10-Q

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________________ to

Commission File Number:

Skyline Medical Inc.

(Exact name of registrant as specified in its charter)

Delaware	33-1007393
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
2915 Commers Drive, Suite 900	Eagan, Minnesota 55121
(Address of principal executive offices)	(Zip Code)

651-389-4800

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of October 30 2016, the registrant had 3,804,860 shares of common stock, par value $.01 per share, outstanding, adjusted for a 1-for-25 reverse stock split effective October 27, 2016 as described in Note 1 to the Condensed Financial Statements under “Subsequent Events.” In this report all numbers of shares and per share amounts, as appropriate, have been restated to reflect the reverse stock split.

SKYLINE MEDICAL INC.

TABLE OF CONTENTS

	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Financial Statements	4
Condensed Balance Sheets September 30, 2016 and December 31, 2015	4
Condensed Statements of Operations and Other Comprehensive Income for the three and nine-month periods ended September 30, 2016 and September 30, 2015	5
Statement of Stockholders’ Equity for the Year Ended December 31, 2015 and the nine-months ended September 30, 2016	6
Condensed Statements of Cash Flows for the nine-month periods ended September 30, 2016 and September 30, 2015	7
Notes to Condensed Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3. Defaults Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5. Other Information	38
Item 6. Exhibits	38
Signatures	39
Exhibit Index	40

PART 1. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

SKYLINE MEDICAL INC.

CONDENSED BALANCE SHEETS

(Unaudited)

	September 30, 2016			December 31, 2015
Current Assets:
Cash and Cash Equivalents	$	634,478		$	4,856,232
Marketable Securities (Note 11)		576,888			-
Accounts Receivable		45,017			38,283
Inventories		289,249			231,740
Prepaid Expense and other assets		163,188			271,579
Total Current Assets		1,708,820			5,397,834
Fixed Assets, net		110,910			139,598
Intangibles, net		97,335			94,987
Total Assets	$	1,917,065		$	5,632,419
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	648,061		$	650,413
Accrued Expenses		820,114			864,295
Deferred Revenue		5,000			5,000
Total Current Liabilities		1,473,175			1,519,708
Accrued Expenses		432,376			-
Total Liabilities		1,905,551			1,519,708
Commitments and Contingencies		-			-
Stockholders’ Equity:
Series B Convertible Preferred Stock, $.01 par value, 20,000,000 authorized, 79,246 and 1,895,010 outstanding		792			18,950
Common Stock, $.01 par value, 8,000,000 authorized, 3,404,860 and 208,259 outstanding		34,048			2,080
Additional paid-in capital		46,257,774			44,584,118
Accumulated Deficit		(46,285,679	)		(40,492,437	)
Accumulated Other Comprehensive Income		4,579			-
Total Stockholders' Equity		11,514			4,112,711
Total Liabilities and Stockholders' Equity	$	1,917,065		$	5,632,419

See Notes to Condensed Financial Statements

4

SKYLINE MEDICAL INC.

CONDENSED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenue	$	134,605		$	85,792		$	316,931		$	471,078
Cost of goods sold		26,481			19,773			149,130			199,307
Gross Margin		108,124			66,019			167,801			271,771
General and administrative expense		733,074			861,098			4,684,130			1,589,522
Operations expense		292,856			202,799			928,062			375,429
Sales and marketing expense		137,784			66,720			348,848			439,703
Interest expense		3			51,804			3			394,641
Total expense		1,163,717			1,182,421			5,961,043			2,799,295
Net loss available to common shareholders		(1,055,593	)		(1,116,402	)		(5,793,242	)		(2,527,524	)
Other comprehensive income
Unrealized gain (loss) from marketable securities		(1,299	)		-			4,579			-
Comprehensive loss	$	(1,056,892	)	$	(1,116,402	)	$	(5,788,663	)	$	(2,527,524	)
Loss per common share - basic and diluted	$	(0.32	)	$	(7.09	)	$	(2.57	)	$	(18.39	)
Weighted average shares used in computation - basic and diluted		3,320,139			157,445			2,250,315			137,428

See Notes to Condensed Financial Statements

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SKYLINE MEDICAL INC.

STATEMENT OF STOCKHOLDERS' EQUITY

(UNAUDITED)

	Preferred Stock			Shares			Amount			Paid-in  Capital			Deficit			Other Comprehensive Income		Total
Balance at 12/31/2014	$	206			123,711		$	1,237		$	30,123,435		$	(35,641,105	)			$	(5,516,227	)
Shares issued to 16 shareholders of Series A Convertible Preferred Stock Adjustment as converted to common shares at $243.75 per share					125			1			(1	)							-
Reduction in escrow account per settlement agreement					(356	)		(4	)		(6,663	)							(6,667	)
Shares issued for a note conversion at $72.50 per share					138			1			9,999								10,000
Shares issued for a note conversion at $74.00 per share					270			3			19,997								20,000
Shares issued for a note conversion at $72.75 per share					413			4			29,996								30,000
Shares issued for a note conversion at $69.25 per share					484			5			33,473								33,478
Shares issued for a note conversion at $56.25 per share					622			6			34,994								35,000
Shares issued to 16 shareholders of Series A Convertible Preferred Stock Dividends as converted to common shares at $243.75 per share					125			1			30,399			(30,401	)				(1	)
Shares issued for a note conversion at $50.00 per share					1,400			14			69,986								70,000
Shares issued for a note conversion at $56.82 per share					3,520			35			199,965								200,000
Shares issued for a note conversion at $50.45 per share					595			6			29,994								30,000
Shares issued for a note conversion at $48.10 per share					520			5			24,995								25,000
Shares issued for a note conversion at $46.45 per share					646			6			29,994								30,000
Shares issued to 16 shareholders of Series A Convertible Preferred Stock Dividends as converted to common shares at $243.75 per share					125			1			30,401			(30,401	)				1
Vesting Expense								-			871,877								871,877
Shares issued in public offering; net		16,667			66,667			667			13,043,546								13,060,880
Preferred stock conversion		2,077			9,134			91			(2,168	)							(0	)
Series A warrant exercise					120			1			9,899								9,900
Net loss								-			-			(4,790,530	)				(4,790,530	)
Balance @ 12/31/2015	$	18,950			208,259		$	2,080		$	44,584,118		$	(40,492,437	)			$	4,112,711
Shares issued for two options exercised at $65.75 per share					1,312			13			86,240								86,253
Shares issued for preferred stock conversion into common stock per the break-up of the Unit from the 2015 public offering		(18,158	)		66,396			664			17,494								(0	)
Shares issued for cashless Series A warrant exercises per the break-up of the Unit from the 2015 public offering					2,318,663			23,187			556,479								579,666
Shares issued for cashless Series B warrant exercises per the tender offer exchange					628,237			6,282			150,777								157,059
Shares issued at $3.75 per share, to an investment banker per contractual agreement					135,995			1,360			508,620								509,980
Shares issued at $4.50 per share to former CEO per severance agreement					20,000			200			90,151								90,351
Vesting Expense								-			147,158								147,158
Unrealized gain from marketable securities																	4,579		4,579
Shares issued at $4.50 per share to investor relations consultant					26,000			260			116,740								117,000
Corrections due to rounding for reverse split					(2	)		2			(3	)							(1	)
Net loss														(5,793,242	)				(5,793,242	)
Balance @ 9/30/2016	$	792			3,404,860		$	34,048		$	46,257,774		$	(46,285,679	)	$	4,579	$	11,514

See Notes to Condensed Financial Statements

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SKYLINE MEDICAL INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2016			2015
Cash flow from operating activities:
Net loss	$	(5,793,242	)	$	(2,527,524	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		62,427			57,512
Vested stock options and warrants		147,158			320,334
Equity instruments issued for management and consulting		717,331			(6,667	)
Issuance of common stock in cashless warrant exchange		736,724			-
Amortization of debt discount		-			219,097
Penalty on debt provision		-			10,031
Loss on Sales of Equipment		(2,387	)		16,917
Gain from sale of marketable securities		(2,309	)		-
Changes in assets and liabilities:
Accounts receivable		(6,734	)		43,353
Inventories		(57,509	)		130,477
Prepaid expense and other assets		108,391			(23,208	)
Accounts payable		(2,352	)		(1,056,006	)
Accrued expenses		388,195			(1,845,850	)
Deferred Revenue		-			24,180
Net cash used in operating activities:	$	(3,704,307	)	$	(4,637,354	)
Cash flow from investing activities:
Purchase of marketable securities		(850,000	)		-
Proceeds from sale of marketable securities		280,000			-
Purchase of certificates of deposit		(1,000,000	)		-
Redemption of certificates of deposit		1,000,000			-
Purchase of fixed assets		(25,127	)		-
Purchase of intangibles		(8,573	)		(23,739	)
Net cash used in investing activities	$	(603,700	)	$	(23,739	)
Cash flow from financing activities:
Proceeds from long-term and convertible debt		-			250,000
Principal payments on debt		-			(933,074	)
Issuance of preferred stock		-			18,950
Issuance of common stock		86,253			13,041,930
Net cash provided by financing activities	$	86,253		$	12,377,806
Net increase in cash and cash equivalents		(4,221,754	)		7,716,713
Cash and cash equivalents at beginning of period		4,856,232			16,384
Cash and cash equivalents at end of period	$	634,478		$	7,733,097
Non cash transactions:
Common stock issued for accrued interest/bonus		-			-
Common stock issued to satisfy debt		-			483,478

See Notes to Condensed Financial Statements

7

SKYLINE MEDICAL INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Amounts presented at and for the three and nine months ended September, 2016 and September, 2015 are unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Continuance of Operations

On October 27, 2016, the Company effected a 1-for-25 reverse stock split of its common stock. All share information in the financial statements for fiscal years 2016 and 2015 reflect the impact of the reverse stock split.

Skyline Medical Inc. (the "Company") was incorporated under the laws of the State of Minnesota in 2002. Effective August 6, 2013, the Company changed its name to Skyline Medical Inc. As of September 30, 2016, the registrant had 3,404,860 shares of common stock, par value $.01 per share, outstanding. Pursuant to an Agreement and Plan of Merger dated effective December 16, 2013, the Company merged with and into a Delaware corporation with the same name that was its wholly-owned subsidiary, with such Delaware Corporation as the surviving corporation of the merger. The Company has developed an environmentally safe system for the collection and disposal of infectious fluids that result from surgical procedures and post-operative care. The Company also makes ongoing sales of our proprietary cleaning fluid and filters to users of our systems. In April 2009, the Company received 510(k) clearance from the FDA to authorize the Company to market and sell its STREAMWAY® FMS products.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations and had a stockholders’ deficit until August 31, 2015 whereupon the Company closed its public offering of units of common stock, Series B Convertible Preferred Stock and Series A Warrants (the “Units”). There remains though, substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Since inception to September 30, 2016, the Company raised approximately $22,325,091 in equity, inclusive of $2,055,000 from a private placement of Series A Convertible Preferred Stock, $13,555,003 from the public offering of Units and $5,685,000 in debt financing. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

Recent Accounting Developments

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers and created a new topic in the FASB Accounting Standards Codification ("ASC"), Topic 606. The new standard provides a single comprehensive revenue recognition framework for all entities and supersedes nearly all existing U.S. GAAP revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and also requires enhanced disclosures. The amendments are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.

In June 2014, the FASB issued ASU 2014-12, "Compensation - Stock Compensation" providing explicit guidance on how to account for share-based payments granted to employees in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact this guidance may have on our financial statements.

8

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The standard is effective for public entities for annual and interim periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts, rather than as an asset. Amortization of these costs will continue to be reported as interest expense. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, 2015. Early adoption is permitted. The adoption of this ASU is not expected to have an impact on our financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, requiring that inventory be measured at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective within annual periods beginning on or after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the impact this guidance may have on our financial statements.

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740)” providing guidance on the balance sheet classification of deferred taxes. The guidance requires that deferred tax assets and liabilities to be classified as noncurrent in the Balance Sheet. The guidance is effective for fiscal years beginning after December 15, 2016 and for interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). The standard changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. Under the new guidance, entities will be required to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not believe that the adoption of this guidance will have a material impact on the Company's consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842 ” (“ASU 2016-02”), which requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The standard states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the timing of our adoption and the impact that the updated standard will have on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the timing of our adoption and the impact that the updated standard will have on our consolidated financial statements.

During August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statements of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. If retrospective application is impractical for some of the issues addressed by the update, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements.

We reviewed all other significant newly issued accounting pronouncements and determined they are either not applicable to our business or that no material effect is expected on our financial position and results of our operations.

9

Valuation of Intangible Assets

We review identifiable intangible assets for impairment in accordance with ASC 350 — Intangibles —Goodwill and Other, whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Our intangible assets are currently solely the costs of obtaining trademarks and patents. Events or changes in circumstances that indicate the carrying amount may not be recoverable include, but are not limited to, a significant change in the medical device marketplace and a significant adverse change in the business climate in which we operate. If such events or changes in circumstances are present, the undiscounted cash flows method is used to determine whether the intangible asset is impaired. Cash flows would include the estimated terminal value of the asset and exclude any interest charges. If the carrying value of the asset exceeds the undiscounted cash flows over the estimated remaining life of the asset, the asset is considered impaired, and the impairment is measured by reducing the carrying value of the asset to its fair value using the discounted cash flows method. The discount rate utilized is based on management’s best estimate of the related risks and return at the time the impairment assessment is made.

Accounting Policies and Estimates

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Presentation of Taxes Collected from Customers

Sales taxes are imposed on the Company’s sales to nonexempt customers. The Company collects the taxes from customers and remits the entire amounts to the governmental authorities. The Company’s accounting policy is to exclude the taxes collected and remitted from revenues and expenses.

Shipping and Handling

Shipping and handling charges billed to customers are recorded as revenue. Shipping and handling costs are recorded within cost of goods sold on the statement of operations.

Advertising

Advertising costs are expensed as incurred. Advertising expenses were $10,343 and $57,004 in the three and nine months ended September 30, 2016 and were $500 and $1,917 in the three and nine months ended September 30, 2015.

10

Research and Development

Research and development costs are charged to operations as incurred. Research and development expenses were $79,936 and $302,330 in the three and nine months ended September 30, 2016 and were $58,792 and $179,739 in the three and nine months ended September 30, 2015.

Revenue Recognition

The Company recognizes revenue in accordance with the SEC’s Staff Accounting Bulletin Topic 13 Revenue Recognition and ASC 605-Revenue Recognition.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is probable. Delivery is considered to have occurred upon either shipment of the product or arrival at its destination based on the shipping terms of the transaction. The Company’s standard terms specify that shipment is FOB Skyline and the Company will, therefore, recognize revenue upon shipment in most cases. This revenue recognition policy applies to shipments of the STREAMWAY FMS units as well as shipments of filters and fluids. When these conditions are satisfied, the Company recognizes gross product revenue, which is the price it charges generally to its customers for a particular product. Under the Company’s standard terms and conditions, there is no provision for installation or acceptance of the product to take place prior to the obligation of the customer. The customer’s right of return is limited only to the Company’s standard one-year warranty whereby the Company replaces or repairs, at its option, and it would be rare that the STREAMWAY FMS unit or significant quantities of cleaning solution or filters may be returned. Additionally, since the Company buys the STREAMWAY FMS units, cleaning solution and filters from “turnkey” suppliers, the Company would have the right to replacements from the suppliers if this situation should occur.

Cash Equivalents

The Company considers all highly liquid debt instruments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximate fair value.

Certificates of Deposit

Short-term interest bearing investments are those with maturities of less than one year but greater than three months when purchased. Certificates with maturity dates beyond one year are classified as noncurrent assets. These investments are readily convertible to cash and are stated at cost plus accrued interest, which approximates fair value.

Investment Securities

Readily marketable investments in debt and equity securities are classified as available-for-sale and are reported at fair value with unrealized gains and losses recorded in other comprehensive income. Unrealized gains are charged to earnings when an incline in fair value above the cost basis is determined to be other-than-temporary. Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific identification method.

Fair Value Measurements

Under generally accepted accounting principles as outlined in the Financial Accounting Standards Board’s Accounting Standards Certification (ASC) 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standards ASC 820 establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing as asset or liability as follows:

Level 1 – Observable inputs such as quoted prices in active markets;

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Level 2 – Inputs other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3 – Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

The Company uses observable market data, when available, in making fair value measurements. Fair value measurements are classified according to the lowest level input that is significant to the valuation.

The fair value of the Company’s investment securities were determined based on Level 1 inputs.

Receivables

Receivables are reported at the amount the Company expects to collect on balances outstanding. The Company provides for probable uncollectible amounts through charges to earnings and credits to the valuation based on management’s assessment of the current status of individual accounts, changes to the valuation allowance have not been material to the financial statements.

12

Inventories

Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory balances are as follows:

	September 30, 2016		December 31, 2015
Finished goods	$	72,540	$	30,237
Raw materials		157,044		162,623
Work-In-Process		59,665		38,880
Total	$	289,249	$	231,740

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Estimated useful asset life by classification is as follows:

	Years
Computers and office equipment	3	-	7
Leasehold improvements		5
Manufacturing tooling	3	-	7
Demo Equipment		3

The Company’s investment in Fixed Assets consists of the following:

	September 30, 2016		December 31, 2015
Computers and office equipment	$	164,319	$	153,553
Leasehold improvements		25,635		23,874
Manufacturing tooling		101,104		97,288
Demo Equipment		17,702		8,962
Total		308,760		283,677
Less: Accumulated depreciation		197,850		144,079
Total Fixed Assets, Net	$	110,910	$	139,598

Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.

Intangible Assets

Intangible assets consist of trademarks and patent costs. Amortization expense was $2,515 and $6,225 in the three and nine months ended September 30, 2016, and was $1,632 and $4,520 in the three and nine months ended September 30, 2015. The assets are reviewed for impairment annually, and impairment losses, if any, are charged to operations when identified.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740- Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

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The Company reviews income tax positions expected to be taken in income tax returns to determine if there are any income tax uncertainties. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by taxing authorities, based on technical merits of the positions. The Company has identified no income tax uncertainties.

Tax years subsequent to 2012 remain open to examination by federal and state tax authorities.

Patents and Intellectual Property

On January 25th, 2014 the Company filed a non-provisional PCT Application No. PCT/US2014/013081 claiming priority from the U.S. Provisional Patent Application, number 61756763 which was filed one year earlier on January 25th, 2013. The Patent Cooperation Treaty (“PCT”) allows an applicant to file a single patent application to seek patent protection for an invention simultaneously in each of the 148 countries of the PCT, including the United States. By filing this single “international” patent application through the PCT, it is easier and more cost effective than filing separate applications directly with each national or regional patent office in which patent protection is desired.

Our PCT patent application is for the new model of the surgical fluid waste management system. We obtained a favorable International Search Report from the PCT searching authority indicating that the claims in our PCT application are patentable (i.e., novel and non-obvious) over the cited prior art. A feature claimed in the PCT application is the ability to maintain continuous suction to the surgical field while measuring, recording and evacuating fluid to the facilities sewer drainage system. This provides for continuous operation of the STREAMWAY System unit in suctioning waste fluids, which means that suction is not interrupted during a surgical operation, for example, to empty a fluid collection container or otherwise dispose of the collected fluid.

The Company holds the following granted patents in the United States and a pending application in the United States on its earlier models: US7469727, US8123731 and U.S. Publication No. US20090216205 (collectively, the “Patents”). These Patents will begin to expire on August 8, 2023.

In July 2015, Skyline Medical filed an international (PCT) patent application for its fluid waste collection system and received a favorable determination by the International Searching Authority finding that all of the claims satisfy the requirements for novelty, inventive step and industrial applicability. Skyline anticipates that the favorable International Search Report will result in allowance of its various national applications.

Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high credit quality financial institutions and, by policy, generally limits the amount of credit exposure to any one financial institution. The Company has a credit risk concentration as a result of depositing $454,369 of funds in excess of insurance limits in a single bank.

Product Warranty Costs

In the three and nine months ending September 30, 2016 the incurred approximately $2,102 and $33,083 in current warranty costs and incurred $12,084 and $39,688 in warranty costs for the three and nine months ending September 30, 2015.

Segments

The Company operates in one segment for the sale of its medical device and consumable products. Substantially all of the Company’s assets, revenues and expenses for the three and nine months ending September 30, 2016 and for 2015 in entirety were located at or derived from operations in the United States. There were no revenue from sales outside of the United States. The Company has recently attained its ISO 13485 certification and is applying to sell our products in Canada.

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Risks and Uncertainties

The Company is subject to risks common to companies in the medical device industry, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with regulations of the FDA and other governmental agencies.

Subsequent Events

The Company filed a Certificate of Amendment effecting a 1:25 reverse stock split (the “Reverse Stock Split” with the Secretary of State of the State of Delaware, which became effective under Delaware law at 5:00 p.m. New York time on October 27, 2016. The Company’s common stock opened for trading on October 28, 2016 on a post-split basis. At the effective time (the “Effective Time”) of the Reverse Stock Split, the issued and outstanding Common Stock of the Company was combined on a 1-for-25 basis such that every twenty-five shares of Common Stock outstanding immediately prior to the Effective Time was combined into one share of Common Stock. The share combination was effected through the exchange and replacement of certificates representing issued and outstanding shares of Common Stock as of the Effective Time, together with immediate book-entry adjustments to the stock register of the Company maintained in accordance with the Delaware General Corporation Law. In the event that the share combination would have resulted in a shareholder being entitled to receive less than a full share of Common Stock, the fractional share that would so result was rounded up to the nearest whole share of Common Stock. The par value of each share of issued and outstanding Common Stock was not affected by the share combination.

Interim Financial Statements

The Company has prepared the unaudited interim financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. These interim financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly the Company’s financial position, the results of its operations and its cash flows for the interim periods. These interim financial statements should be read in conjunction with the annual financial statements and the notes thereto contained in the Form 10-K filed with the SEC on March 16, 2016. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

NOTE 2 – DEVELOPMENT STAGE OPERATIONS

The Company was formed April 23, 2002. Since inception to October 24, 2016, 3,804,860 shares of common stock have been issued between par value and $3,131.25 (as adjusted for the reverse stock split). Operations since incorporation have been devoted to raising capital, obtaining financing, development of the Company’s product, and administrative services, customer acceptance and sales and marketing strategies.

NOTE 3 – STOCKHOLDERS’ DEFICIT, STOCK OPTIONS AND WARRANTS

The Company has an equity incentive plan, which allows issuance of incentive and non-qualified stock options to employees, directors and consultants of the Company, where permitted under the plan. The exercise price for each stock option is determined by the Board of Directors. Vesting requirements are determined by the Board of Directors when granted and currently range from immediate to three years. Options under this plan have terms ranging from three to ten years.

Public Offering of Units

On August 31, 2015 (the “Issuance Date”), the Company completed a public offering (the “Offering”) of 1,666,667 Units (the “Units”) as described below. The public offering price in the Offering was $9.00 per Unit, and the purchase price for the underwriter of the Offering (the “Underwriter”) was $8.28 per Unit, resulting in an underwriting discount and commission of $0.72 (or 8.00%) per Unit and total net proceeds to the Company before expenses of $13.8 million. The Company had granted the Underwriter an option for a period of 45 days to purchase up to an additional 250,000 Units solely to cover over-allotments. The Underwriter chose not to purchase any additional Units under the over-allotment option. The Company paid to the Underwriter a non-accountable expense allowance equal to 1% of the gross proceeds of the Offering and agreed to reimburse expenses incurred by the Underwriter up to $70,000.

On August 31, 2015, as a result of the consummation of the Offering and the issuance of the 228,343 Exchange Units in the Unit Exchange described below, the Company issued a total of 1,895,010 Units, comprised of a total of aggregate of 75,800 shares of Common Stock (as adjusted for the reverse stock split), 1,895,010 shares of Series B Preferred Stock and 7,580,040 Series A Warrants, (as adjusted for the reverse stock split).

Each Unit consisted of one share of common stock, par value $0.01 per share (the “Common Stock”), one share of Series B Convertible Preferred Stock (“Series B Preferred Stock”) and four Series A Warrants. The shares of Common Stock, the shares of Series B Preferred Stock and the Series A Warrants that comprise the Units automatically separated on February 29, 2016.

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For a description of the terms of the Series B Convertible Preferred Stock included within the Units, see “Series B Preferred Stock” below. For a description of the terms of the Series A Warrants included within the Units, see “Series A Warrants” below.

