||||||||
Series J Convertible Preferred Stock | ||||||||||||||||||||||||||
On February 6, March 28 and May 20, 2013, the Company entered into a Securities Purchase with various individuals pursuant to which the Company sold an aggregate of 5,087.5 units for a purchase price of $400.00 per unit (the “Purchase Price”), or an aggregate Purchase Price of $2,034,700. Each unit purchased in the initial tranche consists of (i) one share of a newly created series of preferred stock, designated Series J Convertible Preferred Stock, par value $0.01 per share (the “Series J Convertible Preferred Stock”), convertible into 1,000 shares of the Company’s common stock, par value $0.01 per share and (ii) a warrant to purchase 1,000 shares of common stock at an exercise price equal to $0.40 per share. The warrants expire three years from the issuance date. Of the $2,034,700 invested in the Private Placement, $921,000 was received in cash and $1,113,700 was from the conversion of outstanding indebtedness, interest and accrued board of directors’ fees. The Company incurred $24,405 of legal fees in conjunction with this private placement. The purchasers in the initial tranche of the private placement consisted of certain existing and new investors in the Company as well as all of the members of the Company’s Board of Directors. | ||||||||||||||||||||||||||
From the date of issuance of any shares of Series J Convertible Preferred Stock and until the earlier of the first anniversary of such date, the voluntary conversion of any shares of Series J Convertible Preferred Stock, or the date of any mandatory conversion of the Series J Convertible Preferred Stock, dividends will accrue on each share of Series J Convertible Preferred Stock at an annual rate of (i) four percent (4%) of the Purchase Price on those shares of Series J Convertible Preferred Stock purchased from the Company pursuant to the Securities Purchase Agreement by an individual purchaser who purchased from the Company shares of Series J Convertible Preferred Stock with an aggregate Purchase Price of less than $250,000, and (ii) six percent (6%) of the Purchase Price on those shares of Series J Convertible Preferred Stock purchased from the Company pursuant to the Securities Purchase Agreement by an individual purchaser who purchased shares of Series J Convertible Preferred Stock with an aggregate purchase price of at least $250,000. Dividends accruing on the Series J Convertible Preferred Stock shall accrue from day to day until the earlier of the first anniversary of the date of issuance of such shares of Series J Convertible Stock, the voluntary conversion of any shares of Series J Convertible Preferred Stock, or the date of any mandatory conversion of the Series J Convertible Preferred Stock, and shall be paid, as applicable, within fifteen (15) days of the first anniversary of the original issue date of the Series J Convertible Preferred Stock, within five (5) days of the voluntary conversion of shares of the Series J Convertible Preferred Stock, or within five (5) days of the mandatory conversion of shares of the Series J Convertible Preferred Stock. The Company may pay accrued dividends on the Series J Convertible Preferred Stock in cash or, in the sole discretion of the Board of Directors of the Company, in shares of its common stock in accordance with a specified formula. | ||||||||||||||||||||||||||
Each share of Series J Convertible Preferred Stock is convertible into 1,000 shares of common stock at the option of the holder on or after the six-month anniversary of the issuance of such share, subject to adjustment for stock splits, stock dividends, recapitalizations and similar transactions (the “Conversion Ratio”). Unless waived under certain circumstances by the holder of Series J Convertible Preferred Stock, such holder’s shares of Series J Convertible Preferred Stock may not be converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. | ||||||||||||||||||||||||||
At the election of the Company and upon required advance notice, each share of Series J Convertible Preferred Stock will automatically be converted into shares of common stock at the Conversion Ratio then in effect: (i) on or after the six-month anniversary of the original issuance date of the Series J Convertible Preferred Stock, the common stock trades on the OTC QB Market (or other primary trading market or exchange on which the common stock is then traded) at a price per share equal to at least $0.80 for 7 out of 10 consecutive trading days with average daily trading volume of at least 50,000 shares, (ii) on the first anniversary of the original issuance date of the Series J Convertible Preferred Stock or (iii) within three days of the completion of a firm-commitment underwritten registered public offering by the Company at a per share price equal to at least $0.80, with aggregate gross proceeds to the Company of not less than $2.5 million. Unless waived under certain circumstances by the holder of the Series J Convertible Preferred Stock, such holder’s Series J Convertible Preferred Stock may not be converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. | ||||||||||||||||||||||||||
The proceeds from the sale of each Series J Unit were allocated between the Series J Convertible Preferred Stock and the Series J Warrants based on the relative fair value method. The estimated fair value of the Series J Warrants was determined using a Black Scholes formula, resulting in an allocation of the gross proceeds of $885,309 to the total warrants issued. The allocation of the gross proceeds to the Series J Convertible Preferred Stock was $1,124,986, net of $24,405 in legal costs. In accordance with the provisions of ASC 470-20, an additional adjustment between Additional Paid in Capital and Accumulated Deficit of $651,182 was recorded to reflect an implicit non-cash dividend related to the allocation of proceeds between the stock and warrants issued. The $651,182 represents the value of the adjustment to additional paid in capital related to the beneficial conversion feature of the Series J Convertible Preferred Stock. The value adjustment was calculated by subtracting the fair market value of the underlying common stock on February 6, March 28 and May 20, 2013 issuable upon conversion of the Series J Convertible Preferred Stock from the fair market value of the Series J Convertible Preferred Stock as determined when the Company performed a fair market value allocation of the proceeds to the Series J Convertible Preferred Stock and warrants. | ||||||||||||||||||||||||||
In connection with the Series J warrants, we calculated the fair value of the warrants received as described above using the Black- Scholes formula with the below assumptions: | ||||||||||||||||||||||||||
Assumptions | Series J warrants February 6, | Series J warrants | Series J warrants | |||||||||||||||||||||||
2013 | March 28, | May 20, | ||||||||||||||||||||||||
2013 | 2013 | |||||||||||||||||||||||||
Contractual life (in months) | 36 | 36 | 36 | |||||||||||||||||||||||
Expected volatility | 141.8 | 144.3 | 147 | |||||||||||||||||||||||
Risk-free interest rate | 0.39 | % | 0.36 | % | 0.36 | % | ||||||||||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | $ | 0.4 | ||||||||||||||||||||
Fair value per warrant | $ | 0.36 | $ | 0.26 | $ | 0.3 | ||||||||||||||||||||
The holders of Series J Convertible Preferred Stock are not entitled to vote on any matters presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), except as required by law. | ||||||||||||||||||||||||||
Series J Warrants | ||||||||||||||||||||||||||
The Warrants issued in the Private Placement have an exercise price equal to $0.40 per share, with a term expiring three years from the issuance date. The Warrants also permit the holder to conduct a “cashless exercise” at any time the holder of the Warrant is an affiliate of the Company. The exercise price and/or number of shares issuable upon exercise of the Warrants will be subject to adjustment for stock dividends, stock splits or similar capital reorganizations, as set forth in the Warrant agreement. | ||||||||||||||||||||||||||
Subject to the terms and conditions of the Warrants, at any time commencing six months from the closing date of the sale of Units under the Securities Purchase Agreement the Company has the right to call the Warrants for cancellation if the volume weighted average price of its common stock on the OTC QB Market (or other primary trading market or exchange on which the common stock is then traded) equals or exceeds three times the per share exercise price of the Warrants for either (i) 10 consecutive trading days or (ii) 15 out of 25 consecutive trading days. | ||||||||||||||||||||||||||
Registration Rights Agreement | ||||||||||||||||||||||||||
In connection with the Private Placement, the Company has agreed that, if, at any time after February 1, 2014, the Company files a Registration Statement relating to an offering of equity securities of the Company (the “Registration Statement”), subject to certain exceptions, including a Registration Statement relating solely to an offering or sale of securities having an aggregate public offering price of less than $5,000,000, the Company shall include in the Registration Statement the resale of the shares of common stock underlying the Warrants. Shares of common stock issued upon conversion of Series J Convertible Preferred Stock or in payment of the dividend on the Series J Convertible Preferred Stock will not be registered and will not be subject to registration rights. This right is subject to customary conditions and procedures. | ||||||||||||||||||||||||||
Series K Convertible Preferred Stock | ||||||||||||||||||||||||||
