SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Inventories

Inventories — All of the raw material purchased during the six months ended June 30, 2016 and for the year ended December 31, 2015 was from one vendor. The below table presents inventory by category:

Inventory by category	June 30, 2016		December 31, 2015
Work-in-process	$	48,312	$	45,355
Finished goods	193,306		173,808
	$	241,618	$	219,163

Advertising cost

Advertising cost — Advertising costs are expensed as incurred. Advertising costs for the three months ended June 30, 2016 and 2015 were $11,500 and $16,972, respectively. Advertising costs for the six months ended June 30, 2016 and 2015 were $15,439 and $36,235, respectively.

Marketable securities

Marketable securities — The Company’s marketable securities consist of 39,250 shares of CellSeed, Inc. (“CellSeed”) stock which are part of 147,100 shares acquired in January 2009 for 100,028,000 Japanese Yen (equivalent to $1,109,819), at 680 Yen per share. CellSeed’s IPO (Tokyo Stock Exchange symbol 7776) was completed on March 16, 2010. As of June 30, 2016 and December 31, 2015, the closing price per share for CellSeed was 572 Yen ($5.56) and 672 Yen ($5.58), respectively.

As of June 30, 2016, 39,250 shares of CellSeed stock are pledged to secure a $300,000 convertible note issued to Mitsubishi UFJ Capital III Limited Partnership that is due on demand and are classified as current assets, as marketable securities, pledged to creditor.

Prepaid expenses and other current assets

Prepaid expenses and other current assets — Prepaid expenses and other current assets consisted of the following at June 30, 2016 and December 31, 2015:

	June 30, 2016		December 31, 2015
Prepaid insurance	$	80,791	$	97,708
Other prepaid expenses and current assets	28,323		33,405
	$	109,114	$	131,113

Fair value measurements

Fair value measurements — The following table presents the activity for those items measured at fair value on a recurring basis using Level 3 inputs during the six months ended June 30, 2016 and the year ended December 31, 2015:

	Period ended
Liability Classified Warrants—Stock Purchase Warrants	June 30, 2016		December 31, 2015
Balance, beginning of period	$	—	$	3,206,000
Reclassification to warrant derivative liabilities	—		(2,545,000		)
Change in fair value included in consolidated statements of comprehensive loss	—		(661,000		)
Balance, end of period	$	—	$	—

	Period ended
Warrant Derivative Liabilities—Stock Purchase Warrants	June 30, 2016		December 31, 2015
Balance, beginning of period	$	7,863,000	$	6,520,000
Reclassification from liability classified warrants	—		2,545,000
Change in fair value included in consolidated statements of comprehensive loss	48,000		(1,202,000		)
Balance, end of period	$	7,911,000	$	7,863,000

	Period ended
Warrant Derivative Liabilities—Lender Warrants	June 30, 2016			December 31, 2015
Balance, beginning of period	$	—		$	—
Warrants issued in conjunction with secured loans	316,610			—
Change in fair value included in consolidated statements of comprehensive loss	8,890			—
Reclassified to additional paid-in capital	(325,500		)	—
Balance, end of period	$	—		$	—

The value of the liability classified warrants, the value of warrant derivative liability and the change in fair value of the liability classified warrants and warrant derivative liability were determined using a Binomial Monte-Carlo Cliquet (aka “Ratchet”) Option Pricing Model. The model is similar to traditional Black-Scholes-type option pricing models, except that the exercise price resets at certain dates in the future. The values as of June 30, 2016, December 31, 2015 and the initial value as of September 11, 2013 were calculated based on the following assumptions:

	June 30, 2016			December 31, 2015			Initial Value
Stock price	$	5.00		$	4.70		$	3.60
Risk-free interest rate	0.61		%	1.23		%	1.72		%
Expected volatility (peer group)	61.9		%	64.10		%	72.40		%
Expected life (in years)	2.20			2.70			5.00
Number outstanding	3,320,501			3,320,501			3,320,501
Balance, end of period:
Liability classified warrants	$	—		$	—		$	7,541,000
Warrant derivative liabilities	$	7,911,000		$	7,863,000		$	—

The values of lender warrants as of June 30, 2016, May 13, 2016 and April 18, 2016 were calculated based on the following assumptions:

	June 30, 2016			May 13, 2016			April 18, 2016
Stock price	$	5.00		$	5.00		$	5.00
Risk-free interest rate	1.01		%	1.24		%	1.27		%
Expected volatility (peer group)	74.10		%	73.30		%	72.90		%
Expected life (in years)	5.00			5.13			5.20

Debt and Related Party Debt

Debt and related party debt — The following table presents the effective interest rates on the original loan principal amount for loans originated in the respective periods that either had a beneficial conversion feature or an attached warrant:

Type of Loan	Term of Loan	Stated Annual Interest Rate		Original Loan Principal Amount		Conversion Rate	Beneficial Conversion Discount Amount		Warrants Issued with Notes	Exercise Price		Warrant FMV Discount Amount		Effective Interest Rate Including Discounts
2015 convertible notes payable	Due on demand - 2 years	10	%	$	4,051,022	$3.50- $4.50	$	1,388,201	110,417	$	4.90	$	220,071	14% - 109%
2016 convertible notes payable	Due on demand - 2 years	10	%	4,229,505		$3.50- $4.50	1,037,509		75,000	$	4.70	159,968		14% - 102%
2016 promissory notes	11.5 - 12.5 months	10	%	1,295,000		—	—		100,000	$	4.50	435,381		44%
Total				$	9,575,527		$	2,425,710	285,417			$	815,420

Related party notes are disclosed as separate line items in the Company’s balance sheet.

Net loss per share

Net loss per share — As of June 30, 2016 and 2015, potentially dilutive securities exercisable or convertible into 14,410,498 and 12,761,655 shares of the Company’s common stock were outstanding, respectively. As the Company reported a net loss, none of the potentially dilutive securities were included in the calculation of diluted loss per share since their effect would be anti-dilutive for all periods presented.

Recent accounting pronouncements

Recent accounting pronouncements — In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments applicable to the Company in this Update (1) supersede the guidance to classify equity securities, except equity method securities, with readily determinable fair values into trading or available-for-sale categories and require equity securities to be measured at fair value with changes in the fair value recognized through net income, (2) allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment, (3) require assessment for impairment of equity investments without readily determinable fair values qualitatively at each reporting period, (4) eliminate the requirement to disclose the methods and significant assumptions used in calculating the fair value of financial instruments required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (5) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (6) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements, (7) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this Update are effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those years. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of the Update. The impact of the adoption of the amendments in this Update will depend on the amount of equity securities and financial instruments subject to the amendments in this Update held by the Company at the time of adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The amendments in this Update require a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term for all leases with terms greater than twelve months. For leases less than twelve months, an entity is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The amendments in this Update are effective for the Company for fiscal years beginning after December 15, 2018, including interim periods within those years, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption of the amendments in this Update on the Company’s consolidated financial position and results of operations; however, adoption of the amendments in this Update are expected to be material for most entities who have a material lease with a term of greater than twelve months.

In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this Update simplify the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities andclassification on the statement of cash flows. This Update is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted. The Company is currently in the process of evaluating this new Update.

In April 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”). The amendments in ASU 2016-10 clarify identification of performance obligations and licensing implementation. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: For public companies, this Update is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2016. The Company is currently evaluating the impact that the implementation of ASU 2016-10 will have on the Company’s financial statements.