Series A Warrants. The Series A Warrants separated from the Series B Convertible Preferred Stock and the Common Stock included within the Units as described above and are currently exercisable. The Series A Warrants terminate on August 31, 2020. Each Series A Warrant is exercisable into one share of Common Stock at an initial cash exercise price of $123.75 per share. The Cash exercise price and number of shares of common stock issuable upon cash exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the Common Stock and the exercise price.

Holders may exercise Series A Warrants by paying the exercise price in cash or, in lieu of payment of the exercise price in cash, by electing to receive a number of shares of Common Stock equal to the Black-Scholes Value (as defined below) based upon the number of shares the holder elects to exercise. The number of shares of Common Stock to be delivered according to the following formula, referred to as the “Cashless Exercise.”

Total Shares = (A x B)/C

Where:

· Total shares is the number of shares of Common Stock to be issued upon a Cashless Exercise.

· A is the total number of shares with respect to which the Series A Warrant is then being exercised.

· B is the Black-Scholes Value (as defined below).

· C is the closing bid price of the Common Stock as of two trading days prior to the time of such exercise, provided that in no event may “C” be less than $0.43 per share (subject to appropriate adjustment in the event of stock dividends, stock splits or similar events affecting the Common Stock).

The Black-Scholes Value (as defined above) as of September 30, 2016 was $4.319, and the closing bid price of Common Stock as of September 30, 2016, was $4.125. Therefore, an exercise on that date would have resulted in the issuance of .40 shares of Common Stock for each Series A Warrant. Approximately 6,141,115 Series A Warrants have been exercised in cashless exercises as of September 30, 2016, resulting in the issuance of 2,318,663 shares of Common Stock. If all of the remaining 35,084 Series A Warrants that were issued as part of the Units sold in the Offering and part of the Units issued on August 31, 2015 were exercised pursuant to a cashless exercise and the closing bid price of our common stock as of the two trading days prior to the time of such exercise was $10.75 per share or less and the Black-Scholes Value were $4.319 (the Black-Scholes Value as of September 30, 2016), then a total of an additional approximately 564 shares of our common stock would be issued to the holders of such Series A Warrants.

The Series A Warrants will not be exercisable or exchangeable by the holder of such warrants to the extent (and only to the extent) that the holder or any of its affiliates would beneficially own in excess of 4.99% of the common stock of the Company, determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder.

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In addition to (but not duplicative of) the adjustments to the exercise price and the number of shares of Common Stock issuable upon exercise of the Series A Warrants in the event of stock dividends, stock splits, reorganizations or similar events, the Series A Warrants provide for certain adjustments if the Company, at any time prior to the three year anniversary of the Issuance Date, (1) declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to all or substantially all of the holders of shares of Common Stock at any time after the Issuance Date, or (2) grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of shares of Common Stock. Further, if at any time a Series A Warrant is outstanding, the Company consummates any fundamental transaction, as described in the Series A Warrants and generally including any consolidation or merger into another corporation, or the sale of all or substantially all of our assets, or other transaction in which the Common Stock is converted into or exchanged for other securities or other consideration, the holder of any Series A Warrants will thereafter receive, the securities or other consideration to which a holder or the number of shares of Common Stock then deliverable upon the exercise or exchange of such Series A Warrants would have been entitled upon such consolidation or merger or other transaction.

Unit Purchase Option. The Company, in connection with the Offering, entered into a Unit Purchase Option Agreement, dated as of August 31, 2015 (the “Unit Purchase Option”), pursuant to which the Company granted the Underwriter the right to purchase from the Company up to a number of Units equal to 5% of the Units sold in the Offering (or up to 83,333 Units) or the component securities of such Units at an exercise price equal to 125% of the public offering price of the Units in the Offering, or $11.25 per Unit. The Unit Purchase Option was terminated in May 2016 in exchange for 135,995 shares of common stock.

Series B Preferred Stock. Each share of Series B Preferred Stock became convertible into one share of Common Stock (subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events) as of February 29, 2016. In addition, the Series B Preferred Stock will automatically convert into shares of common stock upon the occurrence of a fundamental transaction, as described in the certificate of designations for the Series B Preferred Stock but including mergers, shares of the company’s assets, changes in control and similar transactions. The Series B Preferred Stock is not convertible by the holder of such preferred stock to the extent (and only to the extent that the holder or any of its affiliates would beneficially own in excess of 4.99% of the common stock of the Company. The Series B Preferred Stock has no voting rights, except for the right to approve certain amendments to the certificate of designations or similar actions. With respect to payment of dividends and distribution of assets upon liquidation or dissolution or winding up of the Company, the Series B Preferred Stock shall rank equal to the common stock of the Company. No sinking fund has been established for the retirement or redemption of the Series B Preferred Stock.

Unit Exchange. On February 4, 2014, the Company raised $2,055,000 in gross proceeds from a private placement of 20,550 shares of Series A Convertible Preferred Stock, par value $0.01, with a stated value of $100 per share (the “Series A Preferred Shares”) and warrants to purchase shares of the Company’s common stock. The Series A Preferred Shares and warrants were sold to investors pursuant to a Securities Purchase Agreement, dated as of February 4, 2014. On August 31, 2015, the Company issued a total of 228,343 Units (the “Exchange Units”) in exchange for the outstanding Series A Preferred Stock which were then cancelled pursuant to an agreement with the holders of the Series A Preferred Shares. The warrants that were issued in connection with the issuance of the Series A Preferred Shares remained outstanding; however, the warrant amounts were reduced so that the warrants are exercisable into an aggregate of 3,391 shares of the Company’s common stock. The Exchange Units were exempt from registration under Section 3(a)(9) of the Securities Act. On August 31, 2015, the Company filed a termination certificate with the Delaware Secretary of State. Following that date there were no shares of Series A Preferred Stock outstanding, and the previously authorized shares of Series A Preferred Stock resumed the status of authorized but issued and undesignated shares of preferred stock of the Company.

Redemption of Convertible Notes. In connection with the closing of the Offering, $933,074 aggregate principal amount of Convertible Notes plus interest and a 40% redeemable premium were redeemed for total payments of $1,548,792. See Note 4. Of this amount, approximately $167,031 was paid to its affiliates in redemption of their Convertible Notes.

Registered Exchange Offer for Warrants. On March 25, 2016, the Company commenced a registered exchange offer (the “Exchange Offer”) to exchange Series B Warrants (the “Series B Warrants”) to purchase shares of our common stock, par value $0.01 per share (the “Warrant Shares”), for up to an aggregate of 3,157,186 outstanding Series A Warrants (the “Series A Warrants”). On March 31, 2016, each Series A Warrant could be exercised on a cashless basis for 10.05 shares of common stock. Each Series B Warrant may be exercised on a cashless basis for one share of common stock. For each outstanding Series A Warrant tendered by holders, we offered to issue 10.2 Series B Warrants, which are subject to cashless exercise at a fixed rate of one share of common stock per Series B Warrant (subject to further adjustment for stock splits, etc.). The Exchange Offer expired at midnight, Eastern time, on April 21, 2016. 1,770,556 Series A Warrants were tendered by holders. The Company delivered an aggregate of 18,059,671 Series B Warrants pursuant to the terms of the Exchange Offer. In addition, between March 31, 2016 and July 6, 2016 1,251,510 Series A Warrants were exercised in cashless exercises, resulting in the issuance of 503,034 shares of common stock.

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Accounting for share-based payment

The Company has adopted ASC 718- Compensation-Stock Compensation ("ASC 718"). Under ASC 718 stock-based employee compensation cost is recognized using the fair value based method for all new awards granted after January 1, 2006 and unvested awards outstanding at January 1, 2006. Compensation costs for unvested stock options and non-vested awards that were outstanding at January 1, 2006, are being recognized over the requisite service period based on the grant-date fair value of those options and awards, using a straight-line method. We elected the modified-prospective method under which prior periods are not retroactively restated.

ASC 718 requires companies to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model or other acceptable means. The Company uses the Black-Scholes option valuation model which requires the input of significant assumptions including an estimate of the average period of time employees will retain vested stock options before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognized. The assumptions the Company uses in calculating the fair value of stock-based payment awards represent the Company's best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based compensation expense could be materially different in the future.

Since the Company's common stock has no significant public trading history, and the Company has experienced no significant option exercises in its history, the Company is required to take an alternative approach to estimating future volatility and estimated life and the future results could vary significantly from the Company's estimates. The Company compiled historical volatilities over a period of 2 to 7 years of 15 small-cap medical companies traded on major exchanges and 10 mid-range medical companies on the OTC Bulletin Board and combined the results using a weighted average approach. In the case of ordinary options to employees the Company determined the expected life to be the midpoint between the vesting term and the legal term. In the case of options or warrants granted to non-employees, the Company estimated the life to be the legal term unless there was a compelling reason to make it shorter.

When an option or warrant is granted in place of cash compensation for services, the Company deems the value of the service rendered to be the value of the option or warrant. In most cases, however, an option or warrant is granted in addition to other forms of compensation and its separate value is difficult to determine without utilizing an option pricing model. For that reason the Company also uses the Black-Scholes option-pricing model to value options and warrants granted to non-employees, which requires the input of significant assumptions including an estimate of the average period the investors or consultants will retain vested stock options and warrants before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options and warrants that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based consulting and/or compensation and, consequently, the related expense recognized.

Since the Company has limited trading history in its stock and no first-hand experience with how its investors and consultants have acted in similar circumstances, the assumptions the Company uses in calculating the fair value of stock-based payment awards represent its best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based consulting and interest expense could be materially different in the future.

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Valuation and accounting for options and warrants

The Company determines the grant date fair value of options and warrants using a Black-Scholes option valuation model based upon assumptions regarding risk-free interest rate, expected dividend rate, volatility and estimated term.

In January 2014 the Company issued 174 shares of common stock to the former CEO at $31.25 per share upon his exercising options.

In January through March 2014, 9 warrant holders exercised warrants through a cashless exercise for a total of 618 shares of common stock.

In January and February 2014 the Company issued warrants to purchase 862 shares pursuant to a February 4, 2014 private placement whereby the Company issued 20,550 shares of Series A Convertible Preferred Stock raising gross proceeds of $2,055,000. The warrants are at an exercise price of $609.50.

In February 2014 the Company issued a warrant to purchase 60 shares of common stock at an exercise price of $506.25 to a major shareholder Dr. Samuel Herschkowitz. The warrant is in consideration for a bridge loan extended in December 2013 that has been paid in February 2014.

On March 31, 2014, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $487.50 per share. As a result 39 shares of common stock were issued to 16 holders of Preferred Shares.

In March 2014, the Company issued 178 shares of common stock to a warrant holder for a partial cash exercise at $281.25 per share; issued 134 shares to the holder via the cashless exercise of the remainder of the warrant.

In June 2014, the Company issued 149 shares of common stock to a warrant holder exercising cashless warrants.

On June 30, 2014, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $487.50 per share. As a result 63 shares of common stock were issued to 16 holders of Preferred Shares.

On June 30, 2014, the Company issued a warrant to purchase 218 shares of common stock at an exercise price of $309.50 to SOK Partners, LLC, in consideration for a bridge loan in the form of convertible notes. On September 9, 2014 the Resale Registration Statement went into effect. The convertible note agreement provided an immediate approximately 11% reduction to the warrant agreement. Therefore, the warrant has been adjusted to purchase 194 shares of common stock at an exercise price of $309.50 to SOK Partners, LLC in consideration for a bridge loan.

In July 2014, the Company issued warrants to purchase 1,160 shares of common stock at an exercise price of $309.50 to two lenders in consideration for a bridge loan in the form of convertible notes. The shares above reflect approximately an 11% reduction resulting from the Resale Registration Statement that went effective September 9, 2014.

In August 2014, the Company issued warrants to purchase 2,462 of common stock at an exercise price of $609.50 to the Purchasers of the Preferred Shares. The Securities Purchase Agreement with the Preferred Shareholders stipulated that if the Company was not listed on either the NASDAQ Stock Market, the New York Stock Exchange or the NYSE MKT within 180 days of closing the agreement then warrants to purchase the above additional shares would be issued in aggregate to the Preferred Shareholders.

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In August and September 2014, the Company issued warrants to purchase 1,498 shares of common stock at an exercise price of $309.50 to four lenders in consideration for a bridge loan in the form of convertible notes. The shares above reflect the approximate 11% reduction resulting from the Resale Registration Statement that went effective September 9, 2014.

On September 30, 2014, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $487.50 per share. As a result 63 shares of common stock were issued to 16 holders of Preferred Shares.

In November 2014, the Company issued 548 shares of common stock, par value $0.01, in escrow for debt settlement.

On December 31, 2014, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $487.50 per share. As a result 63 shares of common stock were issued to 16 holders of Preferred Shares.

For grants of stock options and warrants in 2014 the Company used a 1.44% to 2.75% risk-free interest rate, 0% dividend rate, 59% to 66% volatility and estimated terms of 5 to 10 years. Value computed using these assumptions ranged from $80.015 to $347.9864 per share.

In January 2015, the Company issued a dividend adjustment to the Purchasers of the Preferred Shares as described above. Certain previous dividends paid were calculated with an exercise price of $487.50 per share, but should have been calculated at $243.75 per share. As a result 125 shares of common stock were issued to 16 holders of Preferred Shares.

On March 31, 2015, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $243.75 per share. As a result 125 shares of common stock were issued to 16 holders of Preferred Shares.

On June 30, 2015, the Company issued dividends to Purchases of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $243.75 per share. As a result 125 shares of common stock were issued to 16 holders of Preferred Shares.

For grants of stock options and warrants in 2015 the Company used a 1.63% to 2.35% risk-free interest rate, 0% dividend rate, 59% to 66% volatility and estimated terms of 5 to 10 years. Value computed using these assumptions ranged from $6.8745 to $139.2386 per share.

On March 25, 2016, the Company commenced the Exchange Offer which was completed on April 20, 2016, as described above.

On July 1, 2016, the Company issued inducement stock options in accordance with NASDAQ listing rules for 40,000 shares of common stock, par value $0.01, at $3.75 per share to the Company’s newly hired Vice President of Sales. The options will vest in six equal increments: on the first, second, third, fourth, fifth and sixth quarters of the hiring date anniversary.

On October 4, 2016, the Company issued 400,000 shares of common stock, par value $0.01, to be held in escrow in connection with the Company’s Partnership and Exclusive Reseller Agreement with GLG Pharma, LLC.

For grants of stock options and warrants in 2016 the Company used a 1.46% to 1.78% risk free interest rate, 0% dividend rate, 66% volatility and estimated terms of 10 years. Value computed using these assumptions ranged from $1.6329 to $3.7195 per share.

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The following summarizes transactions for stock options and warrants for the periods indicated:

	Stock Options					Warrants
	Number of Shares			Average Exercise Price		Number of Shares			Average Exercise Price
Outstanding at December 31, 2014		17,945		$	187.75		20,029		$	198.75
Issued		14,171			69.00		303269			123.75
Expired		(766	)		293.25		(79	)		283.50
Exercised		-			-		(120	)		123.75
Outstanding at December 31, 2015		31,350		$	133.23		323,099		$	128.40
Issued		100,837			3.329		730,882			1.44
Expired		(22,377	)		122.132		-			-
Exercised		(1,312	)		65.750		(939,879	)		-
Outstanding at September 30, 2016		108,498		$	15.652		114,102		$	369.06

At September 30, 2016, 64,542 stock options are fully vested and currently exercisable with a weighted average exercise price of $23.46 and a weighted average remaining term of 9.57 years. All warrants are fully vested and exercisable. Stock-based compensation recognized for the nine months ending September 2016 and September 2015 was $1,393,862 and $320,334, respectively. The Company has $132,675 of unrecognized compensation expense related to non-vested stock options that are expected to be recognized over a period of approximately 18 months.

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The following summarizes the status of options and warrants outstanding at September 30, 2016:

	Range of Prices	Shares	Weighted Remaining Life
Options
$	2.25	293	9.90
$	2.42	37,152	9.89
$	3.75	44,000	9.76
$	4.125	3,636	10.00
$	4.1975	7,147	9.97
$	4.25	3,529	9.50
$	5.125	3,902	9.94
$	65.75	342	9.06
$	73.50	1,157	9.26
$	77.50	2,323	8.75
$	80.25	187	9.01
$	86.25	232	8.50
$	121.875	5	6.45
$	131.25	81	5.94
$	148.125	928	6.47
$	150.00	1,760	5.88
$	162.50	123	8.26
$	206.25	121	8.01
$	248.4375	121	6.79
$	262.50	130	6.79
$	281.25	529	6.30
$	318.75	3	6.60
$	346.875	72	7.50
$	431.25	306	7.44
$	468.75	133	7.40
$	506.25	188	7.25
$	543.75	53	7.02
$	596.25	42	7.00
		108,498
Warrants
$	93.75	2,255	1.45
$	123.75	94,084	3.92
$	150.00	4,114	1.45
$	225.00	107	1.32
$	243.75	2,529	2.84
$	281.25	5,897	1.20
$	309.375	2,850	2.86
$	309.50	222	3.10
$	337.50	178	1.72
$	371.25	944	1.66
$	506.25	59	2.38
$	609.375	862	2.34
		114,102

 Stock options and warrants expire on various dates from June 2017 to September 2026.

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On July 24, 2015, an amendment to the Certificate of Incorporation became effective, pursuant to which the authorized common stock was increased to 4,000,000 shares of common stock and the authorized preferred stock was increased to 20,000,000 shares.

Under a Separation Agreement effective June 13, 2016, all of our former CEO Josh Kornberg’s 22,085 outstanding stock options were canceled.

On September 16, 2016, an amendment to the Certificate of Incorporation became effective, pursuant to which the authorized common stock was increased to 8,000,000 shares of common stock.

Stock Options and Warrants Granted by the Company

The following table is the listing of stock options and warrants as of September 30, 2016 by year of grant:

Stock Options:
Year	Shares		Price
2011		173		0.00	-	281.25
2012		1,841		131.25	-	150.00
2013		1,612		121.88	-	596.25
2014		969		162.50	-	468.75
2015		4,240		65.75	-	86.25
2016		99,661		2.25	-	5.13
Total		108,498		$0.00	-	596.25

Warrants:
Year	Shares		Price
2012		2,792			281.25
2013		10,703		93.75	-	371.25
2014		6,455		243.75	-	609.38
2015		94,152		0.00	-	243.75
Total		114,102		$0.00	-	609.38

NOTE 4 – SHORT-TERM NOTES PAYABLE 

From July through September 2014, we entered into a series of securities purchase agreements pursuant to which we issued approximately $1.8 million original principal amount (subsequently reduced to approximately $1.6 million aggregate principal amount in accordance with their terms) of convertible promissory notes (the “2014 Convertible Notes”) and warrants exercisable for shares of our common stock for an aggregate purchase price of $1,475,000. Of this amount, we issued to SOK Partners, LLC, an affiliate of the Company, $122,196 original principal amount of the 2014 Convertible Notes and warrants exercisable for 218 shares of our common stock for an aggregate purchase price of $100,000. In April and May 2015, we issued and sold to a private investor additional Convertible Notes in an aggregate original principal amount of $275,000 for an aggregate purchase price of $250,000, containing terms substantially similar to the 2014 Convertible Notes (the “2015 Convertible Notes” and, together with the 2014 Convertible Notes, the “Convertible Notes”). No warrants were issued with the 2015 Convertible Notes.

Under a provision in the existing agreements, upon effectiveness of a resale registration statement covering certain shares, on September 9, 2014, the principal amount of the notes was reduced by 11%, to $1,603,260 and the number of Warrants was reduced by 11%, to 2,851 shares.

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As of September 30, 2016 $927,663 aggregate principal amount of Convertible Notes, plus accrued and unpaid interest thereto, have been converted into shares of our common stock and no aggregate principal amount of Convertible Notes remains outstanding.

In connection with the Offering, the holders of the Convertible Notes agreed to not exercise their right to convert the Convertible Notes into shares of the Company’s common stock, in exchange for the Company’s agreement to redeem all of the outstanding Convertible Notes promptly following the consummation of the Offering at a redemption price equal to 140% of the principal amount, plus accrued and unpaid interest to the redemption date. On August 31, 2015, the closing date of the offering, the Company redeemed the remaining $933,074 aggregate principal amount of Convertible Notes plus interest and a 40% redeemable premium, for a total payment of $1,548,792. Of this amount, approximately $167,031 was paid to its affiliates in redemption of their Convertible Notes. Each holder of the Convertible Notes agreed to the foregoing terms and entered into an Amendment to Senior Convertible Notes and Agreement with the Company. As of September 30, 2016, none of the Convertible Notes were outstanding.

NOTE 5 - LOSS PER SHARE

The following table presents the shares used in the basic and diluted loss per common share computations:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Numerator:
Net loss available in basic and diluted calculation	$	(1,055,593	)	$	(1,116,402	)	$	(5,793,242	)	$	(2,527,524	)
Other comprehensive income:
Unrealized gain (loss) from marketable securities		(1,299	)		-			4,579			-
Comprehensive (loss)		(1,056,892	)		(1,116,402	)		(5,788,663	)		(2,527,524	)
Denominator:
Weighted average common shares outstanding-basic		3,320,139			157,445			2,250,315			137,428
Effect of diluted stock options, warrants and preferred stock (1)		-			-			-			-
Weighted average common shares outstanding-basic		3,320,139			157,445			2,250,315			137,428
Loss per common share-basic and diluted	$	(0.32	)	$	(7.09	)	$	(2.57	)	$	(18.39	)

(1) The number of shares underlying options and warrants outstanding as of September 30, 2016 and September 30, 2015 are 222,600 and 343,554 respectively. The effect of the shares that would be issued upon exercise of such options, warrants and preferred stock has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

NOTE 6 – INCOME TAXES

Availability and Utilization of Net Operating Losses

During September 2013, the Company experienced an “ownership change” as defined in Section 382 of the Internal Revenue Code which could potentially limit the ability to utilize the Company’s net operating losses (NOLs). The general limitation rules allow the Company to utilize its NOLs subject to an annual limitation that is determined by multiplying the federal long-term tax-exempt rate by the Company’s value immediately before the ownership change.

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During the first quarter of 2016, the Company likely had another ownership change that could further limit the Company’s ability to fully utilize its NOLs however, the determination of the annual limitation has not yet been made.

Income Taxes

At December 31, 2015, the Company had approximately $24.7 million of gross NOLs to reduce future federal taxable income, the majority of which are expected to be available for use in 2016, subject to the Section 382 limitation described above. The federal NOLs will expire beginning in 2022 if unused. The Company also had approximately $13.4 million of gross NOLs to reduce future state taxable income at December 31, 2015, which will expire in years 2022 through 2036 if unused. The Company’s net deferred tax assets, which include the NOLs, are subject to a full valuation allowance. At December 31, 2015, the federal and state valuation allowances were $9.6 million and $1.1 million, respectively.

At September 30, 2016, the Company had approximately $29.2 million of gross NOLs to reduce future federal taxable income, the majority of which are expected to be available for use in 2017, subject to the Section 382 limitations described above. The federal NOLs will expire beginning in 2022 if unused. The Company also had approximately $15.0 million of gross NOLs to reduce future state taxable income at September 30, 2016, which will expire in years 2022 through 2037 if unused. The Company’s net deferred tax assets, which include the NOLs, are subject to a full valuation allowance. At September 30, 2016, the federal and state valuation allowances were $10.1 million and $0.3 million, respectively.

The components of deferred income taxes at September 30, 2016 and December 31, 2015 are as follows:

	September 30, 2016		December 31, 2015
Deferred Tax Asset:
Net Operating Loss	$	10,271,000	$	10,338,000
Other		166,000		359,000
Total Deferred Tax Asset		10,437,000		10,697,000
Less Valuation Allowance		10,437,000		10,697,000
Net Deferred Income Taxes	$	—	$	—

NOTE 7 – RENT OBLIGATION

The Company leases its principal office under a lease that can be cancelled after three years with proper notice per the lease and an amortized schedule of adjustments that will be due to the landlord. The lease extends five years and expires January 2018. In addition to rent, the Company pays real estate taxes and repairs and maintenance on the leased property. Rent expense was $16,356 and $50,106 for the three and nine months ended September 30, 2016 and was $15,900 and $50,156 for the three and nine months ended September 30, 2015 respectively.