On December 12, 2013, the Company entered into a Securities Purchase with various individuals pursuant to which the Company sold an aggregate of 4,000 units for a purchase price of $250.00 per unit (the “Purchase Price”), for an aggregate Purchase Price of $1,000,000. Each unit purchased in the initial tranche consists of (i) one share of a newly created series of preferred stock, designated Series K Convertible Preferred Stock, par value $0.01 per share (the “Series K Convertible Preferred Stock”), convertible into 1,000 shares of the Company’s common stock, par value $0.01 per share and (ii) a warrant to purchase 500 shares of common stock at an exercise price equal to $0.3125 per share. The warrants expire three years from the issuance date. Of the $1,000,000 invested in the Private Placement, $527,044 was received in cash and $427,956 was from the conversion of outstanding indebtedness and interest. The Company incurred $43,334 of fees in conjunction with this private placement. The purchasers in the initial tranche of the private placement consisted of certain existing and new investors in the Company as well as all of the members of the Company’s Board of Directors. | ||||||||||||||||||||||||||
From the date of issuance of any shares of Series K Convertible Preferred Stock and until the earlier of the first anniversary of such date, the voluntary conversion of any shares of Series K Convertible Preferred Stock, or the date of any mandatory conversion of the Series K Convertible Preferred Stock, dividends will accrue on each share of Series K Convertible Preferred Stock at an annual rate of (i) four percent (4%) of the Purchase Price on those shares of Series K Convertible Preferred Stock purchased from the Company pursuant to the Securities Purchase Agreement by an individual purchaser who purchased from the Company shares of Series K Convertible Preferred Stock with an aggregate Purchase Price of less than $100,000, and (ii) six percent (6%) of the Purchase Price on those shares of Series K Convertible Preferred Stock purchased from the Company pursuant to the Securities Purchase Agreement by an individual purchaser who purchased shares of Series K Convertible Preferred Stock with an aggregate purchase price of at least $100,000. Dividends accruing on the Series K Convertible Preferred Stock shall accrue from day to day until the earlier of the first anniversary of the date of issuance of such shares of Series K Convertible Stock, the voluntary conversion of any shares of Series K Convertible Preferred Stock, or the date of any mandatory conversion of the Series K Convertible Preferred Stock, and shall be paid, as applicable, within fifteen (15) days of the first anniversary of the original issue date of the Series K Convertible Preferred Stock, within five (5) days of the voluntary conversion of shares of the Series K Convertible Preferred Stock, or within five (5) days of the mandatory conversion of shares of the Series K Convertible Preferred Stock. The Company may pay accrued dividends on the Series K Convertible Preferred Stock in cash or, in the sole discretion of the Board of Directors of the Company, in shares of its common stock in accordance with a specified formula. | ||||||||||||||||||||||||||
Each share of Series K Convertible Preferred Stock is convertible into 1,000 shares of common stock at the option of the holder on or after the six-month anniversary of the issuance of such share, subject to adjustment for stock splits, stock dividends, recapitalizations and similar transactions (the “Conversion Ratio”). Unless waived under certain circumstances by the holder of Series K Convertible Preferred Stock, such holder’s shares of Series K Convertible Preferred Stock may not be converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. | ||||||||||||||||||||||||||
At the election of the Company and upon required advance notice, each share of Series K Convertible Preferred Stock will automatically be converted into shares of common stock at the Conversion Ratio then in effect: (i) on or after the six-month anniversary of the original issuance date of the Series K Convertible Preferred Stock, the common stock trades on the OTC QB Market (or other primary trading market or exchange on which the common stock is then traded) at a price per share equal to at least $0.80 for 7 out of 10 consecutive trading days with average daily trading volume of at least 50,000 shares, (ii) on the first anniversary of the original issuance date of the Series K Convertible Preferred Stock or (iii) within three days of the completion of a firm-commitment underwritten registered public offering by the Company at a per share price equal to at least $0.80, with aggregate gross proceeds to the Company of not less than $2.5 million. Unless waived under certain circumstances by the holder of the Series K Convertible Preferred Stock, such holder’s Series K Convertible Preferred Stock may not be converted if upon such conversion the holder’s beneficial ownership would exceed certain thresholds. | ||||||||||||||||||||||||||
The proceeds from the sale of each Series K Unit were allocated between the Series K Convertible Preferred Stock and the Series K Warrants based on the relative fair value method. The estimated fair value of the Series K Warrants was determined using a Black-Scholes formula, resulting in an allocation of the gross proceeds of $271,422 to the total warrants issued. The allocation of the gross proceeds to the Series K Convertible Preferred Stock was $685,245, net of $43,334 in fees. In accordance with the provisions of ASC 470-20, an additional adjustment between Additional Paid in Capital and Accumulated Deficit of $351,421 was recorded to reflect an implicit non-cash dividend related to the allocation of proceeds between the stock and warrants issued. The $351,421 represents the value of the adjustment to additional paid in capital related to the beneficial conversion feature of the Series K Convertible Preferred Stock. The value adjustment was calculated by subtracting the fair market value of the underlying common stock on December 12, 2013 issuable upon conversion of the Series K Convertible Preferred Stock from the fair market value of the Series K Convertible Preferred Stock as determined when the Company performed a fair market value allocation of the proceeds to the Series K Convertible Preferred Stock and warrants. | ||||||||||||||||||||||||||
In connection with the Series K warrants, we calculated the fair value of the warrants received as described above using the Black- Scholes formula with the below assumptions: | ||||||||||||||||||||||||||
Assumptions | Series K warrants | |||||||||||||||||||||||||
December 12, | ||||||||||||||||||||||||||
2013 | ||||||||||||||||||||||||||
Contractual life (in months) | 36 | |||||||||||||||||||||||||
Expected volatility | 136.1 | |||||||||||||||||||||||||
Risk-free interest rate | 0.39 | % | ||||||||||||||||||||||||
Exercise price | $ | 0.3125 | ||||||||||||||||||||||||
Fair value per warrant | $ | 0.2012 | ||||||||||||||||||||||||
The holders of Series K Convertible Preferred Stock are not entitled to vote on any matters presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), except as required by law. | ||||||||||||||||||||||||||
Series K Warrants | ||||||||||||||||||||||||||
The Warrants issued in the Private Placement have an exercise price equal to $0.3125 per share, with a term expiring three years from the issuance date. The Warrants also permit the holder to conduct a “cashless exercise” at any time the holder of the Warrant is an affiliate of the Company. The exercise price and/or number of shares issuable upon exercise of the Warrants will be subject to adjustment for stock dividends, stock splits or similar capital reorganizations, as set forth in the Warrant agreement. | ||||||||||||||||||||||||||
Subject to the terms and conditions of the Warrants, at any time commencing six months from the closing date of the sale of Units under the Securities Purchase Agreement the Company has the right to call the Warrants for cancellation if the volume weighted average price of its common stock on the OTC QB Market (or other primary trading market or exchange on which the common stock is then traded) equals or exceeds three times the per share exercise price of the Warrants for either (i) 10 consecutive trading days or (ii) 15 out of 25 consecutive trading days. | ||||||||||||||||||||||||||
Registration Rights Agreement | ||||||||||||||||||||||||||
In connection with the Private Placement, the Company has agreed that, if, at any time after February 1, 2014, the Company files a Registration Statement relating to an offering of equity securities of the Company (the “Registration Statement”), subject to certain exceptions, including a Registration Statement relating solely to an offering or sale of securities having an aggregate public offering price of less than $5,000,000, the Company shall include in the Registration Statement the resale of the shares of common stock underlying the Warrants. Shares of common stock issued upon conversion of Series K Convertible Preferred Stock or in payment of the dividend on the Series K Convertible Preferred Stock will not be registered and will not be subject to registration rights. This right is subject to customary conditions and procedures. | ||||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||||
Shareholders Purchase Rights Plan | ||||||||||||||||||||||||||
On March 3, 2003, our Board of Directors adopted a shareholder purchase rights plan (“the Rights Plan”) and declared a distribution of one Right for each outstanding share of our Common Stock to shareholders of record at the close of business on March 21, 2003 (the “Rights”). Initially, the Rights will trade automatically with the Common Stock and separate Right Certificates will not be issued. The Rights Plan is designed to deter coercive or unfair takeover tactics and to ensure that all of our shareholders receive fair and equal treatment in the event of an unsolicited attempt to acquire the Company. The Rights Plan was not adopted in response to any effort to acquire the Company and the Board is not aware of any such effort. The Rights will expire on February 27, 2013 unless earlier redeemed or exchanged. Each Right entitles the registered holder, subject to the terms of a Rights Agreement, to purchase from the Company one one-thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at a purchase price of $45.00 per one one-thousandth of a share, subject to adjustment. In general, the Rights will not be exercisable until a subsequent distribution date which will only occur if a person or group acquires beneficial ownership of 15% or more of our Common Stock or announces a tender or exchange offer that would result in such person or group owning 15% or more of the Common Stock. With respect to any person or group who currently beneficially owns 15% or more of our Common Stock, the Rights will not become exercisable unless and until such person or group acquires beneficial ownership of additional shares of Common Stock. | ||||||||||||||||||||||||||