The Company’s rent obligation for the next three years is as follows:

2016	$	9,500
2017	$	39,000
2018	$	3,600

NOTE 8 – RELATED PARTY TRANSACTIONS

The Audit Committee has the responsibility to review and approve all transactions to which a related party and the Company may be a party prior to their implementation, to assess whether such transactions meet applicable legal requirements.

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In connection with the sale of the Series A Preferred Share on February 4, 2014, Josh Kornberg, our former, and then President, CEO and Interim Chairman of the Board, was one of the Purchasers. Mr. Kornberg purchased 770 Preferred Shares for a purchase price of $25,000 and received warrants to purchase 3 shares of common stock.

SOK Partners, LLC (“SOK”), a large stockholder with Mr. Kornberg and Dr. Samuel Herschkowitz as managing partners, invested in the July 2014 offering of convertible notes and warrants. In November 2014, the convertible noteholders agreed to convert certain balances of the convertible notes in connection with the public offering of the Existing Units, in consideration of the agreement to issue certain additional shares. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Liquidity and Capital Resources – History Financing – 2014 Sales of Convertible Notes and Warrants.” In connection with the Unit Offering in August 2015, all such convertible notes were redeemed at a redemption price of 140% of the principal amount thereof, plus accrued and unpaid interest. The Company paid approximately $163,000 to SOK in redemption of its convertible note. In addition, Rick Koenigsberger, a former director who resigned on June 5, 2015, is a holder of membership units of SOK Partners.

In connection with the Unit Exchange that was consummated on August 31, 2015, 250 shares of Series A Convertible Stock held by Mr. Kornberg were exchanged for 2,778 Exchange Units.

Note 9 – RETIREMENT SAVINGS PLAN

We have a pre-tax salary reduction/profit-sharing plan under the provisions of Section 401(k) of the Internal Revenue Code, which covers employees meeting certain eligibility requirements. In fiscal 2016 and 2015, we matched 100%, of the employee’s contribution up to 4% of their earnings. The employer contribution was $7,401 and $28,196 for the three and nine months ending September 30, 2016 and was $7,021 and $21,735 for the three and nine months ending September 30, 2015, respectively.

Note 10 – SUPPLEMENTAL CASH FLOW DATA

There were $3 in cash payments for interest for the three and nine months ended September 30, 2016 and were $226,960 and $237,121 for the three and nine months ended September 30, 2015.

Note 11 – INVESTMENT SECURITIES AND OTHER COMPREHENSIVE INCOME (LOSS)

The cost and fair values of investment securities available-for-sale at September 30, 2016 were as follows:

	September 30, 2016
Description	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mutual Funds	$	572,309	$	4,579	$	-	$	576,888

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We were incorporated in Minnesota in April 2002 under the name BioDrain Medical, Inc. Effective August 6, 2013, the Company changed its name to Skyline Medical Inc. Pursuant to an Agreement and Plan of Merger dated effective December 16, 2013, the Company merged with and into a Delaware corporation with the same name that was its wholly-owned subsidiary, with such Delaware corporation as the surviving corporation of the merger. We are a development stage company manufacturing an environmentally conscientious system for the collection and disposal of infectious fluids that result from surgical procedures and post-operative care.   Since our inception in 2002, we have invested significant resources into product development.  We believe that our success depends upon converting the traditional process of collecting and disposing of infectious fluids from the operating rooms of medical facilities to our wall-mounted Fluid Management System (“FMS”) and use of our proprietary cleaning fluid and filter kit.

We currently have one regional sales manager to sell the STREAMWAY FMS, and have recently hired a new Vice President of Sales to build our sales and marketing infrastructure. In 2014 we signed a contract with an independent distributor covering New York and surrounding areas as well as, three other independent contracting groups handling parts of the Midwest, the Southeast and Oklahoma. In 2016, we signed a contract with a large independent distributor covering Georgia and South Carolina. We also signed a reseller agreement granting Munro Enterprises LLC certain exclusive rights to market and distribute the STREAMWAY FMS to the U.S. federal government including U.S. Department of Veterans Affairs, U.S. Department of Defense and U.S. Health and Human Services facilities, among others. Munro Enterprises LLC is an Economically-Disadvantaged, Woman-Owned Small Business.  

Since inception, we have been unprofitable. We incurred net losses of approximately $1.1 million and $5.8 million for the three and nine months ended September 30, 2016, and $1.1 million and $2.5 million for the three months and nine months ended September 30, 2015, respectively. As of September 30, 2016 and September 30, 2015, we had an accumulated deficit of approximately $46.3 million and $38.2 million, respectively. We received approval from the FDA in April 2009 to commence sales and marketing activities of the STREAMWAY FMS and shipped the first system in 2009. However, there was no significant revenue prior to 2011, primarily due to lack of funds to build and ship the product.

In the first quarter of 2014, the Company commenced sales of an updated version of the STREAMWAY FMS, which provides a number of enhancements to the existing product line including a more intuitive and easier to navigate control screen, data storage capabilities, and additional inlet ports on the filters, among other improvements. This updated version utilizes improved technology, including the capability for continuous flow and continuous suctioning, as covered by our provisional patent application filed in 2013 and our non-provisional patent application filed in January 2014. We sold ninety-six STREAMWAY FMS units to date.

We expect the revenue for STREAMWAY FMS units to increase significantly at such time as the hospitals approve the use of the units for their applications and place orders for billable units. We also expect an increase in trial based units. Trial basis units are either installed in or hung on the hospital room wall. The unit is connected to the hospital plumbing and sewer systems, as well as, the hospital vacuum system. The unit remains on the customer site for 2 – 4 weeks, as contracted, at no cost to the customer. However, the customer does purchase the disposable products (cleaning fluid and filters) necessary to effectively operate the units. Once the trial period has expired the unit is either returned to the Company or purchased by the customer. If purchased, at that time, the Company invoices the customer based upon a contracted price negotiated prior to the trial.

We have never generated sufficient revenues to fund our capital requirements. We have funded our operations through a variety of debt and equity instruments. In 2014 we completed private placements of Series A Preferred Stock and convertible notes raising aggregate gross proceeds of $3,530,000. In September 2014, we commenced a public offering that was delayed, and we did not complete our public offering until August 2015. During that period of time, due to limited funding and continued operating losses, we curtailed our operations and delayed our expenditures to stay in operation. These factors negatively affected our sales in late 2014 and the full year 2015. In August 2015, we completed a public unit offering for $13,555,003, after deducting underwriting discounts, commissions and expenses Our future cash requirements and the adequacy of available funds depend on our ability to sell our products and the availability of future financing to fulfill our business plans. See “Plan of Financing; Going Concern Qualification” below.

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Our limited history of operations makes prediction of future operating results difficult. We believe that period to period comparisons of our operating results should not be relied on as predictive of our future results.

Recent Developments

On August 30, 2016, the Company entered into a letter of intent to form a joint venture with Electronic On-Ramp, Inc. (“EOR”). EOR’s partner contracts with government agencies are expected to provide the Company with access to bid on procurement contracts for up to $550 million or more in federal funds budgeted for health, security, life safety-systems support, humanitarian assistance and disaster preparedness.

At a special meeting of stockholders held on September 15, 2016, the Company’s stockholders (i) approved an amendment to the Company’s certificate of incorporation to increase the number of authorized shares of common stock from 100,000,000 to 200,000,000 and (ii) approved an amendment to the Company’s certificate of incorporation to effect a reverse stock split of the outstanding shares to its common stock within certain limits. On September 16, 2016, the Company filed a Certificate of Amendment to its Certificate of Incorporation to effect the increase in the authorized capital stock. On October 26, 2016, the Company filed a Certificate of Amendment to its Certificate of Incorporation to effect a reverse stock split of the outstanding shares of its common stock at a ratio of one-for-twenty-five (1:25), and a proportionate decrease of the authorized common stock from 200,000,000 shares to 8,000,000 shares. The reverse stock split took effect at 5:00 p.m. New York time on October 27, 2016, and the Company’s common stock commenced trading on a post-split basis on October 28, 2016.

On September 20, 2016, the Company entered into a partnership and exclusive reseller agreement with GLG Pharma (“GLG”). Under the terms of the agreement, GLG intends to develop rapid diagnostic tests that utilize fluid and tissue collected by the STREAMWAY System during procedures. The Company will issue an aggregate of 400,000 shares common stock to GLG in four separate tranches of 100,000 shares of common stock in each tranche. The shares reserved in each tranche will be released after the achievement of certain development milestones designated in the agreement. In addition, the Company will pay a royalty to GLG on the sale of individual tests.

On October 11, 2016, the Company received a letter from the Listing Qualifications Department (the “Staff”) of The NASDAQ Stock Market LLC (“Nasdaq”), indicating that the staff had determined to delist the Company’s securities from The Nasdaq Capital Market due to the Company’s continued non-compliance with the minimum bid price requirement as of October 10, 2016, unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company timely requested a hearing before the Panel, which request stayed any delisting or suspension action by the Staff pending the issuance of the Panel’s decision and the expiration of any extension granted by the Panel. At the hearing, the Company intends to present its plan to address compliance with the minimum bid price requirement as well as the minimum stockholders’ equity requirement and to request the continued listing of its securities on The Nasdaq Capital Market, pursuant to an extension if necessary. There can be no assurance that the Panel will determine to continue the Company’s listing or that the Company will be able to demonstrate compliance with the applicable listing criteria within the period of time that may be granted by the Panel.

Effective October 27, 2016, the board of directors of the Company appointed J. Melville (“Mel”) Engle and Timothy A. Krochuk to serve as directors of the Company. These appointments increase the number of directors to five.

Results of Operations

On October 27, 2016, the Company effected a 1-for-25 reverse stock split of its common stock. All share information in the financial statements for fiscal years 2016 and 2015 reflect the impact of the reverse stock split.

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Revenue. The Company recognized $135,000 of revenue in the three months ended September 30, 2016 compared to $86,000 in revenue in the three months ended September 30, 2015. The Company recognized $317,000 of revenue in the nine months ended September 30, 2016 compared to $471,000 in revenue in the nine months ended September 30, 2015.There have been two sales of the STREAMWAY unit in 2016, both in the third quarter. Our sales efforts were curtailed in late 2015 and early 2016 due to our concentrated efforts on customer management. We have hired a Vice President of Sales who has implemented a nine point program focusing on gaining market presence and brand awareness. The Vice President of Sales is rebuilding the infrastructure of our sales team and we expect a positive impact on future sales.

Cost of sales. Cost of sales was $26,000 in the three months ended September 30, 2016 and $20,000 in the three months ended September 30, 2015. Cost of sales was $149,000 in the nine months ended September 30, 2016 and $199,000 in the nine months ended September 30, 2015. The gross profit margin was approximately 53% in the nine months ended September 30, 2016 compared to 58% in the nine months ended September 30, 2015. We expect our margins to increase over the next several quarters as our manufacturing production becomes more consistent, and as increased sales allow us to achieve volume purchasing discounts on both equipment components and our cleaning solution. Over the next several quarters, we expect increases in revenues to exceed increases in costs related to increasing manufacturing and sales capabilities.

General and Administrative expense. General and administrative expense primarily consists of management salaries, professional fees, consulting fees, travel expense, administrative fees and general office expenses.

General and Administrative (G&A) expenses decreased by $128,000 from the three months ended September 30, 2016 compared to September 30, 2015. G&A expenses increased by $3,095,000 from the nine months ended September 30, 2016 compared to September 30, 2015. For the three month period ending September 30, 2016 payroll, bonuses, payroll taxes, benefits, travel and automobile leases decreased by $133,000 due to the CEO resignation and zero dollar compensation for the current Executive Chairman; license fees and payroll tax penalty and interest were also reduced by $38,000. Another reduction resulted from zero expenses for convertible notes in 2016 versus $475,000 in such expenses in 2015. Investor relations, stock based compensation and investor’s stock compensation were offsets that increased by $319,000. A further offset was a $220,000 increase in legal expenses in 2016 as a result of large credits issued in 2015. The nine month increase was affected by severance pay increasing $1,018,000 due to the negotiated settlement with the former CEO. Investors stock compensation and investor relations increased by $1,689,000 due to the new investment banker and the exercise of cashless warrants as a result of the separation of the Units in February 2016. Legal fees increased by $723,000 in 2016 due to the Unit Exchange Offer, the Exchange Offer, negotiations with our former CEO and as a result of large credits issued in the third quarter of 2015. Recruiting fees increased by $107,000 due to hiring the new Vice President of Sales. Offsets include: convertible note expense reductions for $475,000, stock based compensation of $116,000, tax and penalties of $143,000 and payroll expenses of $191,000.

Operations expense. Operations expense primarily consists of expenses related to product development and prototyping and testing in the Company’s current stage.

Operations expense increased by $90,000 in the three months ended September 30, 2016 compared to the three months ended September 30, 2015. The three month increase was due to increased salaries of $24,000 for new engineer and quality control positions; additional consulting expenses of $52,000 to assist in our STREAMWAY software upgrades; employee stock options to retain employees with a value of $47,000 to stock based compensation, and by $21,000 for research and development. Offsets were from decreases to bonuses in 2016 of $43,000 and to reduced miscellaneous expenses of $13,000. Operations expense increased by $553,000 in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. The nine month increase was due to $94,000 in increased salaries, taxes and benefits for the two new positions mentioned above; $206,000 in bonuses as a result of the 2015 reversal of bonus accruals as waived by officers and the additional bonus in 2016 resulting from options exercised; employee stock options to retain employees with a value of $47,000 to stock based compensation; $66,000 in consulting expenses for the STREAMWAY software upgrades and $123,000 for research and development expenses.

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Sales and Marketing expense. Sales and marketing expense consists of expenses required to sell products through independent reps, attendance at trades shows, product literature and other sales and marketing activities.

Sales and marketing expenses increased by $71,000 in the three months ended September 30, 2016 compared to the three months ended September 30, 2015. The three month increase was due to $71,000 in bonuses negated in the 2015 quarter (there were no bonuses in 2016); $15,000 in value for employee options recorded to stock based compensation; $23,000 in increased commissions; $7,000 in increased travel expenses with the addition of the Vice President of Sales to our staff and enhanced sales programs; and $18,000 for increased advertising and trade show participation. Partially offsetting the increases were reduced salaries of $64,000 due to the reduction of our sales staff in 2015. Sales expense decreased by $91,000 in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015. The nine month decrease was due to $207,000 reduction in salaries, payroll taxes and benefits; $9,000 in commissions; and $20,000 in reduced stock based compensation all due to a reduced sales staff in 2016. These increases were partially offset due to $68,000 in increased advertising and trade show participation, $45,000 in increased consulting expenses as we seek to increase our government sales, $7,000 in increased travel due to the addition of our Vice President of Sales and the enhanced sales programs instituted, and $15,000 as result of reversed bonuses in 2015.

Interest expense. Interest decreased by $52,000 in the three months ended September 30, 2016 compared to the three months ended September 30, 2015, and by $395,000 in the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015, as there was no outstanding debt during this period.

Liquidity and Capital Resources

Cash Flows

Net cash used in operating activities was $3,704,000 for the nine months ended September 30, 2016 compared with net cash used of $4,637,000 for the 2015 period. The $933,000 decrease in cash used in operating activities was primarily due to the issuance of common stock in cashless warrant exchanges and equity instruments issued for consulting as a result of hiring an investment banking firm and as a result of large payments to accounts payable and accrued expenses in 2015 after the public offering. There was an offset due to the increased net loss of 3,266,000.

Cash flows used in investing activities was $604,000 for the nine months ended September 30, 2016 and $23,800 for the nine months ended September 30, 2015. The Company invested in marketable securities. There was a moderate increase to purchases in fixed assets and minimal fees related to patents.

Net cash provided by financing activities was $86,000 for the nine months ended September 30, 2016 compared to net cash provided of $12,378,000 for the nine months ended September 30, 2015. The Chief Operating Officer and the Chief Financial Officer exercised options in 2016, and there was a public offering in 2015 that resulted in $13 million net brought into the Company.

Capital Resources

We had a cash balance of $634,000 as of September 30, 2016. Since our inception, we have incurred significant losses. As of September 30, 2016, we had an accumulated deficit of approximately $46,300,000.

From inception to September 30, 2016, our operations have been funded through a bank loan and private convertible debt of approximately $5,685,000 and equity investments totaling approximately $22,325,000.

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In the first nine months of 2016, we recognized $317,000 in revenues. Our product sales since the end of the third quarter have resulted in approximately $33,000 in revenues.

Payment Obligations Under Separation Agreement With Former CEO

Effective May 5, 2016, Joshua Kornberg resigned as the Chief Executive Officer and President and an employee of the Company. In connection with Mr. Kornberg’s resignation, the Company and Mr. Kornberg entered into a separation agreement on June 13, 2016 (the “Separation Agreement”). Pursuant to the Separation Agreement, on July 15, 2016, the Company was required to pay Mr. Kornberg: (a) $15,443.20 less any required tax withholdings in a lump sum on July 15, 2016; and (b) $75,000 less any required tax withholdings on July 15, 2016. The Company is required to pay Mr. Kornberg an additional $75,000 less any required tax withholdings payable in 6 monthly installments of $12,500, due on the first regular payday of each month, starting on August 15, 2016; and (d) an additional $450,000 less any required tax withholdings payable in 11 monthly installments of $40,909, due on the first regular payday of each month, starting on February 15, 2017. The Company issued to Mr. Kornberg a restricted stock award (the “Award”) under the Company’s stock incentive plan consisting of 20,000 shares. The Award vested on July 15, 2016. The value of the Award for purposes of the Separation Agreement (the “Award Value”) is $90,350.61, based on a ten day volume-weighted average closing sale price per share of the Company’s common stock. Mr. Kornberg agreed that the withholding taxes in connection with the Award will be offset against cash payments otherwise due to him in four monthly installments. In addition, the Company agreed to, at its option, either (a) pay Mr. Kornberg $309,649.39 (the “Additional Cash Amount”), equal to the difference between $400,000 and the Award Value, payable in equal monthly installments of $40,909, due on the first regular payday of each month, starting on January 15, 2018, less any required tax withholding, or (b) issue to Mr. Kornberg shares of common stock of the Company (the “Additional Shares”) on January 15, 2018 with an aggregate fair market equal to the Additional Cash Amount, based on a ten day volume-weighted average closing sale price per share. Under the Separation Agreement, all of Mr. Kornberg’s outstanding stock options and outstanding restricted stock prior to the date of the Separation Agreement were canceled, consisting of options to purchase 22,085 shares and 2,667 shares of restricted stock. The Separation Agreement included a waiver and release of claims by Mr. Kornberg. He will also continue to be bound by the terms of any restrictive covenant agreements he had with the Company.

The foregoing summary of the Separation Agreement does not purport to be complete and is qualified in its entirety by reference to the Separation Agreement, a copy of which was filed on June 17, 2016 as an exhibit to our Current Report on Form 8-K.

Plan of Financing; Going Concern Qualification

Since our inception, we have incurred significant losses, and our accumulated deficit was approximately $46.3 million as of September 30, 2016. Our operations from inception have been funded with private placements of convertible debt securities and equity securities, in addition to a past bank loan (not currently outstanding) and a qualified public offering raising a net $13,555,003, after deducting underwriting discounts, commissions and expenses. We currently have no outstanding bank debt and no secured indebtedness.

We have not achieved profitability and anticipate that we will continue to incur net losses at least through fiscal 2016.

We had revenues of $317,000 in 2016, but we had negative operating cash flows of $3.7 million. In August 2015, we received proceeds of $13.5 million, after deducting underwriting discounts, commissions and expenses, as a result of our public offering. During the first quarter of 2016 and the remainder of 2015, we paid $10.2 million in cash to cover accrued debts and obligations, most of which were required to be paid upon completion of the offering or were considered past due. Additionally, we have covered our monthly operating expenses, research and development costs and expanded effort in sales and marketing including the successful search for our newly hired Vice President of Sales. Our cash balance was $0.6 million as of September 30, 2016, and our accounts payable and accrued expenses were an aggregate $2.0 million. We have reduced our monthly negative cash flow to approximately $350,000 beginning in June 2016. Although we are attempting to curtail our expenses, there is no guarantee that we will be able to reduce these expenses significantly, and expenses for some periods may be higher as we prepare our product for broader sales efforts and maintain adequate inventories.

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As of September 30, 2016, the Company had no debt. We will require additional funding to finance operating expenses and to invest in our sales organization and new product development and to enter the international marketplace. We will attempt to raise these funds through equity or debt financing, alternative offerings or other means. If we are successful in securing adequate funding we plan to make significant capital or equipment investments, and we will also continue to make human resource additions over the next 12 months. Such additional financing will be dilutive to existing stockholders, and there is no assurance that such financing will be available upon acceptable terms. If such financing or adequate funds from operations are not available, we will be forced to limit our business activities, which will have a material adverse effect on our results of operations and financial condition.

As a result of the above factors, our independent registered public accounting firm has indicated in their audit opinion, contained in our financial statements included in our annual report on Form 10-K, that they have serious doubts about our ability to continue as a going concern. The financial statements have been prepared assuming the Company will continue as a going concern.

Terminated Exchange offer for Units

In January 2016 we commenced a registered offer (the “Unit Exchange Offer”) to exchange, on a one-for-one basis, new units in exchange for the 1,895,010 outstanding units (the “Units”) that were issued in our August 2015 public offering and a concurrent issuance of Units in exchange for previously outstanding Series A Preferred Stock. Each new unit, if issued, would have consisted of shares of common stock and certain warrants to purchase common stock. On March 2, 2016, we announced the termination of the Exchange Offer. None of the Units were accepted for exchange in the Unit Exchange Offer.

Exchange Offer for Series A Warrants

On March 25, 2016, the Company commenced a registered exchange offer (the “Exchange Offer”) to exchange Series B Warrants (the “Series B Warrants” to purchase shares of our common stock, par value $0.01 per share (the “Warrant Shares”), for up to an aggregate of 3,157,186 outstanding Series A Warrants (the “Series A Warrants”). On March 31, 2016, each Series A Warrant could be exercised on a cashless basis for .40 shares of common stock.

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For each outstanding Series A Warrant tendered by holders, we offered to issue .40 Series B Warrants, which are subject to cashless exercise at a fixed rate of one share of common stock per Series B Warrant (subject to further adjustment for stock splits, etc.).

The Exchange Offer expired at midnight, Eastern time, on April 21, 2016. 1,770,556 Series A Warrants to purchase 722,387 shares of the Company’s common stock were tendered by holders of Series A Warrants. On April 25, 2016, the Company delivered an aggregate of 18,059,671 Series B Warrants pursuant to the terms of the Exchange Offer.

Additional Exercise of Warrants

In addition, between March 31, 2016 and July 6, 2016, 1,251,510 Series A Warrants were exercised in cashless exercises, resulting in the issuance of 20,121 shares of common stock.

Inflation

We do not believe that inflation has had a material impact on our business and operating results during the periods presented.

Off-Balance Sheet Arrangements

We have not engaged in any off-balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.

Critical Accounting Policies and Estimates and Recent Accounting Developments

The discussion and analysis of our financial condition and results of operations are based upon our audited Financial Statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our financial statements, the reported amounts of revenues and expenses during the reporting periods presented, as well as our disclosures of contingent assets and liabilities.  On an on-going basis, we evaluate our estimates and assumptions, including, but not limited to, fair value of stock-based compensation, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, and contingencies and litigation.

We base our estimates and assumptions on our historical experience. We also used any other pertinent information available to us at the time that these estimates and assumptions are made.  We believe that these estimates and assumptions are reasonable under the circumstances and form the basis for our making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources.  Actual results and outcomes could differ from our estimates.

Our significant accounting policies are described in “Note 1 – Summary of Significant Accounting Policies,” in Notes to Financial Statements of this Quarterly Report on Form 10-Q. We believe that the following discussion addresses our critical accounting policies and reflects those areas that require more significant judgments, and use of estimates and assumptions in the preparation of our Financial Statements.

Revenue Recognition.   We recognize revenue in accordance with the SEC’s Staff Accounting Bulletin Topic 13 Revenue Recognition and ASC 605 – Revenue Recognition.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is probable. Delivery is considered to have occurred upon either shipment of the product or arrival at its destination based on the shipping terms of the transaction. Our standard terms specify that shipment is FOB Skyline and we will, therefore, recognize revenue upon shipment in most cases. This revenue recognition policy applies to shipments of our STREAMWAY FMS units as well as shipments of cleaning solution and filter consumables. When these conditions are satisfied, we recognize gross product revenue, which is the price we charge generally to our customers for a particular product. Under our standard terms and conditions, there is no provision for installation or acceptance of the product to take place prior to the obligation of the customer. The customer’s right of return is limited only to our standard one-year warranty, whereby we replace or repair, at our option. We believe it would be rare that the STREAMWAY FMS unit or significant quantities of cleaning solution and filter consumables may be returned. Additionally, since we buy both the STREAMWAY FMS units and cleaning solution and filter consumables from “turnkey” suppliers, we would have the right to replacements from the suppliers if this situation should occur.