Subject to certain limited exceptions, if a person or group acquires beneficial ownership of 15% or more of our outstanding Common Stock or if a current 15% beneficial owner acquires additional shares of Common Stock, each holder of a Right (other than the 15% holder whose Rights become void once such holder reaches the 15% threshold) will thereafter have a right to purchase, upon payment of the purchase price of the Right, that number of shares of our Common Stock which at the time of such transaction will have a market value equal to two times the purchase price of the Right In the event that, at any time after a person or group acquires 15% or more of our Common Stock, we are acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earning power are sold, each holder of a Right will thereafter have the right to purchase, upon payment of the purchase price of the Right, that number of shares of Common Stock of the acquiring company which at the time of such transaction will have a market value of two times the purchase price of the Right. | ||||||||||||||||||||||||||
Our Board of Directors may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of Common Stock per Right (subject to adjustment). At any time prior to the time any person or group acquires 15% or more of our Common Stock, the Board of Directors may redeem the Rights in whole, but not in part, at a price of $0.001 per Right. | ||||||||||||||||||||||||||
Stock Options and Warrants | ||||||||||||||||||||||||||
Our stockholders approved our amended 2005 Equity Incentive Plan (the “Plan”) pursuant to which an aggregate of 1,800,000 shares of our Common Stock were reserved for issuance upon exercise of stock options or other equity awards made under the Plan. Under the Plan, we may award stock options, shares of Common Stock, and other equity interests in the Company to employees, officers, directors, consultants, and advisors, and to any other persons the Board of Directors deems appropriate. As of December 31, 2013, options to acquire 1,738,708 shares were outstanding under the Plan with 61,292 shares available for future grant under the Plan. | ||||||||||||||||||||||||||
As of December 31, 2013, options to acquire 33,000 shares are outstanding under the 1999 Non-qualified Stock Option Plan. No additional options may be granted under the 1999 Non-qualified Stock Option Plan. | ||||||||||||||||||||||||||
All of the outstanding options had an exercise price that was above the Company’s Common Stock share price on December 31, 2013. | ||||||||||||||||||||||||||
On December 12, 2013 at the Company’s special meeting the shareholders approved the 2013 Equity Incentive Plan (the “2013 Plan”) pursuant to which 3,000,000 shares of our Common Stock were reserved for issuance upon exercise of stock options or other equity awards under the 2013 Plan. Under the Plan, we may award stock options, shares of Common Stock, and other equity interests in the Company to employees, officers, directors, consultants, and advisors, and to any other persons the Board of Directors deems appropriate. As of December 31, 2013 no options have been granted under the 2013 Plan. | ||||||||||||||||||||||||||
The following tables summarize information concerning options and warrants outstanding and exercisable: | ||||||||||||||||||||||||||
Stock Options | Warrants | |||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||
Average price | Average price | Total | ||||||||||||||||||||||||
Shares | per share | Shares | per share | Shares | Exercisable | |||||||||||||||||||||
Balance outstanding, January 1, 2012 | 1,508,500 | $ | 2.33 | 4,775,501 | $ | 1.35 | 6,284,001 | 6,112,335 | ||||||||||||||||||
Granted | 1,896,250 | 0.81 | 2,909,068 | 0.62 | 4,805,318 | |||||||||||||||||||||
Exercised | - | - | - | - | - | |||||||||||||||||||||
Expired | (130,000 | ) | 2.28 | (116,490 | ) | 2.8 | (246,490 | ) | ||||||||||||||||||
Forfeited | (1,669,000 | ) | 2.09 | (880,980 | ) | 2.13 | (2,549,980 | ) | ||||||||||||||||||
Balance outstanding, December 31, 2012 | 1,605,750 | $ | 0.8 | 6,687,099 | $ | 0.81 | 8,292,849 | 7,989,331 | ||||||||||||||||||
Granted | 363,500 | 0.41 | 8,346,228 | 0.37 | 8,709,728 | |||||||||||||||||||||
Exercised | - | - | - | - | - | |||||||||||||||||||||
Expired | (10,000 | ) | 1 | (21,000 | ) | 2.38 | (31,000 | ) | ||||||||||||||||||
Forfeited | (187,542 | ) | 0.85 | - | - | (187,542 | ) | |||||||||||||||||||
Balance outstanding, December 31, 2013 | 1,771,708 | $ | 0.71 | 15,012,327 | $ | 0.57 | 16,784,035 | 16,611,528 | ||||||||||||||||||
The weighted average grant date fair value of options issued was $0.35 for the year ending December 31, 2013. | ||||||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
Weighted Average | Weighted Average | |||||||||||||||||||||||||
Range of Exercise Prices | Number of Options | Remaining Contractual Life (Years) | Exercise Price | Number of Options | Remaining Contractual Life (Years) | Exercise Price | ||||||||||||||||||||
$0.00 - $0.49 | 321,000 | 9.4 | $ | 0.4 | 255,208 | 9.4 | $ | 0.4 | ||||||||||||||||||
0.50 - 0.59 | 251,250 | 8.6 | 0.5 | 251,250 | 8.6 | 0.5 | ||||||||||||||||||||
0.60 - 0.99 | 475,250 | 6 | 0.6 | 416,658 | 5.7 | 0.6 | ||||||||||||||||||||
1.00 - 1.50 | 724,208 | 3.2 | 1 | 676,085 | 2.9 | 1 | ||||||||||||||||||||
$0.50 - $1.00 | 1,771,708 | 5.9 | $ | 0.71 | 1,599,201 | 5.6 | $ | 0.72 | ||||||||||||||||||
There was $65,953 of total unrecognized compensation cost, net of estimated forfeitures, related to non-vested stock options granted as of December 31, 2013. This cost is expected to be recognized over a period of 2.1 years, and will be adjusted for any future changes in estimated forfeitures. | ||||||||||||||||||||||||||
Sale of Common Stock | ||||||||||||||||||||||||||
On February 7, 2012, we completed a private placement with 7 accredited investors, pursuant to which we sold an aggregate of 971,867 shares of Common Stock, $0.01 par value (“Shares”), resulting in gross proceeds to us of $800,000 (the “Private Placement”). The price per unit was $0.8025 for units consisting of 789,350 shares of Common Stock and warrants to purchase 394,677 shares of Common Stock, and was $0.9125 for units consisting of the remaining 182,517 shares of Common Stock and warrants to purchase 91,260 shares of Common Stock. Of the $800,000 invested in the private placement, $412,453 was received in cash and $387,547 was from the conversion of outstanding principal and interest on convertible promissory notes issued by us in 2011. | ||||||||||||||||||||||||||
Each unit consists of one share of Common Stock and a warrant to purchase one-half share of Common Stock. The warrants are exercisable for a period of five years, commencing on August 7, 2012, at an exercise price of $0.74 per share for the purchasers of the 789,350 shares, and $0.85 per share for the purchasers of the 182,517 shares. The warrants permit the holder to conduct a “cashless exercise” at any time the holder is an affiliate. The exercise price and/or number of shares of Common Stock issuable upon exercise of the warrants will be subject to adjustment for certain stock dividends, stock splits or similar capital reorganizations. | ||||||||||||||||||||||||||
In connection with the Private Placement, we paid our investment banker a fee of $35,000 for providing advisory services. We accounted for this fee as a reduction in the gross proceeds received from the Private Placement. | ||||||||||||||||||||||||||
Common Stock Issuances | ||||||||||||||||||||||||||
On February 1, 2013, we issued 100,000 shares of restricted Common Stock to an investor relations firm in payment of services to be rendered over eight months. We recorded $40,000 for this issuance of which will be amortized over the eight months. On March 18, 2013, we issued 200,000 shares of restricted Common Stock to an investor relations firm for payment of services to be rendered over eight months. We recorded $80,000 for this issuance as expense. On August 1, 2013, we issued 200,000 shares of restricted Common Stock to an investor relations firm for payment of services to be rendered over six months. We recorded $80,000 for this issuance and recognized $66,087 as expense in 2013 with $13,913 to be expensed in 2014. On September 1, 2013, we issued 200,000 shares of restricted Common Stock to an investor relations firm for payment of services to be rendered over three months. We recorded $80,000 for this issuance which was recorded as expense in 2013. On September 10, 2013, we issued 100,000 shares of restricted Common Stock to an investor relations firm for payment of services to be rendered over four months. We recorded $40,000 for this issuance and recognized expense of $36,721 in 2013 with $3,279 to be expensed in 2014. On December 23, 2013 we issued 75,000 shares of restricted Common Stock to a lender in connection with the sale of debentures. We recognized $17,250 as deferred financing costs that will be recognized over the life of the note. We valued the above stock issuances using the greater of the estimated fair value of the services received or the Company’s stock price on date of issuance. | ||||||||||||||||||||||||||
Warrant Derivative Liability | ||||||||||||||||||||||||||
The Series D Warrants issued in connection with the registered direct offering of Series D Convertible Preferred are measured at fair value and liability-classified because the Series D Warrants contain “down-round protection” and therefore, do not meet the scope exception for treatment as a derivative under ASC 815, Derivatives and Hedging, (“ASC 815”). Since “down-round protection” is not an input into the calculation of the fair value of the warrants, the warrants cannot be considered indexed to the Company’s own stock which is a requirement for the scope exception as outlined under ASC 815. The estimated fair value of the warrants was determined using the binomial model, resulting in an allocation of the gross proceeds $283,725 to the warrants issued in the Series D registered direct offering. The fair value will be affected by changes in inputs to that model including our stock price, expected stock price volatility, the contractual term, and the risk-free interest rate. We will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire or are amended in a way that would no longer require these warrants to be classified as a liability, whichever comes first. The down-round protection for the Series D Warrants survives for the life of the Series D Warrants which ends in May 2017. | ||||||||||||||||||||||||||
The assumptions for the binomial pricing model are represented in the table below for the warrants issued in the Series D private placement reflected on a per share Common Stock equivalent basis. | ||||||||||||||||||||||||||
Assumptions | November 10, | Warrants revalued at | Warrants revalued at | |||||||||||||||||||||||
2011 | December 31, | December 31, | ||||||||||||||||||||||||
2012 | 2013 | |||||||||||||||||||||||||
Expected life (in months) | 60 | 43 | 34 | |||||||||||||||||||||||
Expected volatility | 104.5 | % | 146.4 | % | 154.8 | % | ||||||||||||||||||||
Risk-free interest rate | 0.875 | % | 0.437 | % | 0.78 | % | ||||||||||||||||||||
Exercise price | $ | 0.81 | $ | 0.4 | $ | 0.25 | ||||||||||||||||||||
Fair value per warrant | $ | 0.54 | $ | 0.15 | $ | 0.21 | ||||||||||||||||||||
As of December 31, 2013, the value of the Series D Warrants had increased to $344,570. | ||||||||||||||||||||||||||
Conversion Option Liability | ||||||||||||||||||||||||||
The Company signed five convertible notes and has determined that conversion options are embedded in the notes and it is required to bifurcate the conversion option from the host contract under ASC 815 and account for the derivatives at fair value. The estimated fair value of the conversion options was determined using the binomial model. The fair value of the conversion options will be classified as a liability until the debt is converted by the note holders or paid back by the Company. The fair value will be affected by changes in inputs to that model including our stock price, expected stock price volatility, the contractual term, and the risk-free interest rate. We will continue to classify the fair value of the conversion options as a liability until the conversion options are exercised, expire or are amended in a way that would no longer require these conversion options to be classified as a liability, whichever comes first. The Company has adopted a sequencing policy that reclassifies contracts (from equity to liabilities) with the most recent inception date first. Thus any available shares are allocated first to contracts with the most recent inception dates. | ||||||||||||||||||||||||||
The assumptions for the binomial pricing model are disclosed in Note 2. As of December 31, 2013, the value of the Conversion Option liability was $356,197. | ||||||||||||||||||||||||||
10_Subsequent_Events
10. Subsequent Events | 12 Months Ended | |
Dec. 31, 2013 | ||
Subsequent Events [Abstract] | ' | |
10. Subsequent Events | ' | |
We performed a review of events subsequent to the balance sheet date through the date the financial statements were issued and determined, except as disclosed herein, that there were no other such events requiring recognition or disclosure in the financial statements. | ||
● | On January 29 and February 28, 2014, the Company entered into a Securities Purchase Agreement with various individuals pursuant to which the Company sold an aggregate of 4,875 units for a purchase price of $250.00 per unit and 1,854 units for a purchase price of $340.00 per unit, respectively, or an aggregate Purchase Price of $1,849,110. This represents the second and third tranches of a $1.5 million private placement which was subsequently increased to $3.5 million and extended to April 4, 2014. Each unit purchased in the second and third tranche (“Unit”) consists of (i) one share of a newly created series of preferred stock, designated Series K Convertible Preferred Stock, par value $0.01 per share convertible into 1,000 shares of the Company’s Common Stock, par value $0.01 per share and (ii) a warrant to purchase 500 shares of Common Stock at an exercise price equal to one hundred and twenty-five percent of the common stock equivalent price per share, with a term expiring three years from the respective closing date. | |
● | In February 2014, the Company chose to pay off the April 11, 2013 and June 26, 2013 loan balances see Note 7. The holder of the note chose to convert $37,500 of the outstanding balance to 150,000 shares of Company common stock, resulting in a cash payment of $203,100. | |
● | On February 6, 2014 the Company paid off the $75,000 balance of the promissory note, see Note 7, along with accrued interest on the note. | |
● | In March 2014, a Series D warrant holder exercised warrants to purchase 450,000 shares of common stock resulting in net proceeds to the Company of $112,500. | |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||||
Principles of Consolidation | ' | ||||||||||||||||
The consolidated financial statements include the accounts of Pressure BioSciences, Inc., and its wholly-owned subsidiary PBI BioSeq, Inc. All intercompany accounts and transactions have been eliminated in consolidation. | |||||||||||||||||
Use of Estimates | ' | ||||||||||||||||
To prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we are required to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates were made in projecting future cash flows to quantify impairment of assets, deferred tax assets, the costs associated with fulfilling our warranty obligations for the instruments that we sell, and the estimates employed in our calculation of fair value of stock options awarded and warrant derivative liability. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from the estimates and assumptions used. | |||||||||||||||||
Revenue Recognition | ' | ||||||||||||||||
Revenue is recognized when realized or earned when all the following criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred and risk of loss has passed to the customer; the seller’s price to the buyer is fixed or determinable; and collectability is reasonably assured. | |||||||||||||||||
Our current instruments, the Barocycler NEP3229 and NEP2320, require a basic level of instrumentation expertise to set-up for initial operation. To support a favorable first experience for our customers, we send a highly trained technical representative to the customer site to install every Barocycler that we sell, lease, or rent through our domestic sales force. The installation process includes uncrating and setting up the instrument, followed by introductory user training. Product revenue related to current Barocycler instrumentation is recognized upon the completion of the installation and introductory training process of the instrumentation at the customer location, for domestic installations. Product revenue related to sales of PCT instrumentation to our foreign distributors is recognized upon shipment through a common carrier. We provide for the expected costs of warranty upon the recognition of revenue for the sales of our instrumentation. Our sales arrangements do not provide our customers with a right of return. Product revenue related to the HUB440 and our consumable products such as PULSE Tubes, MicroTubes, and application specific kits is recorded upon shipment through a common carrier. Shipping costs are included in sales and marketing expense. Any shipping costs billed to customers are recognized as revenue. | |||||||||||||||||
We account for our lease agreements under the operating method. We record revenue over the life of the lease term and we record depreciation expense on a straight-line basis over the thirty-six month estimated useful life of the Barocycler instrument. The depreciation expense associated with assets under lease agreement is included in the “Cost of PCT products and services” line item in our consolidated statements of operations. Many of our lease and rental agreements allow the lessee to purchase the instrument at any point during the term of the agreement with partial or full credit for payments previously made. We pay all maintenance costs associated with the instrument during the term of the leases. | |||||||||||||||||
Revenue from government grants is recorded when expenses are incurred under the grant in accordance with the terms of the grant award. | |||||||||||||||||
Revenue from service contracts is recorded ratably over the length of the contract. | |||||||||||||||||
Our transactions sometimes involve multiple elements (i.e., products and services). Revenue under multiple element arrangements is recognized in accordance with FASB ASC 605-25 Multiple-Element Arrangements (“ASC 605”). When vendor specific objective evidence or third party evidence of selling price for deliverables in an arrangement cannot be determined, the Company develops a best estimate of the selling price to separate deliverables and allocates arrangement consideration using the relative selling price method. If an arrangement includes undelivered elements that are not essential to the functionality of the delivered elements, we defer the fair value of the undelivered elements to such time as they are delivered. Fair value is determined based upon the price charged when the element is sold separately. If there is not sufficient evidence of the fair value of the undelivered elements the Company uses its best estimate of the value of those items and recognizes revenues based on the relative values of the delivered and undelivered items. We provide certain customers with extended service contracts with revenue recognized ratably over the life of the contract. | |||||||||||||||||
Cash and Cash Equivalents | ' | ||||||||||||||||
Our policy is to invest available cash in short-term, investment grade interest-bearing obligations, including money market funds, and bank and corporate debt instruments. Securities purchased with initial maturities of three months or less are valued at cost plus accrued interest, which approximates fair value, and are classified as cash equivalents. | |||||||||||||||||