33

Stock-Based Compensation.   Effective January 1, 2006, we adopted ASC 718- Compensation-Stock Compensation (“ASC 718”).  Under ASC 718 stock-based employee compensation cost is recognized using the fair value based method for all new awards granted after January 1, 2006 and unvested awards outstanding at January 1, 2006. Compensation costs for unvested stock options and non-vested awards that were outstanding at January 1, 2006, are being recognized over the requisite service period based on the grant-date fair value of those options and awards, using a straight-line method. We elected the modified-prospective method in adopting ASC 718 under which prior periods are not retroactively restated.

ASC 718 requires companies to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. We use the Black-Scholes option-pricing model which requires the input of significant assumptions including an estimate of the average period of time employees and directors will retain vested stock options before exercising them, the estimated volatility of our common stock price over the expected term, the number of options that will ultimately be forfeited before completing vesting requirements and the risk-free interest rate.

When an option or warrant is granted in place of cash compensation for services, we deem the value of the service rendered to be the value of the option or warrant.  In most cases, however, an option or warrant is granted in addition to other forms of compensation and its separate value is difficult to determine without utilizing an option pricing model.  For that reason we also use the Black-Scholes option-pricing model to value options and warrants granted to non-employees, which requires the input of significant assumptions including an estimate of the average period that investors or consultants will retain vested stock options and warrants before exercising them, the estimated volatility of our common stock price over the expected term, the number of options and warrants that will ultimately be forfeited before completing vesting requirements and the risk-free interest rate.  Changes in the assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognizes that. Since we have no trading history in our common stock and no first-hand experience with how our investors and consultants have acted in similar circumstances, the assumptions we use in calculating the fair value of stock-based payment awards represent our best estimates, which involve inherent uncertainties and the application of management's judgment.  As a result, if factors change and we use different assumptions, our equity-based consulting and interest expense could be materially different in the future.

Since our common stock has no significant public trading history we were required to take an alternative approach to estimating future volatility and the future results could vary significantly from our estimates.  We compiled historical volatilities over a period of 2 to 7 years of 10 small-cap medical companies traded on major exchanges and 15 medical companies in the middle of the market cap size range on the OTC Bulletin Board and combined the results using a weighted average approach.  In the case of standard options to employees we determined the expected life to be the midpoint between the vesting term and the legal term.  In the case of options or warrants granted to non-employees, we estimated the life to be the legal term unless there was a compelling reason to make it shorter.  

Valuation of Intangible Assets   

We review identifiable intangible assets for impairment in accordance with ASC 350- Intangibles – Goodwill and Other, whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Our intangible assets are currently solely the costs of obtaining trademarks and patents.  Events or changes in circumstances that indicate the carrying amount may not be recoverable include, but are not limited to, a significant change in the medical device marketplace and a significant adverse change in the business climate in which we operate. If such events or changes in circumstances are present, the undiscounted cash flows method is used to determine whether the intangible asset is impaired. Cash flows would include the estimated terminal value of the asset and exclude any interest charges. If the carrying value of the asset exceeds the undiscounted cash flows over the estimated remaining life of the asset, the asset is considered impaired, and the impairment is measured by reducing the carrying value of the asset to its fair value using the discounted cash flows method. The discount rate utilized is based on management's best estimate of the related risks and return at the time the impairment assessment is made. The Company wrote off the entire original STREAMWAY FMS product patent of $140,588 in June 2013. The balance represented intellectual property in the form of patents for our original STREAMWAY FMS product. The Company's enhanced STREAMWAY FMS product has a new patent pending, see “Patents and Intellectual Property.”.

34

Recent Accounting Developments

See Note 1 - “Summary of Significant Accounting Policies” to the Condensed Financial Statements of this Quarterly Report on Form 10-Q for a discussion of recent accounting developments.

Information Regarding Forward-Looking Statements

This Form 10-Q contains “forward-looking statements” that indicate certain risks and uncertainties related to the Company, many of which are beyond the Company’s control. The Company’s actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain factors, including those set forth below and elsewhere in this report. Important factors that may cause actual results to differ from projections include:

· Inability to raise sufficient additional capital to operate our business;

· Terms of any future financing, which may be highly dilutive and may include onerous terms;

· Unexpected costs and operating deficits, and lower than expected sales and revenues, if any;

· Potential delisting of our common stock on The Nasdaq Capital Market, with adverse effects on liquidity and coverage of our common stock;

· No assurance of timely development of technologies by GLG Pharma, or of ability to consummate our joint venture with Electronic On-Ramp, Inc.

· Adverse economic conditions;

· Adverse results of any legal proceedings;

· The volatility of our operating results and financial condition;

· Inability to attract or retain qualified senior management personnel, including sales and marketing personnel; and

· Other specific risks that may be alluded to in this report.

All statements other than statements of historical facts, included in this report regarding the Company’s growth strategy, future operations, financial position, estimated revenue or losses, projected costs, prospects and plans and objectives of management are forward-looking statements. When used in this report, the words “will”, “may”, “believe”, “anticipate”, “intend”, “estimate”, “expect”, “project”, “plan” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this report. The Company does not undertake any obligation to update any forward-looking statements or other information contained herein. Potential investors should not place undue reliance on these forward-looking statements. Although Skyline believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable the Company cannot assure potential investors that these plans, intentions or expectations will be achieved. The Company discloses important factors that could cause the Company’s actual results to differ materially from its expectations in the “Risk Factors” section and elsewhere our Annual Report on Form 10-K for the year ended December 31, 2015. These cautionary statements qualify all forward-looking statements attributable to the Company or persons acting on its behalf.

35

Information regarding market and industry statistics contained in this report is included based on information available to the Company that it believes is accurate. It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic analysis. The Company has not reviewed or included data from all sources, and the Company cannot assure potential investors of the accuracy or completeness of the data included in this report. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. The Company has no obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not required.

ITEM 4. Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the rules promulgated under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our Interim Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

With the participation of the Interim Chief Executive Officer and the Chief Financial Officer, management has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Interim Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2016.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the three months ended September 30, 2016 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

None.

ITEM 1A. Risk Factors

In addition to the other information set forth in the Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. There have been no material changes in the Company’s risk factors from those disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 with the exception of the amendment and replacement of the first risk factor below and the addition of the second risk factor below.

36

We will require additional financing to finance operating expenses and fulfill our business plan. Such financing will be dilutive. Our independent public accounting firm has indicated in their audit opinion, contained in our financial statements, that they have serious doubts about our ability to remain a going concern.

We had revenues of $317,000 in the quarters ended September 30, 2016, but we had negative operating cash flows of $3.7 million in those quarters. In August 2015, we received proceeds of $13.5 million, after deducting underwriting discounts, commissions and expenses, as a result of our public offering. During the first quarter 2016 and the remainder of 2015, we paid $10.2 million in cash to cover accrued debts and obligations, most of which were required to be paid upon completion of the offering or were considered past due. Additionally, we have covered our monthly operating expenses, research and development costs and expanded effort in sales and marketing including the successful search for our newly hired Vice President of Sales. Our cash balance was $0.6 million as of September 30, 2016, and our accounts payable and accrued expenses were an aggregate $2.0 million. We expect our monthly negative cash flow to reduce to approximately $350,000 beginning in June 2016. Although we are attempting to curtail our expenses, there is no guarantee that we will be able to reduce these expenses significantly, and expenses for some periods may be higher as we prepare our product for broader sales efforts and maintain adequate inventories.

As of September 30, 2016, the Company had no debt. We will require additional funding to finance operating expenses and to invest in our sales organization and new product development and to enter the international marketplace. We will attempt to raise these funds through equity or debt financing, alternative offerings or other means. If we are successful in securing adequate funding we plan to make significant capital or equipment investments, and we will also continue to make human resource additions over the next 12 months. Such additional financing will be dilutive to existing stockholders, and there is no assurance that such financing will be available upon acceptable terms. If such financing or adequate funds from operations are not available, we will be forced to limit our business activities, which will have a material adverse effect on our results of operations and financial condition.

As a result of the above factors, our independent registered public accounting firm has indicated in their audit opinion, contained in our financial statements included in our annual report on Form 10-K filed on March 16, 2016, that they have serious doubts about our ability to continue as a going concern. The financial statements have been prepared assuming the Company will continue as a going concern. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Our common stock could be delisted from The NASDAQ Capital Market, which delisting could hinder your ability to obtain accurate quotations on the price of our common stock, or dispose of our common stock in the secondary market.

In order to maintain our listing on The NASDAQ Capital Market, our common stock must sustain a minimum bid price of at least $1.00 per share and we must satisfy the other requirements for continued listing on The NASDAQ Capital Market. On October 11, 2016, the Company received a letter from the Listing Qualifications Department (the “Staff”) of The NASDAQ Stock Market LLC (“Nasdaq”), indicating that the Staff had determined to delist the Company’s securities from The Nasdaq Capital Market due to the Company’s continued non-compliance with the minimum bid price requirement as of October 10, 2016, unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company timely requested a hearing before the Panel, which request stayed any delisting or suspension action by the Staff pending the issuance of the Panel’s decision and the expiration of any extension granted by the Panel. At the hearing, the Company intends to present its plan to address compliance with the minimum bid price requirement as well as the minimum stockholders’ equity requirement and to request the continued listing of its securities on The Nasdaq Capital Market, pursuant to an extension if necessary. There can be no assurance that the Panel will determine to continue the Company’s listing or that the Company will be able to demonstrate compliance with the applicable listing criteria within the period of time that may be granted by the Panel.

In the event our common stock is delisted from The NASDAQ Capital Market and we are also unable to maintain listing on another alternate exchange, trading in our common stock could thereafter be conducted in FINRA’s OTC Bulletin Board or in the over-the-counter markets in the so-called pink sheets. In such event, the liquidity of our common stock would likely be impaired, not only in the number of shares which could be bought and sold, but also through delays in the timing of the transactions, and there would likely be a reduction in our coverage by security analysts and the news media, thereby resulting in lower prices for our common stock than might otherwise prevail.

37

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

On July 1, 2016, the Company issued inducement stock options in accordance with NASDAQ listing rules for 40,000 shares of common stock, par value $0.01, at $3.75 per share to the Company’s newly hired Vice President of Sales. The options will vest in six equal increments: on the first, second, third, fourth, fifth and sixth quarters of the hiring date anniversary. The options were granted outside of the Company's stock incentive plan but are subject to terms and conditions generally consistent with the plan.The issuance of these inducement options were made pursuant to the exemption set forth in Section 4(2) of the Securities Act of 1933, as amended for transactions not involving a public offering, and regulations promulgated thereunder.

On October 4, 2016, the Company issued 400,000 shares of common stock, par value $0.01, to be held in escrow in connection with the Company’s Partnership and Exclusive Reseller Agreement with GLG Pharma, LLC. For this issuance, the Company relied on the exemption from federal registration under Section 4(2) of the Securities Act or 1933 and/or Rule 506 promulgated thereunder, based on the Company’s belief that the offer and sale of the shares did not involve a public offering.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

See the attached exhibit index.

38

SIGNATURES:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SKYLINE MEDICAL INC.
Date: November 14, 2016	By:	/s/ Carl Schwartz
		Carl Schwartz
		Executive Chairman

Date: November 14, 2016	By:	/s/ Bob Myers
		Bob Myers
		Chief Financial Officer

39

EXHIBIT INDEX

SKYLINE MEDICAL INC.

Form 10-Q

The quarterly period ended September 30, 2016

Exhibit No.	Description
3.1	Certificate of Amendment to Certificate of Incorporation to increase authorized share capital, , filed with the Delaware Secretary of State on September 16, 2016 (1)
3.2	Certificate of Amendment to Certificate of Incorporation to effect reverse stock split and reduction in authorized share capital, filed with the Delaware Secretary of State on October 26, 2016 (2)
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document**
101.SCH*	XBRL Extension Schema Document**
101.CAL*	XBRL Extension Calculation Linkbase Document**
101.DEF*	XBRL Extension Definition Linkbase Document**
101.LAB*	XBRL Extension Labels Linkbase Document**
101.PRE*	XBRL Extension Presentation Linkbase Document**

____________________________

*	Filed herewith.
**	In accordance with Rule 406T of Regulation S-T, this information is deemed not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
(1)	Filed on September 16, 2016 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.
(2)	Filed on October 27, 2016 as an exhibit to our Current Report on Form 8-K and incorporated herein by reference.

40

EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Carl Schwartz, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Skyline Medical Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2016	/s/ Carl Schwartz
	Carl Schwartz
	Interim Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Bob Myers, certify that:

1. I have reviewed the quarterly report on Form 10-Q of Skyline Medical Inc.;

2. Based on my knowledge, this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements in light of the circumstances under which some statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report( that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date November 14, 2016	/s/ Bob Myers
	Bob Myers
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Skyline Medical Inc. (the “Company”) for the quarter ended September 30, 2016 as filed with the Securities and Exchange Commission (the “Report”), I, Carl Schwartz, Chief Executive Officer (Principal Executive Officer) and, I, Bob Myers, Chief Financial Officer (Principal Financial Officer) of the Company, hereby certify as of the date hereof, solely for purposes of § 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, that to the best of my knowledge:

(1)      The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)       The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: November 14, 2016	/s/ Carl Schwartz
	Carl Schwartz
	Interim Chief Executive Officer

Date: November 14, 2016	/s/ Bob Myers
	Bob Myers
	Chief Financial Officer

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 30, 2016
Document Information [Line Items]
Entity Registrant Name	Skyline Medical Inc.
Entity Central Index Key	0001446159
Trading Symbol	skln
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		3,804,860
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Series B Convertible Preferred Stock [Member]
Stockholders’ Equity:
Series B Convertible Preferred Stock, $.01 par value, 20,000,000 authorized, 79,246 and 1,895,010 outstanding	$ 792	$ 18,950
Cash and Cash Equivalents	634,478	4,856,232
Marketable Securities (Note 11)	576,888
Accounts Receivable	45,017	38,283
Inventories	289,249	231,740
Prepaid Expense and other assets	163,188	271,579
Total Current Assets	1,708,820	5,397,834
Fixed Assets, net	110,910	139,598
Intangibles, net	97,335	94,987
Total Assets	1,917,065	5,632,419
Accounts Payable	648,061	650,413
Accrued Expenses	820,114	864,295
Deferred Revenue	5,000	5,000
Total Current Liabilities	1,473,175	1,519,708
Accrued Expenses	432,376
Total Liabilities	1,905,551	1,519,708
Commitments and Contingencies
Common Stock, $.01 par value, 8,000,000 authorized, 3,404,860 and 208,259 outstanding	34,048	2,080
Additional paid-in capital	46,257,774	44,584,118
Accumulated Deficit	(46,285,679)	(40,492,437)
Accumulated Other Comprehensive Income	4,579
Total Stockholders' Equity	11,514	4,112,711
Total Liabilities and Stockholders' Equity	$ 1,917,065	$ 5,632,419

XML

Condensed Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Sep. 30, 2016	Sep. 16, 2016	Dec. 31, 2015	Jul. 24, 2015	Nov. 30, 2014
Series B Convertible Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.01		$ 0.01
Preferred stock, shares authorized (in shares)	20,000,000		20,000,000
Preferred stock, shares outstanding (in shares)	79,246		1,895,010
Preferred stock, shares authorized (in shares)				20,000,000
Common stock, par value (in dollars per share)	$ 0.01		$ 0.01		$ 0.01
Common stock, shares authorized (in shares)	8,000,000	8,000,000	8,000,000	4,000,000
Common stock, shares outstanding (in shares)	3,404,860		208,259

XML

Condensed Statements of Operations and Other Comprehensive Income (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenue	$ 134,605	$ 85,792	$ 316,931	$ 471,078
Cost of goods sold	26,481	19,773	149,130	199,307
Gross Margin	108,124	66,019	167,801	271,771
General and administrative expense	733,074	861,098	4,684,130	1,589,522
Operations expense	292,856	202,799	928,062	375,429
Sales and marketing expense	137,784	66,720	348,848	439,703
Interest expense	3	51,804	3	394,641
Total expense	1,163,717	1,182,421	5,961,043	2,799,295
Net loss available to common shareholders	(1,055,593)	(1,116,402)	(5,793,242)	(2,527,524)
Unrealized gain (loss) from marketable securities	(1,299)		4,579
Comprehensive loss	$ (1,056,892)	$ (1,116,402)	$ (5,788,663)	$ (2,527,524)
Loss per common share - basic and diluted (in dollars per share)	$ (0.32)	$ (7.09)	$ (2.57)	$ (18.39)
Weighted average shares used in computation - basic and diluted (in shares)	3,320,139	157,445	2,250,315	137,428

XML

Statement of Stockholders' Equity (Unaudited) - USD ($)	Series A Convertible Preferred Stock [Member] Stock Conversion 1 [Member] Common Stock [Member]	Series A Convertible Preferred Stock [Member] Stock Conversion 1 [Member] Additional Paid-in Capital [Member]	Series A Convertible Preferred Stock [Member] Stock Conversion 2 [Member] Common Stock [Member]	Series A Convertible Preferred Stock [Member] Stock Conversion 2 [Member] Additional Paid-in Capital [Member]	Series A Convertible Preferred Stock [Member] Stock Conversion 2 [Member] Retained Earnings [Member]	Series A Convertible Preferred Stock [Member] Stock Conversion 2 [Member]	Series A Convertible Preferred Stock [Member] Stock Conversion 3 [Member] Common Stock [Member]	Series A Convertible Preferred Stock [Member] Stock Conversion 3 [Member] Additional Paid-in Capital [Member]	Series A Convertible Preferred Stock [Member] Stock Conversion 3 [Member] Retained Earnings [Member]	Series A Convertible Preferred Stock [Member] Stock Conversion 3 [Member]	Note Conversion 1 [Member] Common Stock [Member]	Note Conversion 1 [Member] Additional Paid-in Capital [Member]	Note Conversion 1 [Member]	Note Conversion 2 [Member] Common Stock [Member]	Note Conversion 2 [Member] Additional Paid-in Capital [Member]	Note Conversion 2 [Member]	Note Conversion 3 [Member] Common Stock [Member]	Note Conversion 3 [Member] Additional Paid-in Capital [Member]	Note Conversion 3 [Member]	Note Conversion 4 [Member] Common Stock [Member]	Note Conversion 4 [Member] Additional Paid-in Capital [Member]	Note Conversion 4 [Member]	Note Conversion 5 [Member] Common Stock [Member]	Note Conversion 5 [Member] Additional Paid-in Capital [Member]	Note Conversion 5 [Member]	Note Conversion 6 [Member] Common Stock [Member]	Note Conversion 6 [Member] Additional Paid-in Capital [Member]	Note Conversion 6 [Member]	Note Conversion 7 [Member] Common Stock [Member]	Note Conversion 7 [Member] Additional Paid-in Capital [Member]	Note Conversion 7 [Member]	Note Conversion 8 [Member] Common Stock [Member]	Note Conversion 8 [Member] Additional Paid-in Capital [Member]	Note Conversion 8 [Member]	Note Conversion 9 [Member] Common Stock [Member]	Note Conversion 9 [Member] Additional Paid-in Capital [Member]	Note Conversion 9 [Member]	Note Conversion 10 [Member] Common Stock [Member]	Note Conversion 10 [Member] Additional Paid-in Capital [Member]	Note Conversion 10 [Member]	Series B Warrants [Member] Common Stock [Member]	Series B Warrants [Member] Additional Paid-in Capital [Member]	Series B Warrants [Member]	Investment Banker [Member] Common Stock [Member]	Investment Banker [Member] Additional Paid-in Capital [Member]	Investment Banker [Member]	Investor Relations Consultant [Member] Common Stock [Member]	Investor Relations Consultant [Member] Additional Paid-in Capital [Member]	Investor Relations Consultant [Member]	Former CEO [Member] Common Stock [Member]	Former CEO [Member] Additional Paid-in Capital [Member]	Former CEO [Member]	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance at Dec. 31, 2014																																																					$ 206	$ 1,237	$ 30,123,435	$ (35,641,105)		$ (5,516,227)
Balance (in shares) at Dec. 31, 2014																																																						123,711
Shares issued to 16 shareholders of Series A Convertible Preferred Stock Adjustment as converted to common shares at $243.75 per share (in shares)	125		125				125
Shares issued to 16 shareholders of Series A Convertible Preferred Stock Adjustment as converted to common shares at $243.75 per share	$ 1	$ (1)	$ 1	$ 30,399	$ (30,401)	$ (1)	$ 1	$ 30,401	$ (30,401)	$ 1
Reduction in escrow account per settlement agreement (in shares)																																																						(356)
Reduction in escrow account per settlement agreement																																																						$ (4)	(6,663)			(6,667)
Shares issued for a note conversion (in shares)											138			270			413			484			622			1,400			3,520			595			520			646
Shares issued for a note conversion											$ 1	$ 9,999	$ 10,000	$ 3	$ 19,997	$ 20,000	$ 4	$ 29,996	$ 30,000	$ 5	$ 33,473	$ 33,478	$ 6	$ 34,994	$ 35,000	$ 14	$ 69,986	$ 70,000	$ 35	$ 199,965	$ 200,000	$ 6	$ 29,994	$ 30,000	$ 5	$ 24,995	$ 25,000	$ 6	$ 29,994	$ 30,000
Vesting Expense																																																							871,877			871,877
Shares issued in public offering; net																																																					16,667	$ 667	13,043,546			13,060,880
Shares issued in public offering; net (in shares)																																																						66,667
Preferred stock conversion																																																					2,077	$ 91	(2,168)			0
Preferred stock conversion (in shares)																																																						9,134
Series A warrant exercise (in shares)																																																						120
Series A warrant exercise																																																						$ 1	9,899			9,900
Net loss																																																								(4,790,530)		(4,790,530)
Balance at Dec. 31, 2015																																																					18,950	$ 2,080	44,584,118	(40,492,437)		4,112,711
Balance (in shares) at Dec. 31, 2015																																																						208,259
Stock Issued During Period Shares Warrants Exercised																																																						120
Shares issued for cashless Series B warrant exercises per the tender offer exchange																																																						$ 1	9,899			9,900
Vesting Expense																																																							147,158			147,158
Shares issued in public offering; net																																															$ 260	$ 116,740	$ 117,000	$ 200	$ 90,151	$ 90,351
Shares issued in public offering; net (in shares)																																															26,000			20,000
Preferred stock conversion																																																					(18,158)	$ 664	17,494
Preferred stock conversion (in shares)																																																						66,396
Series A warrant exercise (in shares)																																									628,237													2,318,663
Series A warrant exercise																																									$ 6,282	$ 150,777	$ 157,059											$ 23,187	556,479			579,666
Net loss																																																								(5,793,242)		(5,793,242)
Balance at Sep. 30, 2016																																																					$ 792	$ 34,048	46,257,774	$ (46,285,679)	$ 4,579	11,514
Balance (in shares) at Sep. 30, 2016																																																						3,404,860
Shares issued for two options exercised at $65.75 per share (in shares)																																																						1,312
Shares issued for two options exercised at $65.75 per share																																																						$ 13	86,240			86,253
Stock Issued During Period Shares Warrants Exercised																																									628,237													2,318,663
Shares issued for cashless Series B warrant exercises per the tender offer exchange																																									$ 6,282	$ 150,777	$ 157,059											$ 23,187	556,479			579,666
Shares Issued (in shares)																																												135,995
Shares Issued																																												$ 1,360	$ 508,620	$ 509,980
Unrealized gain from marketable securities																																																									$ 4,579	$ 4,579
Corrections due to rounding for reverse split (in shares)																																																						(2)
Corrections due to rounding for reverse split																																																						$ 2	$ (3)

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Statement of Stockholders' Equity (Unaudited) (Parentheticals)	12 Months Ended
	Dec. 31, 2015 $ / shares
Series A Convertible Preferred Stock [Member] | Stock Conversion 1 [Member]
Number of shareholders	16
Series A convertible preferred stock dividends (in dollars per share)	$ 243.75
Series A Convertible Preferred Stock [Member] | Stock Conversion 2 [Member]
Number of shareholders	16
Series A convertible preferred stock dividends (in dollars per share)	$ 243.75
Series A Convertible Preferred Stock [Member] | Stock Conversion 3 [Member]
Number of shareholders	16
Series A convertible preferred stock dividends (in dollars per share)	$ 243.75
Note Conversion 1 [Member]
Note conversion price (in dollars per share)	72.50
Note Conversion 2 [Member]
Note conversion price (in dollars per share)	74
Note Conversion 3 [Member]
Note conversion price (in dollars per share)	72.75
Note Conversion 4 [Member]
Note conversion price (in dollars per share)	69.25
Note Conversion 5 [Member]
Note conversion price (in dollars per share)	56.25
Note Conversion 6 [Member]
Note conversion price (in dollars per share)	50
Note Conversion 7 [Member]
Note conversion price (in dollars per share)	56.82
Note Conversion 8 [Member]
Note conversion price (in dollars per share)	50.45
Note Conversion 9 [Member]
Note conversion price (in dollars per share)	48.10
Note Conversion 10 [Member]
Note conversion price (in dollars per share)	$ 46.45

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Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flow from operating activities:
Net loss	$ (5,793,242)	$ (2,527,524)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	62,427	57,512
Vested stock options and warrants	147,158	320,334
Equity instruments issued for management and consulting	717,331	(6,667)
Issuance of common stock in cashless warrant exchange	736,724
Amortization of debt discount		219,097
Penalty on debt provision		10,031
Loss on Sales of Equipment	(2,387)	16,917
Gain from sale of marketable securities	(2,309)
Changes in assets and liabilities:
Accounts receivable	(6,734)	43,353
Inventories	(57,509)	130,477
Prepaid expense and other assets	108,391	(23,208)
Accounts payable	(2,352)	(1,056,006)
Accrued expenses	388,195	(1,845,850)
Deferred Revenue		24,180
Net cash used in operating activities:	(3,704,307)	(4,637,354)
Cash flow from investing activities:
Purchase of marketable securities	(850,000)
Proceeds from sale of marketable securities	280,000
Purchase of certificates of deposit	(1,000,000)
Redemption of certificates of deposit	1,000,000
Purchase of fixed assets	(25,127)
Purchase of intangibles	(8,573)	(23,739)
Net cash used in investing activities	(603,700)	(23,739)
Cash flow from financing activities:
Proceeds from long-term and convertible debt		250,000
Principal payments on debt		(933,074)
Issuance of preferred stock		18,950
Issuance of common stock	86,253	13,041,930
Net cash provided by financing activities	86,253	12,377,806
Net increase in cash and cash equivalents	(4,221,754)	7,716,713
Cash and cash equivalents at beginning of period	4,856,232	16,384
Cash and cash equivalents at end of period	634,478	7,733,097
Non cash transactions:
Common stock issued for accrued interest/bonus
Common stock issued to satisfy debt		$ 483,478

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Note 1 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Continuance of Operations

On October 27, 2016, the Company effected a 1-for-25 reverse stock split of its common stock. All share information in the financial statements for fiscal years 2016 and 2015 reflect the impact of the reverse stock split.