Research and Development | ' | ||||||||||||||||
Research and development costs, which are comprised of costs incurred in performing research and development activities including wages and associated employee benefits, facilities, consumable products and overhead costs that are expensed as incurred. In support of our research and development activities we utilize our Barocycler instruments that are capitalized as fixed assets and depreciated over their expected useful life. | |||||||||||||||||
Inventories | ' | ||||||||||||||||
Inventories are valued at the lower of cost (average cost) or market (sales price). The cost of Barocyclers consists of the cost charged by the contract manufacturer. The cost of manufactured goods includes material, freight-in, direct labor, and applicable overhead. The composition of inventory as of December 31, 2013 and 2012 is as follows: | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Raw materials | $ | 147,290 | $ | 183,655 | |||||||||||||
Finished goods | 639,386 | 789,707 | |||||||||||||||
Inventory reserve | (50,000 | ) | (50,000 | ) | |||||||||||||
Total | $ | 736,676 | $ | 923,362 | |||||||||||||
Property and Equipment | ' | ||||||||||||||||
Property and equipment are stated at cost, less accumulated depreciation. For financial reporting purposes, depreciation is recognized using the straight-line method, allocating the cost of the assets over their estimated useful lives of three years for certain laboratory equipment, from three to five years for management information systems and office equipment, and three years for all PCT finished units classified as fixed assets. | |||||||||||||||||
Intangible Assets | ' | ||||||||||||||||
We have classified as intangible assets, costs associated with the fair value of acquired intellectual property. Intangible assets, including patents, are being amortized on a straight-line basis over sixteen years. We perform an annual review of our intangible assets for impairment. When impairment is indicated, any excess of carrying value over fair value is recorded as a loss. An impairment analysis of intangible assets was performed as of December 31, 2013. Based on this analysis, we have concluded that no impairment of intangible assets had occurred. | |||||||||||||||||
Long-Lived Assets and Deferred Costs | ' | ||||||||||||||||
The Company’s long-lived assets and other assets are reviewed for impairment in accordance with the guidance of the FASB ASC 360-10-05, Property, Plant, and Equipment, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Through December 31, 2013, the Company had not experienced impairment losses on its long-lived assets. While our current and historical operating losses and cash flow are indicators of impairment, we performed an impairment test at December 31, 2013 and determined that such long-lived assets were not impaired. | |||||||||||||||||
Concentrations | ' | ||||||||||||||||
Credit Risk | |||||||||||||||||
Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents and trade receivables. We have cash investment policies which, among other things, limit investments to investment-grade securities. We perform ongoing credit evaluations of our customers, and the risk with respect to trade receivables is further mitigated by the fact that many of our customers are government institutions and university labs. Allowances are provided for estimated amounts of accounts receivable which may not be collected. At December 31, 2013 and 2012, we determined that no allowance against accounts receivable was necessary. | |||||||||||||||||
The following table illustrates the level of concentration of the below two groups within revenue as a percentage of total revenues during the years ended December 31, 2013 and 2012: | |||||||||||||||||
For the Year Ended | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Top Five Customers | 53 | % | 50 | % | |||||||||||||
Federal Agencies | 33 | % | 41 | % | |||||||||||||
The following table illustrates the level of concentration of the below two groups within accounts receivable as a percentage of total accounts receivable balance as of December 31, 2012 and 2011: | |||||||||||||||||
For the Year Ended | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Top Five Customers | 86 | % | 34 | % | |||||||||||||
Federal Agencies | 16 | % | 32 | % | |||||||||||||
Product Supply | |||||||||||||||||
BIT Group USA, formerly Source Scientific, LLC, has been our sole contract manufacturer for all of our PCT instrumentation. Until we develop a broader network of manufacturers and subcontractors, obtaining alternative sources of supply or manufacturing services could involve significant delays and other costs and challenges, and may not be available to us on reasonable terms, if at all. The failure of a supplier or contract manufacturer to provide sufficient quantities, acceptable quality and timely products at an acceptable price, or an interruption of supplies from such a supplier could harm our business and prospects. | |||||||||||||||||
Computation of 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 by dividing loss available to common shareholders by the weighted average number of common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. For purposes of this calculation, convertible preferred stock, Common Stock dividends, warrants to acquire preferred stock convertible into Common Stock, and warrants and options to acquire Common Stock, are all considered Common Stock equivalents in periods in which they have a dilutive effect and are excluded from this calculation in periods in which these are anti-dilutive. The following table illustrates our computation of loss per share for the years ended December 31, 2013 and 2012. | |||||||||||||||||
For the Year Ended | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Numerator: | |||||||||||||||||
Net loss | $ | (4,084,427 | ) | $ | (3,450,205 | ) | |||||||||||
Accrued dividend for Preferred Stock paid in common stock | - | (278,184 | ) | ||||||||||||||
Deemed dividend on warrant modifications | - | (190,891 | ) | ||||||||||||||
Issuance of common stock for dividends paid in kind | - | (284,116 | ) | ||||||||||||||
Beneficial conversion feature for preferred stock | (1,002,602 | ) | - | ||||||||||||||
Preferred dividends accrued | (100,420 | ) | - | ||||||||||||||
Preferred dividends paid in cash | (60,000 | ) | (196,819 | ) | |||||||||||||
Net loss applicable to common shareholders | $ | (5,247,449 | ) | $ | (4,400,215 | ) | |||||||||||
Denominator for basic and diluted loss per share: | |||||||||||||||||
Weighted average common shares outstanding | 11,821,870 | 10,154,175 | |||||||||||||||
Loss per common share - basic and diluted | $ | (0.44 | ) | $ | (0.43 | ) | |||||||||||
The following table presents securities that could potentially dilute basic loss per share in the future. For all periods presented, the potentially dilutive securities were not included in the computation of diluted loss per share because these securities would have been anti-dilutive. | |||||||||||||||||
For the Year Ended | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Stock options | 1,771,708 | 1,605,750 | |||||||||||||||
Convertible debt | 2,242,024 | - | |||||||||||||||
Common stock warrants | 15,012,327 | 6,687,099 | |||||||||||||||
Preferred stock warrants | - | - | |||||||||||||||
Convertible preferred stock: | |||||||||||||||||
Series A Convertible Preferred | - | - | |||||||||||||||
Series B Convertible Preferred | - | - | |||||||||||||||
Series C Convertible Preferred | - | - | |||||||||||||||
Series D Convertible Preferred | 750,000 | 750,000 | |||||||||||||||
Series E Convertible Preferred | - | - | |||||||||||||||
Series G Convertible Preferred | 1,453,200 | 1,453,200 | |||||||||||||||
Series H Convertible Preferred | 1,000,000 | - | |||||||||||||||
Series J Convertible Preferred | 5,087,500 | - | |||||||||||||||
Series K Convertible Preferred | 4,000,000 | - | |||||||||||||||
31,316,759 | 10,496,049 | ||||||||||||||||
Accounting for Income Taxes | ' | ||||||||||||||||
We account for income taxes under the asset and liability method, which requires recognition of deferred tax assets, subject to valuation allowances, and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. The Company considers many factors when assessing the likelihood of future realization of our deferred tax assets, including recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carry-forward periods available to us for tax reporting purposes, and other relevant factors. A valuation allowance is established if it is more likely than not that all or a portion of the net deferred tax assets will not be realized. If substantial changes in the company’s ownership should occur, as defined in Section 382 of the Internal Revenue Code, there could be significant limitations on the amount of net loss carry forwards that could be used to offset future taxable income. | |||||||||||||||||
Accounting for Stock-Based Compensation | ' | ||||||||||||||||
We maintain equity compensation plans under which incentive stock options and non-qualified stock options are granted to employees, independent members of our Board of Directors and outside consultants. We recognize equity compensation expense over the requisite service period using the Black-Scholes formula to estimate the fair value of the stock options on the date of grant. | |||||||||||||||||
Determining Fair Value of Stock Option Grants | |||||||||||||||||
Valuation and Amortization Method - The fair value of each option award is estimated on the date of grant using the Black-Scholes pricing model based on certain assumptions. The estimated fair value of employee stock options is amortized to expense using the straight-line method over the vesting period, which generally is over three years. | |||||||||||||||||
Expected Term - The Company uses the simplified calculation of expected life, described in the FASB ASC 718, Compensation-Stock Compensation, as the Company does not currently have sufficient historical exercise data on which to base an estimate of expected term. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted. | |||||||||||||||||
Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the award. | |||||||||||||||||
Risk-Free Interest Rate - The Company bases the risk-free interest rate used in the Black-Scholes valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term. | |||||||||||||||||
Forfeitures - As required by FASB ASC 718, Compensation-Stock Compensation, the Company records stock-based compensation expense only for those awards that are expected to vest. The Company estimated a forfeiture rate of 5% for awards granted based on historical experience and future expectations of options vesting. We used this historical rate as our assumption in calculating future stock-based compensation expense. | |||||||||||||||||
The following table summarizes the assumptions we utilized for grants of stock options to the three sub-groups of our stock option recipients during the twelve months ended December 31, 2013 and 2012: | |||||||||||||||||
Assumptions | Non-Employee Board Members | CEO, other Officers and Employees | |||||||||||||||
Expected life | 2.0-5.0 (yrs) | 6.0 (yrs) | |||||||||||||||
Expected volatility | 55.66%-134.75% | 55.66%-124.89% | |||||||||||||||
Risk-free interest rate | 1.00%-4.94% | 0.50%-4.94% | |||||||||||||||
Forfeiture rate | 0.00%-5.00% | 2.00%-5.00% | |||||||||||||||
Expected dividend yield | 0.00% | 0.00% | |||||||||||||||
On August 15, 2012, the Board of Directors approved the immediate re-pricing of certain outstanding stock options (approximately 1,555,500 shares) held by current officers, employees and board members with outstanding stock options to $1.00 per share, a 200% premium to the closing market price on August 15, 2012 of $0.32, for original stock options with an exercise price above $1.00, to $0.60 per share, a 88% premium to the closing market price on August 15, 2012 of $0.32, for original stock options with an exercise price below $1.00 but above $0.60. The compensation value created by the re-pricing, as determined under the Black-Scholes method, was approximately $62,000 and under current accounting rules results in a non-cash expense in current and future periods, not to exceed the vesting periods of the stock options. | |||||||||||||||||
Assumptions for re-pricing of the options were: | |||||||||||||||||
Assumptions | Awards re-priced during the year ended | ||||||||||||||||
December 31, | |||||||||||||||||
2012 | |||||||||||||||||
Expected life (in years) | 6 | ||||||||||||||||
Weighted average expected volatility | 124.9 | % | |||||||||||||||
Risk-free interest rate | 0.7 | % | |||||||||||||||
Weighted average re-priced Black-Scholes calculated fair value | 0.32 | ||||||||||||||||
We recognized stock-based compensation expense of $136,796 and $133,193 for the years ended December 31, 2013 and 2012, respectively. The following table summarizes the effect of this stock-based compensation expense within each of the line items within our accompanying Consolidated Statements of Operations: | |||||||||||||||||
For the Year Ended | |||||||||||||||||
December 31, | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Research and development | $ | 53,509 | $ | 30,034 | |||||||||||||
Selling and marketing | 26,551 | 28,944 | |||||||||||||||
General and administrative | 56,736 | 74,215 | |||||||||||||||
Total stock-based compensation expense | $ | 136,796 | $ | 133,193 | |||||||||||||
During the years ended December 31, 2013 and 2012, the total fair value of stock options awarded was $128,642 and $116,816, respectively. | |||||||||||||||||
As of December 31, 2013, the total estimated fair value of unvested stock options to be amortized over their remaining vesting period was $65,953. The non-cash, stock based compensation expense associated with the vesting of these options will be $45,598 in 2014, $18,575 in 2015, and $1,780 in 2016. | |||||||||||||||||
Fair Value of Financial Instruments | ' | ||||||||||||||||
Due to their short maturities, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their fair value. Short-term and long-term liabilities are primarily related to liabilities transferred under contractual arrangements with carrying values that approximate fair value. | |||||||||||||||||
Advertising | ' | ||||||||||||||||
Advertising costs are expensed as incurred. During 2013 we did not spend anything on advertising. We incurred $500 in advertising expense in 2012. | |||||||||||||||||
Fair Value Measurements | ' | ||||||||||||||||
The Company follows the guidance of FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) as of June 30, 2012, as it related to all financial assets and financial liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. | |||||||||||||||||
The Company generally defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. | |||||||||||||||||
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company has determined that it does not have any financial assets measured at fair value and that its financial liabilities are currently all classified within Level 3 in the fair value hierarchy. | |||||||||||||||||
The following tables set forth the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of December 31, 2013 and December 31, 2012. The assumptions used to determine fair value of the warrants are contained in the table in Note 7 of the accompanying consolidated financial statements. The development of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management. | |||||||||||||||||
Fair value measurements at December 31, 2013 using: | |||||||||||||||||
December 31, | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||
2013 | (Level 3) | ||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 344,570 | $ | - | $ | - | $ | 344,570 | |||||||||
Fair value measurements at December 31, 2012 using: | |||||||||||||||||
December 31, | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||
2012 | (Level 3) | ||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 160,812 | $ | - | $ | - | $ | 160,812 | |||||||||
January 1, | Change in Fair Value | December 31, | |||||||||||||||
2013 | 2013 | ||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 160,812 | $ | 183,758 | $ | 344,570 | |||||||||||
January 1, | Change in Fair Value | December 31, | |||||||||||||||
2012 | 2012 | ||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 231,200 | $ | (70,388 | ) | $ | 160,812 | ||||||||||
Fair value measurements at December 31, 2013 using: | |||||||||||||||||
December 31, | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||
2013 | (Level 3) | ||||||||||||||||
April 11, 2013 note, conversion option | $ | 130,734 | - | - | $ | 130,734 | |||||||||||
June 26, 2013 note, conversion option | 55,307 | - | - | 55,307 | |||||||||||||
December 4, 2013 note, conversion option | 98,129 | - | - | 98,129 | |||||||||||||
December 23, 2013 note, conversion option | 72,027 | - | - | 72,027 | |||||||||||||
Embedded conversion options | $ | 356,197 | - | - | $ | 356,197 | |||||||||||
Issuance date fair value | Change in fair value | Reclassified | December 31, | ||||||||||||||
2013 | |||||||||||||||||
April 11, 2013 note, conversion option | $ | 274,840 | $ | (144,106 | ) | $ | - | $ | 130,734 | ||||||||
May 24, 2013 note, conversion option | 122,223 | (18,702 | ) | (103,521 | ) | - | |||||||||||
June 6, 2013 note, conversion option | 158,715 | (120,535 | ) | (38,180 | ) | - | |||||||||||
June 26, 2013 note, conversion option | 84,146 | (28,839 | ) | - | 55,307 | ||||||||||||
December 4, 2013 note, conversion option | 77,388 | 20,741 | - | 98,129 | |||||||||||||
December 23, 2013 note, conversion option | 59,903 | 12,124 | - | 72,027 | |||||||||||||
Embedded conversion options | $ | 777,215 | $ | (279,317 | ) | $ | (141,701 | ) | $ | 356,197 | |||||||
The assumptions for the binomial pricing model are represented in the table below for the conversion options reflected on a per share common stock equivalent basis. | |||||||||||||||||
Assumptions | April 11, | Conversion options revalued at | |||||||||||||||
2013 | December 31, | ||||||||||||||||
2013 | |||||||||||||||||
Expected life (in months) | 12 | 4 | |||||||||||||||
Expected volatility | 206.2 | % | 149.9 | % | |||||||||||||
Risk-free interest rate | 0.1 | % | 0.04 | % | |||||||||||||
Exercise price | $ | 0.14 | $ | 0.14 | |||||||||||||
Fair value per conversion option | $ | 0.29 | $ | 0.13 | |||||||||||||
Assumptions | May 24, | Conversion options revalued at | |||||||||||||||
2013 | November 22, | ||||||||||||||||
2013 | |||||||||||||||||
Expected life (in months) | 24 | 18 | |||||||||||||||
Expected volatility | 170 | % | 181.8 | % | |||||||||||||
Risk-free interest rate | 0.27 | % | 0.35 | % | |||||||||||||
Exercise price | $ | 0.25 | $ | 0.17 | |||||||||||||
Fair value per conversion option | $ | 0.31 | $ | 0.17 | |||||||||||||
Assumptions | June 6, | Conversion options revalued at | |||||||||||||||
2013 | December 26, | ||||||||||||||||
2013 | |||||||||||||||||
Expected life (in months) | 12 | 5 | |||||||||||||||
Expected volatility | 209.7 | % | 132.9 | % | |||||||||||||
Risk-free interest rate | 0.13 | % | 0.07 | % | |||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | |||||||||||||
Fair value per conversion option | $ | 0.25 | $ | 0.06 | |||||||||||||
Assumptions | June 26, | Conversion options revalued at | |||||||||||||||
2013 | December 31, | ||||||||||||||||
2013 | |||||||||||||||||
Expected life (in months) | 12 | 6 | |||||||||||||||
Expected volatility | 189.2 | % | 136.5 | % | |||||||||||||
Risk-free interest rate | 0.13 | % | 0.07 | % | |||||||||||||
Exercise price | $ | 0.17 | $ | 0.14 | |||||||||||||
Fair value per conversion option | $ | 0.26 | $ | 0.14 | |||||||||||||
Assumptions | December 4, | Conversion options revalued at | |||||||||||||||
2013 | December 31, | ||||||||||||||||
2013 | |||||||||||||||||
Expected life (in months) | 24 | 23 | |||||||||||||||
Expected volatility | 170.3 | % | 170.3 | % | |||||||||||||
Risk-free interest rate | 0.3 | % | 0.38 | % | |||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | |||||||||||||
Fair value per conversion option | $ | 0.16 | $ | 0.18 | |||||||||||||
Assumptions | December 23, | Conversion options revalued at | |||||||||||||||
2013 | December 31, | ||||||||||||||||
2013 | |||||||||||||||||
Expected life (in months) | 36 | 36 | |||||||||||||||