Skyline Medical Inc. (the "Company") was incorporated under the laws of the State of Minnesota in 2002. Effective August 6, 2013, the Company changed its name to Skyline Medical Inc. As of September 30, 2016, the registrant had 3,404,860 shares of common stock, par value $.01 per share, outstanding. Pursuant to an Agreement and Plan of Merger dated effective December 16, 2013, the Company merged with and into a Delaware corporation with the same name that was its wholly-owned subsidiary, with such Delaware Corporation as the surviving corporation of the merger. The Company has developed an environmentally safe system for the collection and disposal of infectious fluids that result from surgical procedures and post-operative care. The Company also makes ongoing sales of our proprietary cleaning fluid and filters to users of our systems. In April 2009, the Company received 510(k) clearance from the FDA to authorize the Company to market and sell its STREAMWAY® FMS products.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations and had a stockholders’ deficit until August 31, 2015 whereupon the Company closed its public offering of units of common stock, Series B Convertible Preferred Stock and Series A Warrants (the “Units”). There remains though, substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Since inception to September 30, 2016, the Company raised approximately $22,325,091 in equity, inclusive of $2,055,000 from a private placement of Series A Convertible Preferred Stock, $13,555,003 from the public offering of Units and $5,685,000 in debt financing. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

Recent Accounting Developments

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09,

Revenue from Contracts with Customers

and created a new topic in the FASB Accounting Standards Codification ("ASC"), Topic 606. The new standard provides a single comprehensive revenue recognition framework for all entities and supersedes nearly all existing U.S. GAAP revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and also requires enhanced disclosures. The amendments are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.

In June 2014, the FASB issued ASU 2014-12,

"Compensation - Stock Compensation"

providing explicit guidance on how to account for share-based payments granted to employees in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact this guidance may have on our financial statements.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The standard is effective for public entities for annual and interim periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts, rather than as an asset. Amortization of these costs will continue to be reported as interest expense. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, 2015. Early adoption is permitted. The adoption of this ASU is not expected to have an impact on our financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, requiring that inventory be measured at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective within annual periods beginning on or after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the impact this guidance may have on our financial statements.

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740)” providing guidance on the balance sheet classification of deferred taxes. The guidance requires that deferred tax assets and liabilities to be classified as noncurrent in the Balance Sheet. The guidance is effective for fiscal years beginning after December 15, 2016 and for interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01,

Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

("ASU 2016-01"). The standard changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. Under the new guidance, entities will be required to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not believe that the adoption of this guidance will have a material impact on the Company's consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, “Leases

(Topic 842

” (“ASU 2016-02”), which requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The standard states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the timing of our adoption and the impact that the updated standard will have on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “

Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accountin

g” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the timing of our adoption and the impact that the updated standard will have on our consolidated financial statements.

During August 2016, the FASB issued ASU No. 2016-15,

Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,

to address diversity in how certain cash receipts and cash payments are presented and classified in the statements of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. If retrospective application is impractical for some of the issues addressed by the update, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements.

We reviewed all other significant newly issued accounting pronouncements and determined they are either not applicable to our business or that no material effect is expected on our financial position and results of our operations.

Valuation of Intangible Assets

We review identifiable intangible assets for impairment in accordance with ASC 350 — Intangibles —Goodwill and Other, whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Our intangible assets are currently solely the costs of obtaining trademarks and patents. Events or changes in circumstances that indicate the carrying amount may not be recoverable include, but are not limited to, a significant change in the medical device marketplace and a significant adverse change in the business climate in which we operate. If such events or changes in circumstances are present, the undiscounted cash flows method is used to determine whether the intangible asset is impaired. Cash flows would include the estimated terminal value of the asset and exclude any interest charges. If the carrying value of the asset exceeds the undiscounted cash flows over the estimated remaining life of the asset, the asset is considered impaired, and the impairment is measured by reducing the carrying value of the asset to its fair value using the discounted cash flows method. The discount rate utilized is based on management’s best estimate of the related risks and return at the time the impairment assessment is made.

Accounting Policies and Estimates

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Presentation of Taxes Collected from Customers

Sales taxes are imposed on the Company’s sales to nonexempt customers. The Company collects the taxes from customers and remits the entire amounts to the governmental authorities. The Company’s accounting policy is to exclude the taxes collected and remitted from revenues and expenses.

Shipping and Handling

Shipping and handling charges billed to customers are recorded as revenue. Shipping and handling costs are recorded within cost of goods sold on the statement of operations.

Advertising

Advertising costs are expensed as incurred. Advertising expenses were $10,343 and $57,004 in the three and nine months ended September 30, 2016 and were $500 and $1,917 in the three and nine months ended September 30, 2015.

Research and Development

Research and development costs are charged to operations as incurred. Research and development expenses were $79,936 and $302,330 in the three and nine months ended September 30, 2016 and were $58,792 and $179,739 in the three and nine months ended September 30, 2015.

Revenue Recognition

The Company recognizes revenue in accordance with the SEC’s Staff Accounting Bulletin Topic 13 Revenue Recognition and ASC 605-Revenue Recognition.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is probable. Delivery is considered to have occurred upon either shipment of the product or arrival at its destination based on the shipping terms of the transaction. The Company’s standard terms specify that shipment is FOB Skyline and the Company will, therefore, recognize revenue upon shipment in most cases. This revenue recognition policy applies to shipments of the STREAMWAY FMS units as well as shipments of filters and fluids. When these conditions are satisfied, the Company recognizes gross product revenue, which is the price it charges generally to its customers for a particular product. Under the Company’s standard terms and conditions, there is no provision for installation or acceptance of the product to take place prior to the obligation of the customer. The customer’s right of return is limited only to the Company’s standard one-year warranty whereby the Company replaces or repairs, at its option, and it would be rare that the STREAMWAY FMS unit or significant quantities of cleaning solution or filters may be returned. Additionally, since the Company buys the STREAMWAY FMS units, cleaning solution and filters from “turnkey” suppliers, the Company would have the right to replacements from the suppliers if this situation should occur.

Cash Equivalents

The Company considers all highly liquid debt instruments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximate fair value.

Certificates of Deposit

Short-term interest bearing investments are those with maturities of less than one year but greater than three months when purchased. Certificates with maturity dates beyond one year are classified as noncurrent assets. These investments are readily convertible to cash and are stated at cost plus accrued interest, which approximates fair value.

Investment Securities

Readily marketable investments in debt and equity securities are classified as available-for-sale and are reported at fair value with unrealized gains and losses recorded in other comprehensive income. Unrealized gains are charged to earnings when an incline in fair value above the cost basis is determined to be other-than-temporary. Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific identification method.

Fair Value Measurements

Under generally accepted accounting principles as outlined in the Financial Accounting Standards Board’s

Accounting Standards Certification

(ASC) 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standards ASC 820 establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing as asset or liability as follows:

Level 1 – Observable inputs such as quoted prices in active markets;

Level 2 – Inputs other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3 – Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

The Company uses observable market data, when available, in making fair value measurements. Fair value measurements are classified according to the lowest level input that is significant to the valuation.

The fair value of the Company’s investment securities were determined based on Level 1 inputs.

Receivables

Receivables are reported at the amount the Company expects to collect on balances outstanding. The Company provides for probable uncollectible amounts through charges to earnings and credits to the valuation based on management’s assessment of the current status of individual accounts, changes to the valuation allowance have not been material to the financial statements.

Inventories

Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory balances are as follows:

	September 30, 2016		December 31, 2015
Finished goods	$	72,540	$	30,237
Raw materials		157,044		162,623
Work-In-Process		59,665		38,880
Total	$	289,249	$	231,740

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Estimated useful asset life by classification is as follows:

	Years
Computers and office equipment	3	-	7
Leasehold improvements		5
Manufacturing tooling	3	-	7
Demo Equipment		3

The Company’s investment in Fixed Assets consists of the following:

	September 30, 2016		December 31, 2015
Computers and office equipment	$	164,319	$	153,553
Leasehold improvements		25,635		23,874
Manufacturing tooling		101,104		97,288
Demo Equipment		17,702		8,962
Total		308,760		283,677
Less: Accumulated depreciation		197,850		144,079
Total Fixed Assets, Net	$	110,910	$	139,598

Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.

Intangible Assets

Intangible assets consist of trademarks and patent costs. Amortization expense was $2,515 and $6,225 in the three and nine months ended September 30, 2016, and was $1,632 and $4,520 in the three and nine months ended September 30, 2015. The assets are reviewed for impairment annually, and impairment losses, if any, are charged to operations when identified.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740- Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company reviews income tax positions expected to be taken in income tax returns to determine if there are any income tax uncertainties. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by taxing authorities, based on technical merits of the positions. The Company has identified no income tax uncertainties.

Tax years subsequent to 2012 remain open to examination by federal and state tax authorities.

Patents and Intellectual Property

On January 25th, 2014 the Company filed a non-provisional PCT Application No. PCT/US2014/013081 claiming priority from the U.S. Provisional Patent Application, number 61756763 which was filed one year earlier on January 25th, 2013. The Patent Cooperation Treaty (“PCT”) allows an applicant to file a single patent application to seek patent protection for an invention simultaneously in each of the 148 countries of the PCT, including the United States. By filing this single “international” patent application through the PCT, it is easier and more cost effective than filing separate applications directly with each national or regional patent office in which patent protection is desired.

Our PCT patent application is for the new model of the surgical fluid waste management system. We obtained a favorable International Search Report from the PCT searching authority indicating that the claims in our PCT application are patentable (i.e., novel and non-obvious) over the cited prior art. A feature claimed in the PCT application is the ability to maintain continuous suction to the surgical field while measuring, recording and evacuating fluid to the facilities sewer drainage system. This provides for continuous operation of the STREAMWAY System unit in suctioning waste fluids, which means that suction is not interrupted during a surgical operation, for example, to empty a fluid collection container or otherwise dispose of the collected fluid.

The Company holds the following granted patents in the United States and a pending application in the United States on its earlier models: US7469727, US8123731 and U.S. Publication No. US20090216205 (collectively, the “Patents”). These Patents will begin to expire on August 8, 2023.

In July 2015, Skyline Medical filed an international (PCT) patent application for its fluid waste collection system and received a favorable determination by the International Searching Authority finding that all of the claims satisfy the requirements for novelty, inventive step and industrial applicability. Skyline anticipates that the favorable International Search Report will result in allowance of its various national applications.

Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high credit quality financial institutions and, by policy, generally limits the amount of credit exposure to any one financial institution. The Company has a credit risk concentration as a result of depositing $454,369 of funds in excess of insurance limits in a single bank.

Product Warranty Costs

In the three and nine months ending September 30, 2016 the incurred approximately $2,102 and $33,083 in current warranty costs and incurred $12,084 and $39,688 in warranty costs for the three and nine months ending September 30, 2015.

Segments

The Company operates in one segment for the sale of its medical device and consumable products. Substantially all of the Company’s assets, revenues and expenses for the three and nine months ending September 30, 2016 and for 2015 in entirety were located at or derived from operations in the United States. There were no revenue from sales outside of the United States. The Company has recently attained its ISO 13485 certification and is applying to sell our products in Canada.

Risks and Uncertainties

The Company is subject to risks common to companies in the medical device industry, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with regulations of the FDA and other governmental agencies.

Subsequent Events

The Company filed a Certificate of Amendment effecting a 1:25 reverse stock split (the “Reverse Stock Split” with the Secretary of State of the State of Delaware, which became effective under Delaware law at 5:00 p.m. New York time on October 27, 2016. The Company’s common stock opened for trading on October 28, 2016 on a post-split basis. At the effective time (the “Effective Time”) of the Reverse Stock Split, the issued and outstanding Common Stock of the Company was combined on a 1-for-25 basis such that every twenty-five shares of Common Stock outstanding immediately prior to the Effective Time was combined into one share of Common Stock. The share combination was effected through the exchange and replacement of certificates representing issued and outstanding shares of Common Stock as of the Effective Time, together with immediate book-entry adjustments to the stock register of the Company maintained in accordance with the Delaware General Corporation Law. In the event that the share combination would have resulted in a shareholder being entitled to receive less than a full share of Common Stock, the fractional share that would so result was rounded up to the nearest whole share of Common Stock. The par value of each share of issued and outstanding Common Stock was not affected by the share combination.

Interim Financial Statements

The Company has prepared the unaudited interim financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. These interim financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly the Company’s financial position, the results of its operations and its cash flows for the interim periods. These interim financial statements should be read in conjunction with the annual financial statements and the notes thereto contained in the Form 10-K filed with the SEC on March 16, 2016. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

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Note 2 - Development Stage Operations

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Development Stage Enterprise Disclosures [Text Block]

NOTE 2 – DEVELOPMENT STAGE OPERATIONS

The Company was formed April 23, 2002. Since inception to October 24, 2016, 3,804,860 shares of common stock have been issued between par value and $3,131.25 (as adjusted for the reverse stock split). Operations since incorporation have been devoted to raising capital, obtaining financing, development of the Company’s product, and administrative services, customer acceptance and sales and marketing strategies.

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Note 3 - Stockholders' Deficit, Stock Options and Warrants

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE 3 – STOCKHOLDERS’ DEFICIT, STOCK OPTIONS AND WARRANTS

The Company has an equity incentive plan, which allows issuance of incentive and non-qualified stock options to employees, directors and consultants of the Company, where permitted under the plan. The exercise price for each stock option is determined by the Board of Directors. Vesting requirements are determined by the Board of Directors when granted and currently range from immediate to three years. Options under this plan have terms ranging from three to ten years.

Public Offering of Units

On August 31, 2015 (the “Issuance Date”), the Company completed a public offering (the “Offering”) of 1,666,667 Units (the “Units”) as described below. The public offering price in the Offering was $9.00 per Unit, and the purchase price for the underwriter of the Offering (the “Underwriter”) was $8.28 per Unit, resulting in an underwriting discount and commission of $0.72 (or 8.00%) per Unit and total net proceeds to the Company before expenses of $13.8 million. The Company had granted the Underwriter an option for a period of 45 days to purchase up to an additional 250,000 Units solely to cover over-allotments. The Underwriter chose not to purchase any additional Units under the over-allotment option. The Company paid to the Underwriter a non-accountable expense allowance equal to 1% of the gross proceeds of the Offering and agreed to reimburse expenses incurred by the Underwriter up to $70,000.

On August 31, 2015, as a result of the consummation of the Offering and the issuance of the 228,343 Exchange Units in the Unit Exchange described below, the Company issued a total of 1,895,010 Units, comprised of a total of aggregate of 75,800 shares of Common Stock (as adjusted for the reverse stock split), 1,895,010 shares of Series B Preferred Stock and 7,580,040 Series A Warrants, (as adjusted for the reverse stock split).

Each Unit consisted of one share of common stock, par value $0.01 per share (the “Common Stock”), one share of Series B Convertible Preferred Stock (“Series B Preferred Stock”) and four Series A Warrants. The shares of Common Stock, the shares of Series B Preferred Stock and the Series A Warrants that comprise the Units automatically separated on February 29, 2016.

For a description of the terms of the Series B Convertible Preferred Stock included within the Units, see “Series B Preferred Stock” below. For a description of the terms of the Series A Warrants included within the Units, see “Series A Warrants” below.

Series A Warrants.

The Series A Warrants separated from the Series B Convertible Preferred Stock and the Common Stock included within the Units as described above and are currently exercisable. The Series A Warrants terminate on August 31, 2020. Each Series A Warrant is exercisable into one share of Common Stock at an initial cash exercise price of $123.75 per share. The Cash exercise price and number of shares of common stock issuable upon cash exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the Common Stock and the exercise price.

Holders may exercise Series A Warrants by paying the exercise price in cash or, in lieu of payment of the exercise price in cash, by electing to receive a number of shares of Common Stock equal to the Black-Scholes Value (as defined below) based upon the number of shares the holder elects to exercise. The number of shares of Common Stock to be delivered according to the following formula, referred to as the “Cashless Exercise.”

Total Shares = (A x B)/C

Where:

· Total shares is the number of shares of Common Stock to be issued upon a Cashless Exercise.

· A is the total number of shares with respect to which the Series A Warrant is then being exercised.

· B is the Black-Scholes Value (as defined below).

· C is the closing bid price of the Common Stock as of two trading days prior to the time of such exercise, provided that in no event may “C” be less than $0.43 per share (subject to appropriate adjustment in the event of stock dividends, stock splits or similar events affecting the Common Stock).

The Black-Scholes Value (as defined above) as of September 30, 2016 was $4.319, and the closing bid price of Common Stock as of September 30, 2016, was $4.125. Therefore, an exercise on that date would have resulted in the issuance of .40 shares of Common Stock for each Series A Warrant. Approximately 6,141,115 Series A Warrants have been exercised in cashless exercises as of September 30, 2016, resulting in the issuance of 2,318,663 shares of Common Stock. If all of the remaining 35,084 Series A Warrants that were issued as part of the Units sold in the Offering and part of the Units issued on August 31, 2015 were exercised pursuant to a cashless exercise and the closing bid price of our common stock as of the two trading days prior to the time of such exercise was $10.75 per share or less and the Black-Scholes Value were $4.319 (the Black-Scholes Value as of September 30, 2016), then a total of an additional approximately 564 shares of our common stock would be issued to the holders of such Series A Warrants.

The Series A Warrants will not be exercisable or exchangeable by the holder of such warrants to the extent (and only to the extent) that the holder or any of its affiliates would beneficially own in excess of 4.99% of the common stock of the Company, determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder.

In addition to (but not duplicative of) the adjustments to the exercise price and the number of shares of Common Stock issuable upon exercise of the Series A Warrants in the event of stock dividends, stock splits, reorganizations or similar events, the Series A Warrants provide for certain adjustments if the Company, at any time prior to the three year anniversary of the Issuance Date, (1) declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to all or substantially all of the holders of shares of Common Stock at any time after the Issuance Date, or (2) grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of shares of Common Stock. Further, if at any time a Series A Warrant is outstanding, the Company consummates any fundamental transaction, as described in the Series A Warrants and generally including any consolidation or merger into another corporation, or the sale of all or substantially all of our assets, or other transaction in which the Common Stock is converted into or exchanged for other securities or other consideration, the holder of any Series A Warrants will thereafter receive, the securities or other consideration to which a holder or the number of shares of Common Stock then deliverable upon the exercise or exchange of such Series A Warrants would have been entitled upon such consolidation or merger or other transaction.

Unit Purchase Option.

The Company, in connection with the Offering, entered into a Unit Purchase Option Agreement, dated as of August 31, 2015 (the “Unit Purchase Option”), pursuant to which the Company granted the Underwriter the right to purchase from the Company up to a number of Units equal to 5% of the Units sold in the Offering (or up to 83,333 Units) or the component securities of such Units at an exercise price equal to 125% of the public offering price of the Units in the Offering, or $11.25 per Unit. The Unit Purchase Option was terminated in May 2016 in exchange for 135,995 shares of common stock.

Series B Preferred Stock.

Each share of Series B Preferred Stock became convertible into one share of Common Stock (subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events) as of February 29, 2016. In addition, the Series B Preferred Stock will automatically convert into shares of common stock upon the occurrence of a fundamental transaction, as described in the certificate of designations for the Series B Preferred Stock but including mergers, shares of the company’s assets, changes in control and similar transactions. The Series B Preferred Stock is not convertible by the holder of such preferred stock to the extent (and only to the extent that the holder or any of its affiliates would beneficially own in excess of 4.99% of the common stock of the Company. The Series B Preferred Stock has no voting rights, except for the right to approve certain amendments to the certificate of designations or similar actions. With respect to payment of dividends and distribution of assets upon liquidation or dissolution or winding up of the Company, the Series B Preferred Stock shall rank equal to the common stock of the Company. No sinking fund has been established for the retirement or redemption of the Series B Preferred Stock.

Unit Exchange.

On February 4, 2014, the Company raised $2,055,000 in gross proceeds from a private placement of 20,550 shares of Series A Convertible Preferred Stock, par value $0.01, with a stated value of $100 per share (the “Series A Preferred Shares”) and warrants to purchase shares of the Company’s common stock. The Series A Preferred Shares and warrants were sold to investors pursuant to a Securities Purchase Agreement, dated as of February 4, 2014. On August 31, 2015, the Company issued a total of 228,343 Units (the “Exchange Units”) in exchange for the outstanding Series A Preferred Stock which were then cancelled pursuant to an agreement with the holders of the Series A Preferred Shares. The warrants that were issued in connection with the issuance of the Series A Preferred Shares remained outstanding; however, the warrant amounts were reduced so that the warrants are exercisable into an aggregate of 3,391 shares of the Company’s common stock. The Exchange Units were exempt from registration under Section 3(a)(9) of the Securities Act. On August 31, 2015, the Company filed a termination certificate with the Delaware Secretary of State. Following that date there were no shares of Series A Preferred Stock outstanding, and the previously authorized shares of Series A Preferred Stock resumed the status of authorized but issued and undesignated shares of preferred stock of the Company.

Redemption of Convertible Notes.

In connection with the closing of the Offering, $933,074 aggregate principal amount of Convertible Notes plus interest and a 40% redeemable premium were redeemed for total payments of $1,548,792. See Note 4. Of this amount, approximately $167,031 was paid to its affiliates in redemption of their Convertible Notes.

Registered Exchange Offer for Warrants.

On March 25, 2016, the Company commenced a registered exchange offer (the “Exchange Offer”) to exchange Series B Warrants (the “Series B Warrants”) to purchase shares of our common stock, par value $0.01 per share (the “Warrant Shares”), for up to an aggregate of 3,157,186 outstanding Series A Warrants (the “Series A Warrants”). On March 31, 2016, each Series A Warrant could be exercised on a cashless basis for 10.05 shares of common stock. Each Series B Warrant may be exercised on a cashless basis for one share of common stock. For each outstanding Series A Warrant tendered by holders, we offered to issue 10.2 Series B Warrants, which are subject to cashless exercise at a fixed rate of one share of common stock per Series B Warrant (subject to further adjustment for stock splits, etc.). The Exchange Offer expired at midnight, Eastern time, on April 21, 2016. 1,770,556 Series A Warrants were tendered by holders. The Company delivered an aggregate of 18,059,671 Series B Warrants pursuant to the terms of the Exchange Offer. In addition, between March 31, 2016 and July 6, 2016 1,251,510 Series A Warrants were exercised in cashless exercises, resulting in the issuance of 503,034 shares of common stock.

Accounting for share-based payment

The Company has adopted ASC 718- Compensation-Stock Compensation ("ASC 718"). Under ASC 718 stock-based employee compensation cost is recognized using the fair value based method for all new awards granted after January 1, 2006 and unvested awards outstanding at January 1, 2006. Compensation costs for unvested stock options and non-vested awards that were outstanding at January 1, 2006, are being recognized over the requisite service period based on the grant-date fair value of those options and awards, using a straight-line method. We elected the modified-prospective method under which prior periods are not retroactively restated.

ASC 718 requires companies to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model or other acceptable means. The Company uses the Black-Scholes option valuation model which requires the input of significant assumptions including an estimate of the average period of time employees will retain vested stock options before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognized. The assumptions the Company uses in calculating the fair value of stock-based payment awards represent the Company's best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based compensation expense could be materially different in the future.

Since the Company's common stock has no significant public trading history, and the Company has experienced no significant option exercises in its history, the Company is required to take an alternative approach to estimating future volatility and estimated life and the future results could vary significantly from the Company's estimates. The Company compiled historical volatilities over a period of 2 to 7 years of 15 small-cap medical companies traded on major exchanges and 10 mid-range medical companies on the OTC Bulletin Board and combined the results using a weighted average approach. In the case of ordinary options to employees the Company determined the expected life to be the midpoint between the vesting term and the legal term. In the case of options or warrants granted to non-employees, the Company estimated the life to be the legal term unless there was a compelling reason to make it shorter.

When an option or warrant is granted in place of cash compensation for services, the Company deems the value of the service rendered to be the value of the option or warrant. In most cases, however, an option or warrant is granted in addition to other forms of compensation and its separate value is difficult to determine without utilizing an option pricing model. For that reason the Company also uses the Black-Scholes option-pricing model to value options and warrants granted to non-employees, which requires the input of significant assumptions including an estimate of the average period the investors or consultants will retain vested stock options and warrants before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options and warrants that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based consulting and/or compensation and, consequently, the related expense recognized.

Since the Company has limited trading history in its stock and no first-hand experience with how its investors and consultants have acted in similar circumstances, the assumptions the Company uses in calculating the fair value of stock-based payment awards represent its best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based consulting and interest expense could be materially different in the future.

Valuation and accounting for options and warrants

The Company determines the grant date fair value of options and warrants using a Black-Scholes option valuation model based upon assumptions regarding risk-free interest rate, expected dividend rate, volatility and estimated term.

In January 2014 the Company issued 174 shares of common stock to the former CEO at $31.25 per share upon his exercising options.

In January through March 2014, 9 warrant holders exercised warrants through a cashless exercise for a total of 618 shares of common stock.

In January and February 2014 the Company issued warrants to purchase 862 shares pursuant to a February 4, 2014 private placement whereby the Company issued 20,550 shares of Series A Convertible Preferred Stock raising gross proceeds of $2,055,000. The warrants are at an exercise price of $609.50.

In February 2014 the Company issued a warrant to purchase 60 shares of common stock at an exercise price of $506.25 to a major shareholder Dr. Samuel Herschkowitz. The warrant is in consideration for a bridge loan extended in December 2013 that has been paid in February 2014.

On March 31, 2014, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $487.50 per share. As a result 39 shares of common stock were issued to 16 holders of Preferred Shares.

In March 2014, the Company issued 178 shares of common stock to a warrant holder for a partial cash exercise at $281.25 per share; issued 134 shares to the holder via the cashless exercise of the remainder of the warrant.

In June 2014, the Company issued 149 shares of common stock to a warrant holder exercising cashless warrants.

On June 30, 2014, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $487.50 per share. As a result 63 shares of common stock were issued to 16 holders of Preferred Shares.

On June 30, 2014, the Company issued a warrant to purchase 218 shares of common stock at an exercise price of $309.50 to SOK Partners, LLC, in consideration for a bridge loan in the form of convertible notes. On September 9, 2014 the Resale Registration Statement went into effect. The convertible note agreement provided an immediate approximately 11% reduction to the warrant agreement. Therefore, the warrant has been adjusted to purchase 194 shares of common stock at an exercise price of $309.50 to SOK Partners, LLC in consideration for a bridge loan.

In July 2014, the Company issued warrants to purchase 1,160 shares of common stock at an exercise price of $309.50 to two lenders in consideration for a bridge loan in the form of convertible notes. The shares above reflect approximately an 11% reduction resulting from the Resale Registration Statement that went effective September 9, 2014.

In August 2014, the Company issued warrants to purchase 2,462 of common stock at an exercise price of $609.50 to the Purchasers of the Preferred Shares. The Securities Purchase Agreement with the Preferred Shareholders stipulated that if the Company was not listed on either the NASDAQ Stock Market, the New York Stock Exchange or the NYSE MKT within 180 days of closing the agreement then warrants to purchase the above additional shares would be issued in aggregate to the Preferred Shareholders.

In August and September 2014, the Company issued warrants to purchase 1,498 shares of common stock at an exercise price of $309.50 to four lenders in consideration for a bridge loan in the form of convertible notes. The shares above reflect the approximate 11% reduction resulting from the Resale Registration Statement that went effective September 9, 2014.

On September 30, 2014, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $487.50 per share. As a result 63 shares of common stock were issued to 16 holders of Preferred Shares.

In November 2014, the Company issued 548 shares of common stock, par value $0.01, in escrow for debt settlement.

On December 31, 2014, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $487.50 per share. As a result 63 shares of common stock were issued to 16 holders of Preferred Shares.

For grants of stock options and warrants in 2014 the Company used a 1.44% to 2.75% risk-free interest rate, 0% dividend rate, 59% to 66% volatility and estimated terms of 5 to 10 years. Value computed using these assumptions ranged from $80.015 to $347.9864 per share.

In January 2015, the Company issued a dividend adjustment to the Purchasers of the Preferred Shares as described above. Certain previous dividends paid were calculated with an exercise price of $487.50 per share, but should have been calculated at $243.75 per share. As a result 125 shares of common stock were issued to 16 holders of Preferred Shares.

On March 31, 2015, the Company issued dividends to the Purchasers of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $243.75 per share. As a result 125 shares of common stock were issued to 16 holders of Preferred Shares.

On June 30, 2015, the Company issued dividends to Purchases of the Preferred Shares as described above. The dividends are at an annual rate of 6% of the stated value of the Preferred Shares paid on a quarterly basis in the form of common stock per a stipulated $243.75 per share. As a result 125 shares of common stock were issued to 16 holders of Preferred Shares.

For grants of stock options and warrants in 2015 the Company used a 1.63% to 2.35% risk-free interest rate, 0% dividend rate, 59% to 66% volatility and estimated terms of 5 to 10 years. Value computed using these assumptions ranged from $6.8745 to $139.2386 per share.

On March 25, 2016, the Company commenced the Exchange Offer which was completed on April 20, 2016, as described above.

On July 1, 2016, the Company issued inducement stock options in accordance with NASDAQ listing rules for 40,000 shares of common stock, par value $0.01, at $3.75 per share to the Company’s newly hired Vice President of Sales. The options will vest in six equal increments: on the first, second, third, fourth, fifth and sixth quarters of the hiring date anniversary.

On October 4, 2016, the Company issued 400,000 shares of common stock, par value $0.01, to be held in escrow in connection with the Company’s Partnership and Exclusive Reseller Agreement with GLG Pharma, LLC.

For grants of stock options and warrants in 2016 the Company used a 1.46% to 1.78% risk free interest rate, 0% dividend rate, 66% volatility and estimated terms of 10 years. Value computed using these assumptions ranged from $1.6329 to $3.7195 per share.

The following summarizes transactions for stock options and warrants for the periods indicated:

	Stock Options					Warrants
	Number of Shares			Average Exercise Price		Number of Shares			Average Exercise Price
Outstanding at December 31, 2014		17,945		$	187.75		20,029		$	198.75
Issued		14,171			69.00		303269			123.75
Expired		(766	)		293.25		(79	)		283.50
Exercised		-			-		(120	)		123.75
Outstanding at December 31, 2015		31,350		$	133.23		323,099		$	128.40
Issued		100,837			3.329		730,882			1.44
Expired		(22,377	)		122.132		-			-
Exercised		(1,312	)		65.750		(939,879	)		-
Outstanding at September 30, 2016		108,498		$	15.652		114,102		$	369.06

At September 30, 2016, 64,542 stock options are fully vested and currently exercisable with a weighted average exercise price of $23.46 and a weighted average remaining term of 9.57 years. All warrants are fully vested and exercisable. Stock-based compensation recognized for the nine months ending September 2016 and September 2015 was $1,393,862 and $320,334, respectively. The Company has $132,675 of unrecognized compensation expense related to non-vested stock options that are expected to be recognized over a period of approximately 18 months.

The following summarizes the status of options and warrants outstanding at September 30, 2016:

	Range of Prices	Shares	Weighted Remaining Life
Options
$	2.25	293	9.90
$	2.42	37,152	9.89
$	3.75	44,000	9.76
$	4.125	3,636	10.00
$	4.1975	7,147	9.97
$	4.25	3,529	9.50
$	5.125	3,902	9.94
$	65.75	342	9.06
$	73.50	1,157	9.26
$	77.50	2,323	8.75
$	80.25	187	9.01
$	86.25	232	8.50
$	121.875	5	6.45
$	131.25	81	5.94
$	148.125	928	6.47
$	150.00	1,760	5.88
$	162.50	123	8.26
$	206.25	121	8.01
$	248.4375	121	6.79
$	262.50	130	6.79
$	281.25	529	6.30
$	318.75	3	6.60
$	346.875	72	7.50
$	431.25	306	7.44
$	468.75	133	7.40
$	506.25	188	7.25
$	543.75	53	7.02
$	596.25	42	7.00
		108,498
Warrants
$	93.75	2,255	1.45
$	123.75	94,084	3.92
$	150.00	4,114	1.45
$	225.00	107	1.32
$	243.75	2,529	2.84
$	281.25	5,897	1.20
$	309.375	2,850	2.86
$	309.50	222	3.10
$	337.50	178	1.72
$	371.25	944	1.66
$	506.25	59	2.38
$	609.375	862	2.34
		114,102

 Stock options and warrants expire on various dates from June 2017 to September 2026.

On July 24, 2015, an amendment to the Certificate of Incorporation became effective, pursuant to which the authorized common stock was increased to 4,000,000 shares of common stock and the authorized preferred stock was increased to 20,000,000 shares.

Under a Separation Agreement effective June 13, 2016, all of our former CEO Josh Kornberg’s 22,085 outstanding stock options were canceled.

On September 16, 2016, an amendment to the Certificate of Incorporation became effective, pursuant to which the authorized common stock was increased to 8,000,000 shares of common stock.

Stock Options and Warrants Granted by the Company

The following table is the listing of stock options and warrants as of September 30, 2016 by year of grant:

Stock Options:
Year	Shares		Price
2011		173		0.00	-	281.25
2012		1,841		131.25	-	150.00
2013		1,612		121.88	-	596.25
2014		969		162.50	-	468.75
2015		4,240		65.75	-	86.25
2016		99,661		2.25	-	5.13
Total		108,498		$0.00	-	596.25

Warrants:
Year	Shares		Price
2012		2,792			281.25
2013		10,703		93.75	-	371.25
2014		6,455		243.75	-	609.38
2015		94,152		0.00	-	243.75
Total		114,102		$0.00	-	609.38

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Note 4 - Short-term Notes Payable

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Short-term Debt [Text Block]

NOTE 4 – SHORT-TERM NOTES PAYABLE

 

From July through September 2014, we entered into a series of securities purchase agreements pursuant to which we issued approximately $1.8 million original principal amount (subsequently reduced to approximately $1.6 million aggregate principal amount in accordance with their terms) of convertible promissory notes (the “2014 Convertible Notes”) and warrants exercisable for shares of our common stock for an aggregate purchase price of $1,475,000. Of this amount, we issued to SOK Partners, LLC, an affiliate of the Company, $122,196 original principal amount of the 2014 Convertible Notes and warrants exercisable for 218 shares of our common stock for an aggregate purchase price of $100,000. In April and May 2015, we issued and sold to a private investor additional Convertible Notes in an aggregate original principal amount of $275,000 for an aggregate purchase price of $250,000, containing terms substantially similar to the 2014 Convertible Notes (the “2015 Convertible Notes” and, together with the 2014 Convertible Notes, the “Convertible Notes”). No warrants were issued with the 2015 Convertible Notes.

Under a provision in the existing agreements, upon effectiveness of a resale registration statement covering certain shares, on September 9, 2014, the principal amount of the notes was reduced by 11%, to $1,603,260 and the number of Warrants was reduced by 11%, to 2,851 shares.

As of September 30, 2016 $927,663 aggregate principal amount of Convertible Notes, plus accrued and unpaid interest thereto, have been converted into shares of our common stock and no aggregate principal amount of Convertible Notes remains outstanding.

In connection with the Offering, the holders of the Convertible Notes agreed to not exercise their right to convert the Convertible Notes into shares of the Company’s common stock, in exchange for the Company’s agreement to redeem all of the outstanding Convertible Notes promptly following the consummation of the Offering at a redemption price equal to 140% of the principal amount, plus accrued and unpaid interest to the redemption date. On August 31, 2015, the closing date of the offering, the Company redeemed the remaining $933,074 aggregate principal amount of Convertible Notes plus interest and a 40% redeemable premium, for a total payment of $1,548,792. Of this amount, approximately $167,031 was paid to its affiliates in redemption of their Convertible Notes. Each holder of the Convertible Notes agreed to the foregoing terms and entered into an Amendment to Senior Convertible Notes and Agreement with the Company. As of September 30, 2016, none of the Convertible Notes were outstanding.

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Note 5 - Loss Per Share

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE 5 - LOSS PER SHARE

The following table presents the shares used in the basic and diluted loss per common share computations:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Numerator:
Net loss available in basic and diluted calculation	$	(1,055,593	)	$	(1,116,402	)	$	(5,793,242	)	$	(2,527,524	)
Other comprehensive income:
Unrealized gain (loss) from marketable securities		(1,299	)		-			4,579			-
Comprehensive (loss)		(1,056,892	)		(1,116,402	)		(5,788,663	)		(2,527,524	)
Denominator:
Weighted average common shares outstanding-basic		3,320,139			157,445			2,250,315			137,428
Effect of diluted stock options, warrants and preferred stock (1)		-			-			-			-
Weighted average common shares outstanding-basic		3,320,139			157,445			2,250,315			137,428
Loss per common share-basic and diluted	$	(0.32	)	$	(7.09	)	$	(2.57	)	$	(18.39	)

(1) The number of shares underlying options and warrants outstanding as of September 30, 2016 and September 30, 2015 are 222,600 and 343,554 respectively. The effect of the shares that would be issued upon exercise of such options, warrants and preferred stock has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

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Note 6 - Income Taxes

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 6 – INCOME TAXES

Availability and Utilization of Net Operating Losses

During September 2013, the Company experienced an “ownership change” as defined in Section 382 of the Internal Revenue Code which could potentially limit the ability to utilize the Company’s net operating losses (NOLs). The general limitation rules allow the Company to utilize its NOLs subject to an annual limitation that is determined by multiplying the federal long-term tax-exempt rate by the Company’s value immediately before the ownership change.

During the first quarter of 2016, the Company likely had another ownership change that could further limit the Company’s ability to fully utilize its NOLs however, the determination of the annual limitation has not yet been made.

Income Taxes

At December 31, 2015, the Company had approximately $24.7 million of gross NOLs to reduce future federal taxable income, the majority of which are expected to be available for use in 2016, subject to the Section 382 limitation described above. The federal NOLs will expire beginning in 2022 if unused. The Company also had approximately $13.4 million of gross NOLs to reduce future state taxable income at December 31, 2015, which will expire in years 2022 through 2036 if unused. The Company’s net deferred tax assets, which include the NOLs, are subject to a full valuation allowance. At December 31, 2015, the federal and state valuation allowances were $9.6 million and $1.1 million, respectively.

At September 30, 2016, the Company had approximately $29.2 million of gross NOLs to reduce future federal taxable income, the majority of which are expected to be available for use in 2017, subject to the Section 382 limitations described above. The federal NOLs will expire beginning in 2022 if unused. The Company also had approximately $15.0 million of gross NOLs to reduce future state taxable income at September 30, 2016, which will expire in years 2022 through 2037 if unused. The Company’s net deferred tax assets, which include the NOLs, are subject to a full valuation allowance. At September 30, 2016, the federal and state valuation allowances were $10.1 million and $0.3 million, respectively.

The components of deferred income taxes at September 30, 2016 and December 31, 2015 are as follows:

	September 30, 2016		December 31, 2015
Deferred Tax Asset:
Net Operating Loss	$	10,271,000	$	10,338,000
Other		166,000		359,000
Total Deferred Tax Asset		10,437,000		10,697,000
Less Valuation Allowance		10,437,000		10,697,000
Net Deferred Income Taxes	$	—	$	—

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Note 7 - Rent Obligation

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Leases of Lessee Disclosure [Text Block]

NOTE 7 – RENT OBLIGATION

The Company leases its principal office under a lease that can be cancelled after three years with proper notice per the lease and an amortized schedule of adjustments that will be due to the landlord. The lease extends five years and expires January 2018. In addition to rent, the Company pays real estate taxes and repairs and maintenance on the leased property. Rent expense was $16,356 and $50,106 for the three and nine months ended September 30, 2016 and was $15,900 and $50,156 for the three and nine months ended September 30, 2015 respectively.

The Company’s rent obligation for the next three years is as follows:

2016	$	9,500
2017	$	39,000
2018	$	3,600

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Note 8 - Related Party Transactions

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE 8 – RELATED PARTY TRANSACTIONS

The Audit Committee has the responsibility to review and approve all transactions to which a related party and the Company may be a party prior to their implementation, to assess whether such transactions meet applicable legal requirements.

In connection with the sale of the Series A Preferred Share on February 4, 2014, Josh Kornberg, our former, and then President, CEO and Interim Chairman of the Board, was one of the Purchasers. Mr. Kornberg purchased 770 Preferred Shares for a purchase price of $25,000 and received warrants to purchase 3 shares of common stock.

SOK Partners, LLC (“SOK”), a large stockholder with Mr. Kornberg and Dr. Samuel Herschkowitz as managing partners, invested in the July 2014 offering of convertible notes and warrants. In November 2014, the convertible noteholders agreed to convert certain balances of the convertible notes in connection with the public offering of the Existing Units, in consideration of the agreement to issue certain additional shares. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations – Liquidity and Capital Resources – History Financing – 2014 Sales of Convertible Notes and Warrants.” In connection with the Unit Offering in August 2015, all such convertible notes were redeemed at a redemption price of 140% of the principal amount thereof, plus accrued and unpaid interest. The Company paid approximately $163,000 to SOK in redemption of its convertible note. In addition, Rick Koenigsberger, a former director who resigned on June 5, 2015, is a holder of membership units of SOK Partners.

In connection with the Unit Exchange that was consummated on August 31, 2015, 250 shares of Series A Convertible Stock held by Mr. Kornberg were exchanged for 2,778 Exchange Units.

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Note 9 - Retirement Savings Plan

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 9 – RETIREMENT SAVINGS PLAN

We have a pre-tax salary reduction/profit-sharing plan under the provisions of Section 401(k) of the Internal Revenue Code, which covers employees meeting certain eligibility requirements. In fiscal 2016 and 2015, we matched 100%, of the employee’s contribution up to 4% of their earnings. The employer contribution was $7,401 and $28,196 for the three and nine months ending September 30, 2016 and was $7,021 and $21,735 for the three and nine months ending September 30, 2015, respectively.

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Note 10 - Supplemental Cash Flow Data

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

Note 10 – SUPPLEMENTAL CASH FLOW DATA

There were $3 in cash payments for interest for the three and nine months ended September 30, 2016 and were $226,960 and $237,121 for the three and nine months ended September 30, 2015.

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Note 11 - Investment Securities and Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Investment Securities and Other Comprehensive Income/(Loss) [Text Block]

Note 11 – INVESTMENT SECURITIES AND OTHER COMPREHENSIVE INCOME (LOSS)

The cost and fair values of investment securities available-for-sale at September 30, 2016 were as follows:

	September 30, 2016
Description	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mutual Funds	$	572,309	$	4,579	$	-	$	576,888

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Nature of Operations and Continuance of Operations

On October 27, 2016, the Company effected a 1-for-25 reverse stock split of its common stock. All share information in the financial statements for fiscal years 2016 and 2015 reflect the impact of the reverse stock split.

Skyline Medical Inc. (the "Company") was incorporated under the laws of the State of Minnesota in 2002. Effective August 6, 2013, the Company changed its name to Skyline Medical Inc. As of September 30, 2016, the registrant had 3,404,860 shares of common stock, par value $.01 per share, outstanding. Pursuant to an Agreement and Plan of Merger dated effective December 16, 2013, the Company merged with and into a Delaware corporation with the same name that was its wholly-owned subsidiary, with such Delaware Corporation as the surviving corporation of the merger. The Company has developed an environmentally safe system for the collection and disposal of infectious fluids that result from surgical procedures and post-operative care. The Company also makes ongoing sales of our proprietary cleaning fluid and filters to users of our systems. In April 2009, the Company received 510(k) clearance from the FDA to authorize the Company to market and sell its STREAMWAY® FMS products.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations and had a stockholders’ deficit until August 31, 2015 whereupon the Company closed its public offering of units of common stock, Series B Convertible Preferred Stock and Series A Warrants (the “Units”). There remains though, substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Since inception to September 30, 2016, the Company raised approximately $22,325,091 in equity, inclusive of $2,055,000 from a private placement of Series A Convertible Preferred Stock, $13,555,003 from the public offering of Units and $5,685,000 in debt financing. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Developments

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09,

Revenue from Contracts with Customers

and created a new topic in the FASB Accounting Standards Codification ("ASC"), Topic 606. The new standard provides a single comprehensive revenue recognition framework for all entities and supersedes nearly all existing U.S. GAAP revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and also requires enhanced disclosures. The amendments are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.

In June 2014, the FASB issued ASU 2014-12,

"Compensation - Stock Compensation"

providing explicit guidance on how to account for share-based payments granted to employees in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the impact this guidance may have on our financial statements.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. The standard is effective for public entities for annual and interim periods beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. Debt issuance costs related to a recognized debt liability will be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts, rather than as an asset. Amortization of these costs will continue to be reported as interest expense. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, 2015. Early adoption is permitted. The adoption of this ASU is not expected to have an impact on our financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, requiring that inventory be measured at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective within annual periods beginning on or after December 15, 2016, including interim periods within that reporting period. We are currently evaluating the impact this guidance may have on our financial statements.

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740)” providing guidance on the balance sheet classification of deferred taxes. The guidance requires that deferred tax assets and liabilities to be classified as noncurrent in the Balance Sheet. The guidance is effective for fiscal years beginning after December 15, 2016 and for interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact this guidance may have on our financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01,

Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

("ASU 2016-01"). The standard changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. Under the new guidance, entities will be required to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not believe that the adoption of this guidance will have a material impact on the Company's consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, “Leases

(Topic 842

” (“ASU 2016-02”), which requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The standard states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the timing of our adoption and the impact that the updated standard will have on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “

Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accountin

g” (“ASU 2016-09”). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the timing of our adoption and the impact that the updated standard will have on our consolidated financial statements.