Expected volatility | 151.4 | % | 152.5 | % | |||||||||||||
Risk-free interest rate | 0.77 | % | 0.78 | % | |||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | |||||||||||||
Fair value per conversion option | $ | 0.17 | $ | 0.19 | |||||||||||||
2_Summary_of_Significant_Accou2
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||
Inventories Table | ' | ||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Raw materials | $ | 147,290 | $ | 183,655 | |||||||||||||||
Finished goods | 639,386 | 789,707 | |||||||||||||||||
Inventory reserve | (50,000 | ) | (50,000 | ) | |||||||||||||||
Total | $ | 736,676 | $ | 923,362 | |||||||||||||||
Customer Concentration | ' | ||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Top Five Customers | 53 | % | 50 | % | |||||||||||||||
Federal Agencies | 33 | % | 41 | % | |||||||||||||||
The following table illustrates the level of concentration of the below two groups within accounts receivable as a percentage of total accounts receivable balance as of December 31, 2012 and 2011: | |||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Top Five Customers | 86 | % | 34 | % | |||||||||||||||
Federal Agencies | 16 | % | 32 | % | |||||||||||||||
Computation of Loss per Share | ' | ||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Numerator: | |||||||||||||||||||
Net loss | $ | (4,084,427 | ) | $ | (3,450,205 | ) | |||||||||||||
Accrued dividend for Preferred Stock paid in common stock | - | (278,184 | ) | ||||||||||||||||
Deemed dividend on warrant modifications | - | (190,891 | ) | ||||||||||||||||
Issuance of common stock for dividends paid in kind | - | (284,116 | ) | ||||||||||||||||
Beneficial conversion feature for preferred stock | (1,002,602 | ) | - | ||||||||||||||||
Preferred dividends accrued | (160,420 | ) | - | ||||||||||||||||
Preferred dividends accrued and paid in cash | - | (196,819 | ) | ||||||||||||||||
Net loss applicable to common shareholders | $ | (5,247,449 | ) | $ | (4,400,215 | ) | |||||||||||||
Denominator for basic and diluted loss per share: | |||||||||||||||||||
Weighted average common shares outstanding | 11,821,870 | 10,154,175 | |||||||||||||||||
Loss per common share - basic and diluted | $ | (0.44 | ) | $ | (0.43 | ) | |||||||||||||
The following table presents securities that could potentially dilute basic loss per share in the future. For all periods presented, the potentially dilutive securities were not included in the computation of diluted loss per share because these securities would have been anti-dilutive. | |||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Stock options | 1,771,708 | 1,605,750 | |||||||||||||||||
Convertible debt | 2,242,024 | - | |||||||||||||||||
Common stock warrants | 15,012,327 | 6,687,099 | |||||||||||||||||
Preferred stock warrants | - | - | |||||||||||||||||
Convertible preferred stock: | |||||||||||||||||||
Series A Convertible Preferred | - | - | |||||||||||||||||
Series B Convertible Preferred | - | - | |||||||||||||||||
Series C Convertible Preferred | - | - | |||||||||||||||||
Series D Convertible Preferred | 750,000 | 750,000 | |||||||||||||||||
Series E Convertible Preferred | - | - | |||||||||||||||||
Series G Convertible Preferred | 1,453,200 | 1,453,200 | |||||||||||||||||
Series H Convertible Preferred | 1,000,000 | - | |||||||||||||||||
Series J Convertible Preferred | 5,087,500 | - | |||||||||||||||||
Series K Convertible Preferred | 4,000,000 | - | |||||||||||||||||
31,316,759 | 10,496,049 | ||||||||||||||||||
Stock based compensation expense | ' | ||||||||||||||||||
Assumptions | Non-Employee Board Members | CEO, other Officers and Employees | |||||||||||||||||
Expected life | 2.0-5.0 (yrs) | 6.0 (yrs) | |||||||||||||||||
Expected volatility | 55.66%-134.75% | 55.66%-124.89% | |||||||||||||||||
Risk-free interest rate | 1.00%-4.94% | 0.50%-4.94% | |||||||||||||||||
Forfeiture rate | 0.00%-5.00% | 2.00%-5.00% | |||||||||||||||||
Expected dividend yield | 0.00% | 0.00% | |||||||||||||||||
Assumptions for re-pricing of the options were: | |||||||||||||||||||
Assumptions | Awards re-priced during the year ended | ||||||||||||||||||
December 31, | |||||||||||||||||||
2012 | |||||||||||||||||||
Expected life (in years) | 6 | ||||||||||||||||||
Weighted average expected volatility | 124.9 | % | |||||||||||||||||
Risk-free interest rate | 0.7 | % | |||||||||||||||||
Weighted average re-priced Black-Scholes calculated fair value | 0.32 | ||||||||||||||||||
For the Year Ended | |||||||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Research and development | $ | 53,509 | $ | 30,034 | |||||||||||||||
Selling and marketing | 26,551 | 28,944 | |||||||||||||||||
General and administrative | 56,736 | 74,215 | |||||||||||||||||
Total stock-based compensation expense | $ | 136,796 | $ | 133,193 | |||||||||||||||
Liabilities measured at fair value on recurring basis | ' | ||||||||||||||||||
December 31, | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||||
2013 | (Level 3) | ||||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 344,570 | $ | - | $ | - | $ | 344,570 | |||||||||||
Fair value measurements at December 31, 2012 using: | |||||||||||||||||||
December 31, | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||||
2012 | (Level 3) | ||||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 160,812 | $ | - | $ | - | $ | 160,812 | |||||||||||
January 1, | Change in Fair Value | December 31, | |||||||||||||||||
2013 | 2013 | ||||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 160,812 | $ | 183,758 | $ | 344,570 | |||||||||||||
January 1, | Change in Fair Value | December 31, | |||||||||||||||||
2012 | 2012 | ||||||||||||||||||
Series D Common Stock Purchase Warrants | $ | 231,200 | $ | (70,388 | ) | $ | 160,812 | ||||||||||||
Fair value measurements at December 31, 2013 using: | |||||||||||||||||||
December 31, | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||||
2013 | (Level 3) | ||||||||||||||||||
April 11, 2013 note, conversion option | $ | 130,734 | - | - | $ | 130,734 | |||||||||||||
June 26, 2013 note, conversion option | 55,307 | - | - | 55,307 | |||||||||||||||
December 4, 2013 note, conversion option | 98,129 | - | - | 98,129 | |||||||||||||||
December 23, 2013 note, conversion option | 72,027 | - | - | 72,027 | |||||||||||||||
Embedded conversion options | $ | 356,197 | - | - | $ | 356,197 | |||||||||||||
January 1, | Issuance date fair value | Change in fair | Reclassification | December 31, | |||||||||||||||
2013 | value | into equity | 2013 | ||||||||||||||||
April 11, 2013 note, conversion option | - | $ | 274,840 | $ | (144,106 | ) | $ | - | $ | 130,734 | |||||||||
May 24, 2013 note, conversion option | - | 122,223 | (18,702 | ) | (103,521 | ) | - | ||||||||||||
June 6, 2013 note, conversion option | - | 158,715 | (120,535 | ) | (38,180 | ) | - | ||||||||||||
June 26, 2013 note, conversion option | - | 84,146 | (28,839 | ) | - | 55,307 | |||||||||||||
December 4, 2013 note, conversion option | - | 90,444 | 7,685 | - | 98,129 | ||||||||||||||
December 23, 2013 note, conversion option | - | 65,033 | 7,024 | - | 72,027 | ||||||||||||||
Embedded conversion options | - | $ | 795,371 | $ | (297,471 | ) | $ | (141,701 | ) | $ | 356,197 | ||||||||
Fair value assumptions | ' | ||||||||||||||||||
Assumptions | April 11, | Conversion options revalued at | |||||||||||||||||
2013 | December 31, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 12 | 4 | |||||||||||||||||
Expected volatility | 206.2 | % | 149.9 | % | |||||||||||||||
Risk-free interest rate | 0.1 | % | 0.04 | % | |||||||||||||||
Exercise price | $ | 0.14 | $ | 0.14 | |||||||||||||||
Fair value per conversion option | $ | 0.29 | $ | 0.13 | |||||||||||||||
Assumptions | May 24, | Conversion options revalued at | |||||||||||||||||
2013 | November 22, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 24 | 18 | |||||||||||||||||
Expected volatility | 170 | % | 181.8 | % | |||||||||||||||
Risk-free interest rate | 0.27 | % | 0.35 | % | |||||||||||||||
Exercise price | $ | 0.25 | $ | 0.17 | |||||||||||||||
Fair value per conversion option | $ | 0.31 | $ | 0.17 | |||||||||||||||
Assumptions | June 6, | Conversion options revalued at | |||||||||||||||||
2013 | December 26, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 12 | 5 | |||||||||||||||||
Expected volatility | 209.7 | % | 132.9 | % | |||||||||||||||
Risk-free interest rate | 0.13 | % | 0.07 | % | |||||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | |||||||||||||||
Fair value per conversion option | $ | 0.25 | $ | 0.06 | |||||||||||||||
Assumptions | June 26, | Conversion options revalued at | |||||||||||||||||
2013 | December 31, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 12 | 6 | |||||||||||||||||
Expected volatility | 189.2 | % | 136.5 | % | |||||||||||||||
Risk-free interest rate | 0.13 | % | 0.07 | % | |||||||||||||||
Exercise price | $ | 0.17 | $ | 0.14 | |||||||||||||||
Fair value per conversion option | $ | 0.26 | $ | 0.14 | |||||||||||||||
Assumptions | December 4, | Conversion options revalued at | |||||||||||||||||
2013 | December 31, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 24 | 23 | |||||||||||||||||
Expected volatility | 170.3 | % | 170.3 | % | |||||||||||||||
Risk-free interest rate | 0.3 | % | 0.38 | % | |||||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | |||||||||||||||
Fair value per conversion option | $ | 0.16 | $ | 0.18 | |||||||||||||||
Assumptions | December 23, | Conversion options revalued at | |||||||||||||||||
2013 | December 31, | ||||||||||||||||||
2013 | |||||||||||||||||||
Expected life (in months) | 36 | 36 | |||||||||||||||||
Expected volatility | 151.4 | % | 152.5 | % | |||||||||||||||
Risk-free interest rate | 0.77 | % | 0.78 | % | |||||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | |||||||||||||||
Fair value per conversion option | $ | 0.17 | $ | 0.19 |
3_Property_and_Equipment_net_T
3. Property and Equipment, net (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and equipment | ' | ||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Laboratory and manufacturing equipment | $ | 226,081 | $ | 172,560 | |||||
Office equipment | 142,323 | 137,093 | |||||||
Leasehold improvements | 8,117 | 8,117 | |||||||