During August 2016, the FASB issued ASU No. 2016-15,

Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,

to address diversity in how certain cash receipts and cash payments are presented and classified in the statements of cash flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method to each period presented. If retrospective application is impractical for some of the issues addressed by the update, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-15 to have a material impact on its consolidated financial statements.

We reviewed all other significant newly issued accounting pronouncements and determined they are either not applicable to our business or that no material effect is expected on our financial position and results of our operations.

Goodwill and Intangible Assets, Intangible Assets, Indefinite-Lived, Policy [Policy Text Block]

Valuation of Intangible Assets

We review identifiable intangible assets for impairment in accordance with ASC 350 — Intangibles —Goodwill and Other, whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Our intangible assets are currently solely the costs of obtaining trademarks and patents. Events or changes in circumstances that indicate the carrying amount may not be recoverable include, but are not limited to, a significant change in the medical device marketplace and a significant adverse change in the business climate in which we operate. If such events or changes in circumstances are present, the undiscounted cash flows method is used to determine whether the intangible asset is impaired. Cash flows would include the estimated terminal value of the asset and exclude any interest charges. If the carrying value of the asset exceeds the undiscounted cash flows over the estimated remaining life of the asset, the asset is considered impaired, and the impairment is measured by reducing the carrying value of the asset to its fair value using the discounted cash flows method. The discount rate utilized is based on management’s best estimate of the related risks and return at the time the impairment assessment is made.

Use of Estimates, Policy [Policy Text Block]

Accounting Policies and Estimates

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Presentation of Taxes Collected From Customers, Policy [Policy Text Block]

Presentation of Taxes Collected from Customers

Sales taxes are imposed on the Company’s sales to nonexempt customers. The Company collects the taxes from customers and remits the entire amounts to the governmental authorities. The Company’s accounting policy is to exclude the taxes collected and remitted from revenues and expenses.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling

Shipping and handling charges billed to customers are recorded as revenue. Shipping and handling costs are recorded within cost of goods sold on the statement of operations.

Advertising Costs, Policy [Policy Text Block]

Advertising

Advertising costs are expensed as incurred. Advertising expenses were $10,343 and $57,004 in the three and nine months ended September 30, 2016 and were $500 and $1,917 in the three and nine months ended September 30, 2015.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

Research and development costs are charged to operations as incurred. Research and development expenses were $79,936 and $302,330 in the three and nine months ended September 30, 2016 and were $58,792 and $179,739 in the three and nine months ended September 30, 2015.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes revenue in accordance with the SEC’s Staff Accounting Bulletin Topic 13 Revenue Recognition and ASC 605-Revenue Recognition.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is probable. Delivery is considered to have occurred upon either shipment of the product or arrival at its destination based on the shipping terms of the transaction. The Company’s standard terms specify that shipment is FOB Skyline and the Company will, therefore, recognize revenue upon shipment in most cases. This revenue recognition policy applies to shipments of the STREAMWAY FMS units as well as shipments of filters and fluids. When these conditions are satisfied, the Company recognizes gross product revenue, which is the price it charges generally to its customers for a particular product. Under the Company’s standard terms and conditions, there is no provision for installation or acceptance of the product to take place prior to the obligation of the customer. The customer’s right of return is limited only to the Company’s standard one-year warranty whereby the Company replaces or repairs, at its option, and it would be rare that the STREAMWAY FMS unit or significant quantities of cleaning solution or filters may be returned. Additionally, since the Company buys the STREAMWAY FMS units, cleaning solution and filters from “turnkey” suppliers, the Company would have the right to replacements from the suppliers if this situation should occur.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash Equivalents

The Company considers all highly liquid debt instruments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximate fair value.

Certificates of Deposit Policy [Policy Text Block]

Certificates of Deposit

Short-term interest bearing investments are those with maturities of less than one year but greater than three months when purchased. Certificates with maturity dates beyond one year are classified as noncurrent assets. These investments are readily convertible to cash and are stated at cost plus accrued interest, which approximates fair value.

Marketable Securities, Policy [Policy Text Block]

Investment Securities

Readily marketable investments in debt and equity securities are classified as available-for-sale and are reported at fair value with unrealized gains and losses recorded in other comprehensive income. Unrealized gains are charged to earnings when an incline in fair value above the cost basis is determined to be other-than-temporary. Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific identification method.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

Under generally accepted accounting principles as outlined in the Financial Accounting Standards Board’s

Accounting Standards Certification

(ASC) 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standards ASC 820 establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing as asset or liability as follows:

Level 1 – Observable inputs such as quoted prices in active markets;

Level 2 – Inputs other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3 – Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

The Company uses observable market data, when available, in making fair value measurements. Fair value measurements are classified according to the lowest level input that is significant to the valuation.

The fair value of the Company’s investment securities were determined based on Level 1 inputs.

Receivables, Policy [Policy Text Block]

Receivables

Receivables are reported at the amount the Company expects to collect on balances outstanding. The Company provides for probable uncollectible amounts through charges to earnings and credits to the valuation based on management’s assessment of the current status of individual accounts, changes to the valuation allowance have not been material to the financial statements.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory balances are as follows:

	September 30, 2016		December 31, 2015
Finished goods	$	72,540	$	30,237
Raw materials		157,044		162,623
Work-In-Process		59,665		38,880
Total	$	289,249	$	231,740

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Estimated useful asset life by classification is as follows:

	Years
Computers and office equipment	3	-	7
Leasehold improvements		5
Manufacturing tooling	3	-	7
Demo Equipment		3

The Company’s investment in Fixed Assets consists of the following:

	September 30, 2016		December 31, 2015
Computers and office equipment	$	164,319	$	153,553
Leasehold improvements		25,635		23,874
Manufacturing tooling		101,104		97,288
Demo Equipment		17,702		8,962
Total		308,760		283,677
Less: Accumulated depreciation		197,850		144,079
Total Fixed Assets, Net	$	110,910	$	139,598

Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

Intangible Assets

Intangible assets consist of trademarks and patent costs. Amortization expense was $2,515 and $6,225 in the three and nine months ended September 30, 2016, and was $1,632 and $4,520 in the three and nine months ended September 30, 2015. The assets are reviewed for impairment annually, and impairment losses, if any, are charged to operations when identified.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes in accordance with ASC 740- Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company reviews income tax positions expected to be taken in income tax returns to determine if there are any income tax uncertainties. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by taxing authorities, based on technical merits of the positions. The Company has identified no income tax uncertainties.

Tax years subsequent to 2012 remain open to examination by federal and state tax authorities.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Patents and Intellectual Property

On January 25th, 2014 the Company filed a non-provisional PCT Application No. PCT/US2014/013081 claiming priority from the U.S. Provisional Patent Application, number 61756763 which was filed one year earlier on January 25th, 2013. The Patent Cooperation Treaty (“PCT”) allows an applicant to file a single patent application to seek patent protection for an invention simultaneously in each of the 148 countries of the PCT, including the United States. By filing this single “international” patent application through the PCT, it is easier and more cost effective than filing separate applications directly with each national or regional patent office in which patent protection is desired.

Our PCT patent application is for the new model of the surgical fluid waste management system. We obtained a favorable International Search Report from the PCT searching authority indicating that the claims in our PCT application are patentable (i.e., novel and non-obvious) over the cited prior art. A feature claimed in the PCT application is the ability to maintain continuous suction to the surgical field while measuring, recording and evacuating fluid to the facilities sewer drainage system. This provides for continuous operation of the STREAMWAY System unit in suctioning waste fluids, which means that suction is not interrupted during a surgical operation, for example, to empty a fluid collection container or otherwise dispose of the collected fluid.

The Company holds the following granted patents in the United States and a pending application in the United States on its earlier models: US7469727, US8123731 and U.S. Publication No. US20090216205 (collectively, the “Patents”). These Patents will begin to expire on August 8, 2023.

In July 2015, Skyline Medical filed an international (PCT) patent application for its fluid waste collection system and received a favorable determination by the International Searching Authority finding that all of the claims satisfy the requirements for novelty, inventive step and industrial applicability. Skyline anticipates that the favorable International Search Report will result in allowance of its various national applications.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high credit quality financial institutions and, by policy, generally limits the amount of credit exposure to any one financial institution. The Company has a credit risk concentration as a result of depositing $454,369 of funds in excess of insurance limits in a single bank.

Standard Product Warranty, Policy [Policy Text Block]

Product Warranty Costs

In the three and nine months ending September 30, 2016 the incurred approximately $2,102 and $33,083 in current warranty costs and incurred $12,084 and $39,688 in warranty costs for the three and nine months ending September 30, 2015.

Segment Reporting, Policy [Policy Text Block]

Segments

The Company operates in one segment for the sale of its medical device and consumable products. Substantially all of the Company’s assets, revenues and expenses for the three and nine months ending September 30, 2016 and for 2015 in entirety were located at or derived from operations in the United States. There were no revenue from sales outside of the United States. The Company has recently attained its ISO 13485 certification and is applying to sell our products in Canada.

Risks and Uncertainties Policy [Policy Text Block]

Risks and Uncertainties

The Company is subject to risks common to companies in the medical device industry, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with regulations of the FDA and other governmental agencies.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

The Company filed a Certificate of Amendment effecting a 1:25 reverse stock split (the “Reverse Stock Split” with the Secretary of State of the State of Delaware, which became effective under Delaware law at 5:00 p.m. New York time on October 27, 2016. The Company’s common stock opened for trading on October 28, 2016 on a post-split basis. At the effective time (the “Effective Time”) of the Reverse Stock Split, the issued and outstanding Common Stock of the Company was combined on a 1-for-25 basis such that every twenty-five shares of Common Stock outstanding immediately prior to the Effective Time was combined into one share of Common Stock. The share combination was effected through the exchange and replacement of certificates representing issued and outstanding shares of Common Stock as of the Effective Time, together with immediate book-entry adjustments to the stock register of the Company maintained in accordance with the Delaware General Corporation Law. In the event that the share combination would have resulted in a shareholder being entitled to receive less than a full share of Common Stock, the fractional share that would so result was rounded up to the nearest whole share of Common Stock. The par value of each share of issued and outstanding Common Stock was not affected by the share combination.

Interim Financial Statements, Policy [Policy Text Block]

Interim Financial Statements

The Company has prepared the unaudited interim financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. These interim financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly the Company’s financial position, the results of its operations and its cash flows for the interim periods. These interim financial statements should be read in conjunction with the annual financial statements and the notes thereto contained in the Form 10-K filed with the SEC on March 16, 2016. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

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Note 1 - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30, 2016		December 31, 2015
Finished goods	$	72,540	$	30,237
Raw materials		157,044		162,623
Work-In-Process		59,665		38,880
Total	$	289,249	$	231,740

Property Plant and Equipment UsefulLife [Table Text Block]

	Years
Computers and office equipment	3	-	7
Leasehold improvements		5
Manufacturing tooling	3	-	7
Demo Equipment		3

Property, Plant and Equipment [Table Text Block]

	September 30, 2016		December 31, 2015
Computers and office equipment	$	164,319	$	153,553
Leasehold improvements		25,635		23,874
Manufacturing tooling		101,104		97,288
Demo Equipment		17,702		8,962
Total		308,760		283,677
Less: Accumulated depreciation		197,850		144,079
Total Fixed Assets, Net	$	110,910	$	139,598

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Note 3 - Stockholders' Deficit, Stock Options and Warrants (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Share-based Compensation, Activity [Table Text Block]

	Stock Options					Warrants
	Number of Shares			Average Exercise Price		Number of Shares			Average Exercise Price
Outstanding at December 31, 2014		17,945		$	187.75		20,029		$	198.75
Issued		14,171			69.00		303269			123.75
Expired		(766	)		293.25		(79	)		283.50
Exercised		-			-		(120	)		123.75
Outstanding at December 31, 2015		31,350		$	133.23		323,099		$	128.40
Issued		100,837			3.329		730,882			1.44
Expired		(22,377	)		122.132		-			-
Exercised		(1,312	)		65.750		(939,879	)		-
Outstanding at September 30, 2016		108,498		$	15.652		114,102		$	369.06

Schedule of Share-based Compensation Shares Authorized Under Stock Option and Warrant Plans by Exercise Price Range [Table Text Block]

	Range of Prices	Shares	Weighted Remaining Life
Options
$	2.25	293	9.90
$	2.42	37,152	9.89
$	3.75	44,000	9.76
$	4.125	3,636	10.00
$	4.1975	7,147	9.97
$	4.25	3,529	9.50
$	5.125	3,902	9.94
$	65.75	342	9.06
$	73.50	1,157	9.26
$	77.50	2,323	8.75
$	80.25	187	9.01
$	86.25	232	8.50
$	121.875	5	6.45
$	131.25	81	5.94
$	148.125	928	6.47
$	150.00	1,760	5.88
$	162.50	123	8.26
$	206.25	121	8.01
$	248.4375	121	6.79
$	262.50	130	6.79
$	281.25	529	6.30
$	318.75	3	6.60
$	346.875	72	7.50
$	431.25	306	7.44
$	468.75	133	7.40
$	506.25	188	7.25
$	543.75	53	7.02
$	596.25	42	7.00
		108,498
Warrants
$	93.75	2,255	1.45
$	123.75	94,084	3.92
$	150.00	4,114	1.45
$	225.00	107	1.32
$	243.75	2,529	2.84
$	281.25	5,897	1.20
$	309.375	2,850	2.86
$	309.50	222	3.10
$	337.50	178	1.72
$	371.25	944	1.66
$	506.25	59	2.38
$	609.375	862	2.34
		114,102

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

Stock Options:
Year	Shares		Price
2011		173		0.00	-	281.25
2012		1,841		131.25	-	150.00
2013		1,612		121.88	-	596.25
2014		969		162.50	-	468.75
2015		4,240		65.75	-	86.25
2016		99,661		2.25	-	5.13
Total		108,498		$0.00	-	596.25

Warrants:
Year	Shares		Price
2012		2,792			281.25
2013		10,703		93.75	-	371.25
2014		6,455		243.75	-	609.38
2015		94,152		0.00	-	243.75
Total		114,102		$0.00	-	609.38

XML

Note 5 - Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Numerator:
Net loss available in basic and diluted calculation	$	(1,055,593	)	$	(1,116,402	)	$	(5,793,242	)	$	(2,527,524	)
Other comprehensive income:
Unrealized gain (loss) from marketable securities		(1,299	)		-			4,579			-
Comprehensive (loss)		(1,056,892	)		(1,116,402	)		(5,788,663	)		(2,527,524	)
Denominator:
Weighted average common shares outstanding-basic		3,320,139			157,445			2,250,315			137,428
Effect of diluted stock options, warrants and preferred stock (1)		-			-			-			-
Weighted average common shares outstanding-basic		3,320,139			157,445			2,250,315			137,428
Loss per common share-basic and diluted	$	(0.32	)	$	(7.09	)	$	(2.57	)	$	(18.39	)

XML

Note 6 - Income Taxes (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	September 30, 2016		December 31, 2015
Deferred Tax Asset:
Net Operating Loss	$	10,271,000	$	10,338,000
Other		166,000		359,000
Total Deferred Tax Asset		10,437,000		10,697,000
Less Valuation Allowance		10,437,000		10,697,000
Net Deferred Income Taxes	$	—	$	—

XML

Note 7 - Rent Obligation (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Rent Expense [Table Text Block]

2016	$	9,500
2017	$	39,000
2018	$	3,600

XML

Note 11 - Investment Securities and Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

	September 30, 2016
Description	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mutual Funds	$	572,309	$	4,579	$	-	$	576,888

XML

Note 1 - Summary of Significant Accounting Policies (Details Textual)		3 Months Ended		9 Months Ended		12 Months Ended	177 Months Ended
	Oct. 27, 2016	Sep. 30, 2016 USD ($) $ / shares shares	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) $ / shares shares	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($) $ / shares shares	Sep. 30, 2016 USD ($) $ / shares shares	Oct. 04, 2016 $ / shares	Nov. 30, 2014 $ / shares
Reverse Stock Split [Member] | Subsequent Event [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio	25
Subsequent Event [Member]
Common Stock, Par or Stated Value Per Share | $ / shares								$ 0.01
Series A Convertible Preferred Stock [Member] | Private Placement [Member]
Stock Issued During Period, Value, New Issues							$ 2,055,000
IPO [Member]
Stock Issued During Period, Value, New Issues							$ 13,555,003
Earliest Tax Year [Member]
Open Tax Year				2012
Common Stock, Shares, Outstanding | shares		3,404,860		3,404,860		208,259	3,404,860
Common Stock, Par or Stated Value Per Share | $ / shares		$ 0.01		$ 0.01		$ 0.01	$ 0.01		$ 0.01
Stockholders' Equity, Period Increase (Decrease)				$ 22,325,091
Stock Issued During Period, Value, New Issues						$ 13,060,880
Debt Instrument, Increase (Decrease), Net							$ 5,685,000
Advertising Expense		$ 10,343	$ 500	57,004	$ 1,917
Research and Development Expense		79,936	58,792	302,330	179,739
Amortization of Intangible Assets		2,515	1,632	6,225	4,520
Cash, Uninsured Amount		454,369		454,369			$ 454,369
Product Warranty Expense		$ 2,102	$ 12,084	$ 33,083	$ 39,688
Number of Operating Segments				1

XML

Note 1 - Summary of Significant Accounting Policies - Schedule of Inventory (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Finished goods	$ 72,540	$ 30,237
Raw materials	157,044	162,623
Work-In-Process	59,665	38,880
Total	$ 289,249	$ 231,740

XML

Note 1 - Summary of Significant Accounting Policies - Schedule of Property, Plant and Equipment, Useful Life (Details)	9 Months Ended
	Sep. 30, 2016
Office Equipment [Member] | Minimum [Member]
Property Plant and Equipment	3 years
Office Equipment [Member] | Maximum [Member]
Property Plant and Equipment	7 years
Leasehold Improvements [Member]
Property Plant and Equipment	5 years
Manufacturing Tooling [Member] | Minimum [Member]
Property Plant and Equipment	3 years
Manufacturing Tooling [Member] | Maximum [Member]
Property Plant and Equipment	7 years
Demo Equipment [Member]
Property Plant and Equipment	3 years

XML

Note 1 - Summary of Significant Accounting Policies - Schedule of Property, Plant and Equipment (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Office Equipment [Member]
Property, Plant and Equipment Gross	$ 164,319	$ 153,553
Leasehold Improvements [Member]
Property, Plant and Equipment Gross	25,635	23,874
Manufacturing Tooling [Member]
Property, Plant and Equipment Gross	101,104	97,288
Demo Equipment [Member]
Property, Plant and Equipment Gross	17,702	8,962
Property, Plant and Equipment Gross	308,760	283,677
Less: Accumulated depreciation	197,850	144,079
Total Fixed Assets, Net	$ 110,910	$ 139,598

XML

Note 2 - Development Stage Operations (Details Textual) - $ / shares		1 Months Ended	12 Months Ended	174 Months Ended
	Aug. 31, 2015	Nov. 30, 2014	Dec. 31, 2015	Oct. 24, 2016	Sep. 30, 2016
Common Stock [Member] | Maximum [Member]
Share Price				$ 3,131.25
Common Stock [Member]
Stock Issued During Period, Shares, New Issues			66,667	3,804,860
Stock Issued During Period, Shares, New Issues	1,666,667	548
Share Price					$ 4.125