PCT collaboration, demonstration and leased systems | 461,858 | 461,858 | |||||||
Total property and equipment | 838,379 | 779,628 | |||||||
Less accumulated depreciation | (780,277 | ) | (749,346 | ) | |||||
Net book value | $ | 58,102 | $ | 30,282 |
4_Intangible_Assets_net_Tables
4. Intangible Assets, net (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
Intangible Assets | ' | ||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
PCT Patents | $ | 778,156 | $ | 778,156 | |||||
Less accumulated amortization | (741,658 | ) | (693,026 | ) | |||||
Net book value | $ | 36,498 | $ | 85,130 |
6_Income_Taxes_Tables
6. Income Taxes (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Deferred tax assets and deferred tax liabilities | ' | ||||||||
December 31, | |||||||||
Current deferred taxes | 2013 | 2012 | |||||||
Inventories | $ | 19,640 | $ | 19,723 | |||||
Accounts Receivable allowance | - | - | |||||||
Other accruals | 23,050 | 45,053 | |||||||
Less: valuation allowance | (42,690 | ) | (64,776 | ) | |||||
Total current deferred tax assets | $ | - | $ | - | |||||
Long term deferred taxes: | |||||||||
Accelerated tax depreciation | $ | 29,511 | $ | 32,686 | |||||
Non-cash, stock-based compensation, nonqualified | 387,708 | 388,506 | |||||||
Goodwill and intangibles | (14,337 | ) | (33,580 | ) | |||||
Operating loss carry forwards and tax credits | 8,938,681 | 7,643,661 | |||||||
Less: valuation allowance | (9,341,563 | ) | (8,031,273 | ) | |||||
Total long term deferred tax assets (liabilities), net | - | - | |||||||
Total net deferred tax liabilities | $ | - | $ | - | |||||
Effective income tax (benefit) provision rate | ' | ||||||||
For the Year Ended | |||||||||
December 31, | |||||||||
2012 | 2012 | ||||||||
Federal tax (benefit) provision rate | 34 | % | 34 | % | |||||
Permanent differences | (3 | ) % | (1 | ) % | |||||
State tax expense | 0 | % | 0 | % | |||||
Refundable AMT and R&D tax credit | 0 | % | 0 | % | |||||
Net operating loss carry back | 0 | % | 0 | % | |||||
Valuation allowance | (31 | ) % | (33 | ) % | |||||
Effective income tax (benefit) provision rate from continuing operations | 0 | % | 0 | % |
7_Commitments_and_Contingencie1
7. Commitments and Contingencies (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Future minimum rental payments required under operating leases | ' | ||||
Year ending | |||||
December 31: | |||||
2014 | $ | 123,600 | |||
Thereafter | - | ||||
Total minimum payments required | $ | 123,600 |
9_Stockholders_Deficit_Tables
9. Stockholdersb (Deficit) (Tables) | 12 Months Ended | |||||||||||||||||||||||||
Dec. 31, 2013 | ||||||||||||||||||||||||||
Stockholders Deficit Tables | ' | |||||||||||||||||||||||||
Assumptions used | ' | |||||||||||||||||||||||||
In connection with the warrant amendments, we calculated the fair value of the warrants, as described above, using a Black-Scholes model with the below assumptions. | ||||||||||||||||||||||||||
Assumptions | Series A | Series A | Series B | Series C | Aug/Sep 2011 | Feb-12 | ||||||||||||||||||||
(Affiliates) | Notes | PIPE | ||||||||||||||||||||||||
Contractual life, in years | 4.1 | 3.1 | 3.1 | 5.1 | 2.1 | 4.6 | ||||||||||||||||||||
Expected volatility | 132 | % | 114.1 | % | 114.1 | % | 121.9 | % | 126.6 | % | 126.6 | % | ||||||||||||||
Risk-free interest rate | 0.4 | % | 0.4 | % | 0.4 | % | 0.4 | % | 0.4 | % | 0.4 | % | ||||||||||||||
Exercise price | $ | 0.6 | $ | 0.6 | $ | 0.6 | $ | 0.6 | $ | 0.6 | $ | 0.6 | ||||||||||||||
Fair value per warrant | $ | 0.03 | $ | 0.03 | $ | 0.03 | $ | 0.03 | $ | 0.03 | $ | 0.03 | ||||||||||||||
In connection with the Series J warrants, we calculated the fair value of the warrants received as described above using the Black- Scholes formula with the below assumptions: | ||||||||||||||||||||||||||
Assumptions | Series J warrants February 6, | Series J warrants | Series J warrants | |||||||||||||||||||||||
2013 | March 28, | May 20, | ||||||||||||||||||||||||
2013 | 2013 | |||||||||||||||||||||||||
Contractual life (in months) | 36 | 36 | 36 | |||||||||||||||||||||||
Expected volatility | 141.8 | 144.3 | 147 | |||||||||||||||||||||||
Risk-free interest rate | 0.39 | % | 0.36 | % | 0.36 | % | ||||||||||||||||||||
Exercise price | $ | 0.4 | $ | 0.4 | $ | 0.4 | ||||||||||||||||||||
Fair value per warrant | $ | 0.36 | $ | 0.26 | $ | 0.3 | ||||||||||||||||||||
The assumptions for the binomial pricing model are represented in the table below for the warrants issued in the Series D private placement reflected on a per share Common Stock equivalent basis. | ||||||||||||||||||||||||||
Assumptions | November 10, | Warrants revalued at | Warrants revalued at | |||||||||||||||||||||||
2011 | December 31, | December 31, | ||||||||||||||||||||||||
2012 | 2013 | |||||||||||||||||||||||||
Expected life (in months) | 60 | 43 | 34 | |||||||||||||||||||||||
Expected volatility | 104.5 | % | 146.4 | % | 154.8 | % | ||||||||||||||||||||
Risk-free interest rate | 0.875 | % | 0.437 | % | 0.78 | % | ||||||||||||||||||||
Exercise price | $ | 0.81 | $ | 0.4 | $ | 0.25 | ||||||||||||||||||||
Fair value per warrant | $ | 0.54 | $ | 0.15 | $ | 0.21 | ||||||||||||||||||||
Options and warrants outstanding and exercisable | ' | |||||||||||||||||||||||||
Stock Options | Warrants | |||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||
Average price | Average price | Total | ||||||||||||||||||||||||
Shares | per share | Shares | per share | Shares | Exercisable | |||||||||||||||||||||
Balance outstanding, January 1, 2012 | 1,508,500 | $ | 2.33 | 4,775,501 | $ | 1.35 | 6,284,001 | 6,112,335 | ||||||||||||||||||
Granted | 1,896,250 | 0.81 | 2,909,068 | 0.62 | 4,805,318 | |||||||||||||||||||||
Exercised | - | - | - | - | - | |||||||||||||||||||||
Expired | (130,000 | ) | 2.28 | (116,490 | ) | 2.8 | (246,490 | ) | ||||||||||||||||||
Forfeited | (1,669,000 | ) | 2.09 | (880,980 | ) | 2.13 | (2,549,980 | ) | ||||||||||||||||||
Balance outstanding, December 31, 2012 | 1,605,750 | $ | 0.8 | 6,687,099 | $ | 0.81 | 8,292,849 | 7,989,331 | ||||||||||||||||||
Granted | 363,500 | 0.41 | 8,346,228 | 0.37 | 8,709,728 | |||||||||||||||||||||
Exercised | - | - | - | - | - | |||||||||||||||||||||
Expired | (10,000 | ) | 1 | (21,000 | ) | 2.38 | (31,000 | ) | ||||||||||||||||||
Forfeited | (187,542 | ) | 0.85 | - | - | (187,542 | ) | |||||||||||||||||||
Balance outstanding, December 31, 2013 | 1,771,708 | $ | 0.71 | 15,012,327 | $ | 0.57 | 16,784,035 | 16,611,528 | ||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||
Weighted Average | Weighted Average | |||||||||||||||||||||||||
Range of Exercise Prices | Number of Options | Remaining Contractual Life (Years) | Exercise Price | Number of Options | Remaining Contractual Life (Years) | Exercise Price | ||||||||||||||||||||
$0.00 - $0.49 | 321,000 | 9.4 | $ | 0.4 | 255,208 | 9.4 | $ | 0.4 | ||||||||||||||||||
0.50 - 0.59 | 251,250 | 8.6 | 0.5 | 251,250 | 8.6 | 0.5 | ||||||||||||||||||||
0.60 - 0.99 | 475,250 | 6 | 0.6 | 416,658 | 5.7 | 0.6 | ||||||||||||||||||||
1.00 - 1.50 | 724,208 | 3.2 | 1 | 676,085 | 2.9 | 1 | ||||||||||||||||||||
$0.50 - $1.00 | 1,771,708 | 5.9 | $ | 0.71 | 1,599,201 | 5.6 | $ | 0.72 |
2_Summary_of_Significant_Accou3
2. Summary of Significant Accounting Policies (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Summary Of Significant Accounting Policies Details | ' | ' |
Raw materials | $147,290 | $183,655 |
Finished Goods | 639,386 | 789,707 |
Inventory Reserve | -50,000 | -50,000 |
Total | $736,676 | $923,362 |
2_Summary_of_Significant_Accou4
2. Summary of Significant Accounting Policies (Details 1) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Summary Of Significant Accounting Policies Details 1 | ' | ' |
Top Five Customers by percentage of total revenue | 53.00% | 50.00% |
Federal Agencies percentage of total revenue | 33.00% | 41.00% |
Top Five Customers percentage of total receivables | 86.00% | 34.00% |
Federal Agencies percentage of total receivables | 16.00% | 32.00% |
3_Property_and_Equipment_net_D
3. Property and Equipment, net (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Property And Equipment Net Details | ' | ' |
Laboratory and manufacturing equipment | $226,081 | $172,560 |
Office equipment | 142,323 | 137,093 |
Leasehold improvements | 8,117 | 8,117 |
PCT collaboration, demonstration and leased systems | 461,858 | 461,858 |
Total property and equipment | 838,379 | 779,628 |
Less accumulated depreciation | -780,277 | -749,346 |
Net book value | $58,102 | $30,282 |
4_Intangible_Assets_net_Detail
4. Intangible Assets, net (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Intangible Assets Net Details | ' | ' |
PCT Patents | $778,156 | $778,156 |
Less accumulated amortization | -741,658 | -693,026 |
Net book value | $36,498 | $85,130 |
5_Retirement_Plan_Details_Narr
5. Retirement Plan (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Retirement Plan Details Narrative | ' | ' |
Company-matching contributions | $10,377 | $12,458 |
6_Income_Taxes_Details
6. Income Taxes (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current deferred taxes | ' | ' |
Inventories | $19,640 | $19,723 |
Accounts Receivable allowance | 0 | 0 |
Other accruals | 23,050 | 45,053 |
Less: valuation allowance | -42,690 | -64,776 |
Total current deferred tax assets | 0 | 0 |
Long term deferred taxes: | ' | ' |
Accelerated tax depreciation | 29,511 | 32,686 |
Non-cash, stock-based compensation, nonqualified | 387,708 | 388,506 |
Goodwill and intangibles | -14,337 | -33,580 |
Operating loss carry forwards and tax credits | 8,938,681 | 7,643,661 |
Less: valuation allowance | -9,341,563 | -8,031,273 |
Total long term deferred tax assets (liabilities), net | 0 | 0 |
Total net deferred tax liabilities | $0 | $0 |
6_Income_Taxes_Details_1
6. Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Taxes Details 1 | ' | ' |
Federal tax (benefit) provision rate | 34.00% | 34.00% |
Permanent differences | -3.00% | -1.00% |
Valuation allowance | -31.00% | -33.00% |
Effective income tax (benefit) provision rate from continuing operations | 0.00% | 0.00% |
7_Commitments_and_Contingencie2
7. Commitments and Contingencies (Details) (USD $) | Dec. 31, 2012 |
Commitments And Contingencies Details | ' |
2014 | $123,600 |
Thereafter | 0 |
Total minimum payments required | $123,600 |