XML

Note 3 - Stockholders' Deficit, Stock Options and Warrants (Details Textual)														1 Months Ended						3 Months Ended		9 Months Ended		12 Months Ended		174 Months Ended
	Oct. 04, 2016 $ / shares shares	Jul. 01, 2016 $ / shares shares	Jun. 13, 2016 shares	Mar. 31, 2016 shares	Aug. 31, 2015 USD ($) $ / shares shares	Jun. 30, 2015 $ / shares shares	Mar. 31, 2015 $ / shares shares	Dec. 31, 2014 $ / shares shares	Sep. 30, 2014 $ / shares shares	Sep. 09, 2014 $ / shares shares	Jun. 30, 2014 $ / shares shares	Mar. 31, 2014 $ / shares shares	Feb. 04, 2014 USD ($) $ / shares shares	Jan. 31, 2015 $ / shares shares	Nov. 30, 2014 $ / shares shares	Aug. 31, 2014 $ / shares shares	Jun. 30, 2014 $ / shares shares	Mar. 31, 2014 $ / shares shares	Jan. 31, 2014 USD ($) $ / shares shares	Jul. 06, 2016 shares	Mar. 31, 2014 $ / shares shares	Sep. 30, 2016 USD ($) $ / shares shares	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($) $ / shares shares	Dec. 31, 2014 $ / shares shares	Oct. 24, 2016 $ / shares shares	Sep. 16, 2016 shares	Aug. 31, 2016 shares	Apr. 21, 2016 shares	Mar. 25, 2016 $ / shares shares	Mar. 11, 2016 $ / shares	Jul. 24, 2015 shares	Jul. 31, 2014 $ / shares shares	Feb. 28, 2014 $ / shares shares
Maximum [Member] | Common Stock [Member]
Share Price | $ / shares																										$ 3,131.25
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period																						3 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period																						10 years
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares																						$ 609.38
Underwriting Agreement Expenses Agreed to Reimburse the Underwriter | $					$ 70,000
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate																						1.78%		2.35%	2.75%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term																						10 years		10 years	10 years
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares																						$ 596.25		$ 139.2386	$ 347.9864
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares																						$ 3.7195
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period																						3 years
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares																						$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate																						1.46%		1.63%	1.44%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term																								5 years	5 years
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares																						$ 0		$ 6.8745	$ 80.015
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares																						$ 1.6329
Series A Convertible Preferred Stock [Member] | Exchange Units [Member]
Stock Issued During Period, Shares, Conversion of Convertible Securities					3,391
Series A Convertible Preferred Stock [Member]
Preferred Stock, Shares Outstanding																												0
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares																																		$ 609.50
Stock Issued During Period, Shares, New Issues													20,550
Preferred Stock Par Value | $ / shares													$ 0.01
Preferred Stock Stated Value | $ / shares													$ 100
Stock Issued During Period, Value, New Issues | $													$ 2,055,000
Series B Convertible Preferred Stock [Member] | Corporate Stock Transfer Inc. [Member]
Unit Agreement Number of Shares of Preferred Stock Included in Each Unit					1
Series B Convertible Preferred Stock [Member]
Preferred Stock, Shares Outstanding																						79,246		1,895,010
Convertible Preferred Stock, Shares Issued upon Conversion					1
Beneficial Ownership Limitation Percentage					4.99%
Preferred Stock, Par or Stated Value Per Share | $ / shares																						$ 0.01		$ 0.01
Preferred Stock, Shares Authorized																						20,000,000		20,000,000
Series B Preferred Stock [Member] | Exchange Units [Member]
Stock Issued During Period, Shares, Conversion of Convertible Securities					1,895,010
Four Lenders [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights									1,498							1,498
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares									$ 309.50							$ 309.50
Chief Executive Officer [Member]
Stock Issued During Period, Value, Stock Options Exercised | $																			$ 174
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price | $ / shares																			$ 31.25
Dr.Samuel Herschkowitz [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																																		60
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares																																		$ 506.25
Two Lenders [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																																	1,160
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares																																	$ 309.50
Purchasers [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																2,462
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares																$ 609.50
Stock Issued During Period, Shares, Conversion of Convertible Securities						125	125	63						125
Preferred Stock, Dividend Rate, Percentage						6.00%	6.00%	6.00%	6.00%
Preferred Stock Conversion Price Per Share | $ / shares									$ 487.50					$ 487.50
Stock Issued During Period Shares Preferred Stock Conversion									63
Number of Preferred Stock Share holders						16	16	16	16					16											16
Maximum Number of Days Not Listed on Stock Market																180 days
Preferred Stock, Par or Stated Value Per Share | $ / shares								$ 487.50																	$ 487.50
Conversion of Stock Price Per Share | $ / shares						$ 243.75	$ 243.75							$ 243.75
Vice President of Sales [Member]
Common Stock, Par or Stated Value Per Share | $ / shares		$ 0.01
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares		$ 3.75
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		40,000
Number of Equal Installments Options are Expected to Vest		6
Former CEO [Member] | Common Stock [Member]
Stock Issued During Period, Shares, New Issues																						20,000
Stock Issued During Period, Value, New Issues | $																						$ 200
Former CEO [Member]
Shares Issued, Price Per Share | $ / shares																						$ 4.50
Stock Issued During Period, Value, New Issues | $																						$ 90,351
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period			22,085
Exchange Units [Member] | Common Stock [Member]
Stock Issued During Period, Shares, Conversion of Convertible Securities					75,800
Exchange Units [Member] | Series A Warrants [Member]
Stock Issued During Period, Shares, Conversion of Convertible Securities					7,580,040
Exchange Units [Member] | Corporate Stock Transfer Inc. [Member]
Unit Purchase Option Units Issued					228,343
Unit Purchase Option Number of Units Available for Underwriter to Purchase, Percentage					5.00%
Unit Purchase Option Number of Units Available For Underwriter to Purchase					83,333
Unit Purchase Option Exercise Price, Percentage					125.00%
Unit Purchase Option Exercise Price | $ / shares					$ 11.25
Unit Purchase Option, Exercised					135,995
Exchange Units [Member]
Unit Purchase Option Units Issued					228,343
Stock Issued During Period, Shares, Conversion of Convertible Securities					1,895,010
Employee Stock Option [Member]
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price | $ / shares																						$ 65.75
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period																						1,312
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross																						100,837		14,171
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares																						$ 3.329		$ 69
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition																						1 year 180 days
Common Stock [Member] | Series B Warrants [Member]
Stock Issued During Period Shares Warrants Exercised																						628,237
Common Stock [Member]
Stock Issued During Period, Shares, New Issues																								66,667		3,804,860
Stock Issued During Period Shares Warrants Exercised																						2,318,663		120
Stock Issued During Period, Value, Stock Options Exercised | $																						$ 13
Stock Issued During Period, Value, New Issues | $																								$ 667
Stock Issued During Period Shares Preferred Stock Conversion																						66,396		9,134
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period																						1,312
Warrant [Member]
Cashless Exercise of Common Stock Warrants, Total																					618
Series A Warrants [Member] | Corporate Stock Transfer Inc. [Member] | Scenario, All Outstanding Warrants Exercised at Minimum Bid Price [Member]
Stock Issued During Period Shares Warrants Exercised																						564
Series A Warrants [Member] | Corporate Stock Transfer Inc. [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares					$ 123.75
Unit Agreement Number of Warrants Included in Each Unit					4
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right					1																	0.4
Cash Less Exercise Formula Definition of Letter C in the Formula Closing Bid Price Number of Trading Days Prior to the Time of Exercise					2 days
Cash Less Exercise Formula Closing Bid Price Per Share Minimum to Be Used in the Formula | $ / shares																															$ 0.43
Warrants Option to Settle in Cash Fair Value Disclosure | $ / shares																						$ 4.319
Class of Warrant or Right Exercised During Period																						6,141,115
Stock Issued During Period Shares Warrants Exercised																						2,318,663
Class of Warrant or Right, Outstanding					35,084
Class of Warrant or Right Cash less Exercise Common Stock Price That Would Result in a Dilutive Exercise | $ / shares					$ 10.75
Beneficial Ownership Limitation Percentage					4.99%
Class of Warrant or Right Period Over Which Additional Adjustments to Price and Number of Shares May Be Made					3 years
Series A Warrants [Member] | Exchange Offer [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																													1,770,556
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right				1
Stock to be Issued for Exchange Offer, Shares, Maximum																														3,157,186
Cashless Exercise of Common Stock Warrants, Total				10.05
Exchange from Series B Warrants to Warrant Shares [Member] | Exchange Offer [Member]
Common Stock, Par or Stated Value Per Share | $ / shares																														$ 0.01
Series B Warrants [Member] | Exchange Offer [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																													18,059,671
Class of Warrant or Right Exercised During Period																				1,251,510
Stock Issued During Period Shares Warrants Exercised																				503,034
Cashless Exercise of Common Stock Warrants, Total				10.2
Cashless Exercised Class of Warrant Called by Each Warrant or Right				1
Corporate Stock Transfer Inc. [Member]
Unit Agreement Number of Shares of Common Stock Included in Each Unit					1
Common Stock, Par or Stated Value Per Share | $ / shares					$ 0.01
The Convertible Notes [Member]
Debt Instrument Redemption Principal Amount | $					$ 933,074
Debt Instrument Redemption Premium Percentage					40.00%
Debt Instrument Redemption Price | $					$ 1,548,792
Debt Instrument Redemption Amount Paid to Affiliates | $					$ 167,031
SOK Partners LLC [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights										194	218						218
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares										$ 309.50	$ 309.50						$ 309.50
Percentage of Reduction to Warrant Agreement										11.00%
Subsequent Event [Member]
Stock Issued During Period, Shares, New Issues	400,000
Common Stock, Par or Stated Value Per Share | $ / shares	$ 0.01
Option Granted to Underwriter to Purchase Additional Units Additional Units Purchased					0
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																			862															862
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares												$ 281.25						$ 281.25			$ 281.25
Stock Issued During Period, Shares, New Issues					1,666,667										548
Shares Issued, Price Per Share | $ / shares					$ 9
Underwriter Price | $ / shares					8.28
Underwriting Discount | $ / shares					$ 0.72
Underwriting Commission					8.00%
Proceeds from Issuance or Sale of Equity | $					$ 13,800,000
Option Granted to Underwriter to Purchase Additional Units Period					45 days
Option Granted to Underwriter to Purchase Additional Units Number of Units Granted					250,000
Underwriting Agreement Non-accountable Expense Allowance Percentage					1.00%
Common Stock, Par or Stated Value Per Share | $ / shares															$ 0.01							$ 0.01		$ 0.01
Share Price | $ / shares																						$ 4.125
Class of Warrant or Right, Outstanding																						114,102
Cashless Exercise of Common Stock Warrants, Total																		134
Stock Issued During Period, Value, Stock Options Exercised | $																						$ 86,253
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price | $ / shares																						$ 65.75
Stock Issued During Period, Value, New Issues | $																								$ 13,060,880
Preferred Stock, Dividend Rate, Percentage											6.00%	6.00%
Preferred Stock Conversion Price Per Share | $ / shares											$ 487.50	$ 487.50
Stock Issued During Period Shares Preferred Stock Conversion											63	39
Number of Preferred Stock Share holders											16	16					16	16			16
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period																	149	178
Percentage Reduction to Number of Warrants										11.00%																							11.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate																						0.00%		0.00%	0.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate, Minimum																								59.00%	59.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate, Maximum																						66.00%		66.00%	66.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Number																						64,542
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price | $ / shares																						$ 23.46
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Remaining Contractual Term																						9 years 208 days
Allocated Share-based Compensation Expense | $																						$ 1,393,862	$ 320,334
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options | $																						$ 132,675
Common Stock, Shares Authorized																						8,000,000		8,000,000			8,000,000					4,000,000
Preferred Stock, Shares Authorized																																20,000,000

XML

Note 3 - Stockholders' Deficit, Stock Options and Warrants - Summary of Transactions for Stock Options and Warrants (Details) - $ / shares	1 Months Ended		9 Months Ended	12 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Sep. 30, 2016	Dec. 31, 2015
Employee Stock Option [Member]
Number of Shares Outstanding (in shares)			31,350	17,945
Average Exercise Price Outstanding (in dollars per share)			$ 133.23	$ 187.75
Number of Shares Issued (in shares)			100,837	14,171
Average Exercise Price Issued (in dollars per share)			$ 3.329	$ 69
Number of Shares Expired (in shares)			(22,377)	(766)
Average Exercise Price Expired (in dollars per share)			$ 122.132	$ 293.25
Number of Shares Outstanding (in shares)			108,498	31,350
Average Exercise Price Outstanding (in dollars per share)			$ 15.652	$ 133.23
Number of Shares Exercised (in shares)			(1,312)
Average Exercise Price Exercised (in dollars per share)			$ 65.75
Warrant [Member]
Number of Shares Outstanding (in shares)			323,099	20,029
Average Exercise Price Outstanding (in dollars per share)			$ 128.40	$ 198.75
Number of Shares Issued (in shares)			730,882	303,269
Average Exercise Price Issued (in dollars per share)			$ 1.44	$ 123.75
Number of Shares Expired (in shares)				(79)
Number of Shares Expired (in dollars per share)				$ 283.50
Number of Shares Exercised (in shares)			(939,879)	(120)
Average Exercise Price Exercised (in dollars per share)				$ 123.75
Number of Shares Outstanding (in shares)			114,102	323,099
Average Exercise Price Outstanding (in dollars per share)			$ 369.06	$ 128.40
Number of Shares Outstanding (in shares)			108,498
Average Exercise Price Outstanding (in dollars per share)
Number of Shares Exercised (in shares)	(149)	(178)
Average Exercise Price Exercised (in dollars per share)			$ 65.75

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Note 3 - Stockholders' Deficit, Stock Options and Warrants - Summary of Status of Options and Warrants Outstanding (Details) - $ / shares	9 Months Ended
	Sep. 30, 2016	Mar. 31, 2014
Stock Options One [Member]
Range of exercise prices, options (in dollars per share)	$ 2.25
Shares, options (in shares)	293
Weighted average remaining life, options	9 years 328 days
Stock Options Two [Member]
Range of exercise prices, options (in dollars per share)	$ 2.42
Shares, options (in shares)	37,152
Weighted average remaining life, options	9 years 324 days
Stock Options Three [Member]
Range of exercise prices, options (in dollars per share)	$ 3.75
Shares, options (in shares)	44,000
Weighted average remaining life, options	9 years 277 days
Stock Options Four [Member]
Range of exercise prices, options (in dollars per share)	$ 4.125
Shares, options (in shares)	3,636
Weighted average remaining life, options	10 years
Stock Options Five [Member]
Range of exercise prices, options (in dollars per share)	$ 4.1975
Shares, options (in shares)	7,147
Weighted average remaining life, options	9 years 354 days
Stock Options Six [Member]
Range of exercise prices, options (in dollars per share)	$ 4.25
Shares, options (in shares)	3,529
Weighted average remaining life, options	9 years 182 days
Stock Options Seven [Member]
Range of exercise prices, options (in dollars per share)	$ 5.125
Shares, options (in shares)	3,902
Weighted average remaining life, options	9 years 343 days
Stock Options Eight [Member]
Range of exercise prices, options (in dollars per share)	$ 65.75
Shares, options (in shares)	342
Weighted average remaining life, options	9 years 21 days
Stock Options Nine [Member]
Range of exercise prices, options (in dollars per share)	$ 73.50
Shares, options (in shares)	1,157
Weighted average remaining life, options	9 years 94 days
Stock Options Ten [Member]
Range of exercise prices, options (in dollars per share)	$ 77.50
Shares, options (in shares)	2,323
Weighted average remaining life, options	8 years 273 days
Stock Options Eleven [Member]
Range of exercise prices, options (in dollars per share)	$ 80.25
Shares, options (in shares)	187
Weighted average remaining life, options	9 years 3 days
Stock Options Twelve [Member]
Range of exercise prices, options (in dollars per share)	$ 86.25
Shares, options (in shares)	232
Weighted average remaining life, options	8 years 182 days
Stock Options Thirteen [Member]
Range of exercise prices, options (in dollars per share)	$ 121.875
Shares, options (in shares)	5
Weighted average remaining life, options	6 years 164 days
Stock Options Fourteen [Member]
Range of exercise prices, options (in dollars per share)	$ 131.25
Shares, options (in shares)	81
Weighted average remaining life, options	5 years 343 days
Stock Options Fifteen [Member]
Range of exercise prices, options (in dollars per share)	$ 148.125
Shares, options (in shares)	928
Weighted average remaining life, options	6 years 171 days
Stock Options Sixteen [Member]
Range of exercise prices, options (in dollars per share)	$ 150
Shares, options (in shares)	1,760
Weighted average remaining life, options	5 years 321 days
Stock Options Seventeen [Member]
Range of exercise prices, options (in dollars per share)	$ 162.50
Shares, options (in shares)	123
Weighted average remaining life, options	8 years 94 days
Stock Options Eighteen [Member]
Range of exercise prices, options (in dollars per share)	$ 206.25
Shares, options (in shares)	121
Weighted average remaining life, options	8 years 3 days
Stock Options Nineteen [Member]
Range of exercise prices, options (in dollars per share)	$ 248.4375
Shares, options (in shares)	121
Weighted average remaining life, options	6 years 288 days
Stock Options Twenty [Member]
Range of exercise prices, options (in dollars per share)	$ 262.50
Shares, options (in shares)	130
Weighted average remaining life, options	6 years 288 days
Stock Options Twenty One [Member]
Range of exercise prices, options (in dollars per share)	$ 281.25
Shares, options (in shares)	529
Weighted average remaining life, options	6 years 109 days
Stock Options Twenty Two [Member]
Range of exercise prices, options (in dollars per share)	$ 318.75
Shares, options (in shares)	3
Weighted average remaining life, options	6 years 219 days
Stock Options Twenty Three [Member]
Range of exercise prices, options (in dollars per share)	$ 346.875
Shares, options (in shares)	72
Weighted average remaining life, options	7 years 182 days
Stock Options Twenty Four [Member]
Range of exercise prices, options (in dollars per share)	$ 431.25
Shares, options (in shares)	306
Weighted average remaining life, options	7 years 160 days
Stock Options Twenty Five [Member]
Range of exercise prices, options (in dollars per share)	$ 468.75
Shares, options (in shares)	133
Weighted average remaining life, options	7 years 146 days
Stock Options Twenty Six [Member]
Range of exercise prices, options (in dollars per share)	$ 506.25
Shares, options (in shares)	188
Weighted average remaining life, options	7 years 91 days
Stock Options Twenty Seven [Member]
Range of exercise prices, options (in dollars per share)	$ 543.75
Shares, options (in shares)	53
Weighted average remaining life, options	7 years 7 days
Stock Options Twenty Eight [Member]
Range of exercise prices, options (in dollars per share)	$ 596.25
Shares, options (in shares)	42
Weighted average remaining life, options	7 years
Warrant One [Member]
Price, warrants (in dollars per share)	$ 93.75
Shares, warrants (in shares)	2,255
Weighted average remaining life, warrants	1 year 164 days
Warrant Two [Member]
Price, warrants (in dollars per share)	$ 123.75
Shares, warrants (in shares)	94,084
Weighted average remaining life, warrants	3 years 335 days
Warrant Three [Member]
Price, warrants (in dollars per share)	$ 150
Shares, warrants (in shares)	4,114
Weighted average remaining life, warrants	1 year 164 days
Warrant Four [Member]
Price, warrants (in dollars per share)	$ 225
Shares, warrants (in shares)	107
Weighted average remaining life, warrants	1 year 116 days
Warrant Five [Member]
Price, warrants (in dollars per share)	$ 243.75
Shares, warrants (in shares)	2,529
Weighted average remaining life, warrants	2 years 306 days
Warrant Six [Member]
Price, warrants (in dollars per share)	$ 281.25
Shares, warrants (in shares)	5,897
Weighted average remaining life, warrants	1 year 73 days
Warrant Seven [Member]
Price, warrants (in dollars per share)	$ 309.375
Shares, warrants (in shares)	2,850
Weighted average remaining life, warrants	2 years 313 days
Warrant Eight [Member]
Price, warrants (in dollars per share)	$ 309.50
Shares, warrants (in shares)	222
Weighted average remaining life, warrants	3 years 36 days
Warrant Nine [Member]
Price, warrants (in dollars per share)	$ 337.50
Shares, warrants (in shares)	178
Weighted average remaining life, warrants	1 year 262 days
Warrant Ten [Member]
Price, warrants (in dollars per share)	$ 371.25
Shares, warrants (in shares)	944
Weighted average remaining life, warrants	1 year 240 days
Warrant Eleven [Member]
Price, warrants (in dollars per share)	$ 506.25
Shares, warrants (in shares)	59
Weighted average remaining life, warrants	2 years 138 days
Warrant Twelve [Member]
Price, warrants (in dollars per share)	$ 609.375
Shares, warrants (in shares)	862
Weighted average remaining life, warrants	2 years 124 days
Range of exercise prices, options (in dollars per share)
Shares, options (in shares)	108,498
Weighted average remaining life, options
Price, warrants (in dollars per share)		$ 281.25
Shares, warrants (in shares)	114,102

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Note 3 - Stockholders' Deficit, Stock Options and Warrants - Listing of Stock Options and Warrants (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015	Dec. 31, 2014	Mar. 31, 2014
Stock Options 2011 [Member] | Minimum [Member]
Price, options (in dollars per share)	$ 0
Stock Options 2011 [Member] | Maximum [Member]
Price, options (in dollars per share)	$ 281.25
Stock Options 2011 [Member]
Shares, options (in shares)	173
Stock Options 2012 [Member] | Minimum [Member]
Price, options (in dollars per share)	$ 131.25
Stock Options 2012 [Member] | Maximum [Member]
Price, options (in dollars per share)	$ 150
Stock Options 2012 [Member]
Shares, options (in shares)	1,841
Stock Options 2013 [Member] | Minimum [Member]
Price, options (in dollars per share)	$ 121.88
Stock Options 2013 [Member] | Maximum [Member]
Price, options (in dollars per share)	$ 596.25
Stock Options 2013 [Member]
Shares, options (in shares)	1,612
Stock Options 2014 [Member] | Minimum [Member]
Price, options (in dollars per share)	$ 162.50
Stock Options 2014 [Member] | Maximum [Member]
Price, options (in dollars per share)	$ 468.75
Stock Options 2014 [Member]
Shares, options (in shares)	969
Stock Options 2015 [Member] | Minimum [Member]
Price, options (in dollars per share)	$ 65.75
Stock Options 2015 [Member] | Maximum [Member]
Price, options (in dollars per share)	$ 86.25
Stock Options 2015 [Member]
Shares, options (in shares)	4,240
Stock Options 2016 [Member] | Minimum [Member]
Price, options (in dollars per share)	$ 2.25
Stock Options 2016 [Member] | Maximum [Member]
Price, options (in dollars per share)	$ 5.13
Stock Options 2016 [Member]
Shares, options (in shares)	99,661
Warrants 2012 [Member]
Class of Warrant or Right, Outstanding	2,792
Price, warrants (in dollars per share)	$ 281.25
Warrants 2013 [Member] | Minimum [Member]
Price, warrants (in dollars per share)	93.75
Warrants 2013 [Member] | Maximum [Member]
Price, warrants (in dollars per share)	$ 371.25
Warrants 2013 [Member]
Class of Warrant or Right, Outstanding	10,703
Warrants 2014 [Member] | Minimum [Member]
Price, warrants (in dollars per share)	$ 243.75
Warrants 2014 [Member] | Maximum [Member]
Price, warrants (in dollars per share)	$ 609.38
Warrants 2014 [Member]
Class of Warrant or Right, Outstanding	6,455
Warrants 2015 [Member] | Minimum [Member]
Price, warrants (in dollars per share)	$ 0
Warrants 2015 [Member] | Maximum [Member]
Price, warrants (in dollars per share)	$ 243.75
Warrants 2015 [Member]
Class of Warrant or Right, Outstanding	94,152
Minimum [Member]
Price, options (in dollars per share)	$ 0	$ 6.8745	$ 80.015
Price, warrants (in dollars per share)	0
Maximum [Member]
Price, options (in dollars per share)	596.25	$ 139.2386	$ 347.9864
Price, warrants (in dollars per share)	$ 609.38
Shares, options (in shares)	108,498
Class of Warrant or Right, Outstanding	114,102
Price, warrants (in dollars per share)				$ 281.25

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Note 4 - Short-term Notes Payable (Details Textual) - USD ($)		2 Months Ended	3 Months Ended		27 Months Ended
	Aug. 31, 2015	May 30, 2015	Mar. 31, 2016	Sep. 30, 2014	Sep. 30, 2016	Sep. 09, 2014	Jul. 31, 2014	Jun. 30, 2014	Feb. 28, 2014	Jan. 31, 2014
The 2015 Convertible Notes [Member]
Class of Warrant or Right Issued During Period		0
Debt Instrument, Face Amount		$ 275,000
Proceeds from Convertible Debt		$ 250,000
The Convertible Notes [Member]
Short-term Debt					$ 0
Debt Conversion, Converted Instrument, Amount					$ 927,663
Debt Instrument, Redemption Price, Percentage			140.00%
Debt Instrument Redemption Principal Amount	$ 933,074
Debt Instrument Redemption Premium Percentage	40.00%
Debt Instrument Redemption Price	$ 1,548,792
Debt Instrument Redemption Amount Paid to Affiliates	$ 167,031
The 2014 Convertible Notes [Member] | SOK Partners LLC [Member]
Debt Instrument, Face Amount				$ 122,196
Proceeds from Convertible Debt				$ 100,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights				218
The 2014 Convertible Notes [Member]
Debt Instrument, Face Amount				$ 1,800,000
Debt Instrument Reduced Face Amount				1,600,000		$ 1,603,260
Proceeds from Convertible Debt				$ 1,475,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights						2,851
Percentage Reduction to Debt Instrument Face Amount						11.00%
Percentage Reduction to Number of Warrants						11.00%
SOK Partners LLC [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights						194		218
Class of Warrant or Right, Number of Securities Called by Warrants or Rights									862	862
Percentage Reduction to Number of Warrants						11.00%	11.00%

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Note 5 - Loss Per Share (Details Textual) - shares	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Options and Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	222,600	343,554

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Note 5 - Loss Per Share - Shares Used in Basic and Diluted Loss Per Common Share Computations (Details) - USD ($)		3 Months Ended		9 Months Ended		12 Months Ended
		Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Net loss available in basic and diluted calculation		$ (1,055,593)	$ (1,116,402)	$ (5,793,242)	$ (2,527,524)	$ (4,790,530)
Unrealized gain (loss) from marketable securities		(1,299)		4,579
Comprehensive (loss)		$ (1,056,892)	$ (1,116,402)	$ (5,788,663)	$ (2,527,524)
Weighted average common shares outstanding-basic (in shares)		3,320,139	157,445	2,250,315	137,428
Effect of diluted stock options, warrants and preferred stock (1) (in shares)	[1]
Loss per common share-basic and diluted (in dollars per share)		$ (0.32)	$ (7.09)	$ (2.57)	$ (18.39)

[1] The number of shares underlying options and warrants outstanding as of September 30, 2016 and September 30, 2015 are 222,600 and 343,554 respectively. The effect of the shares that would be issued upon exercise of such options, warrants and preferred stock has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

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Note 6 - Income Taxes (Details Textual) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Domestic Tax Authority [Member]
Operating Loss Carryforwards	$ 29,200,000	$ 24,700,000
Operating Loss Carryforwards, Valuation Allowance	10,100,000	9,600,000
State and Local Jurisdiction [Member]
Operating Loss Carryforwards	15,000,000	13,400,000
Operating Loss Carryforwards, Valuation Allowance	$ 0.30	$ 1,100,000

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Note 6 - Income Taxes - Components of Deferred Income Taxes (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Net Operating Loss	$ 10,271,000	$ 10,338,000
Other	166,000	359,000
Total Deferred Tax Asset	10,437,000	10,697,000
Less Valuation Allowance	10,437,000	10,697,000
Net Deferred Income Taxes	$ 0	$ 0

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Note 7 - Rent Obligation (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Lessee Leasing Arrangements Operating Leases Terms of Contract Cancellation			3 years
Lessee Leasing Arrangements Operating Leases Extension Term			5 years
Operating Leases, Rent Expense	$ 16,356	$ 15,900	$ 50,106	$ 50,156

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Note 7 - Rent Obligation - Rent Obligation (Details)	Sep. 30, 2016 USD ($)
2016	$ 9,500
2017	39,000
2018	$ 3,600

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Note 8 - Related Party Transactions (Details Textual) - USD ($)			1 Months Ended		12 Months Ended	174 Months Ended
	Aug. 31, 2015	Feb. 04, 2014	Aug. 31, 2015	Nov. 30, 2014	Dec. 31, 2015	Oct. 24, 2016	Feb. 28, 2014	Jan. 31, 2014
Chief Executive Officer [Member] | Series A Preferred Stock [Member]
Stock Issued During Period, Shares, New Issues		770
Stock Issued During Period, Value, New Issues		$ 25,000
Chief Executive Officer [Member] | Common Stock [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		3
Chief Executive Officer [Member] | Stock Conversion from Series A Convertible Stock to Exchange Units [Member]
Conversion of Stock, Shares Converted	250
Conversion of Stock, Shares Issued	2,778
SOK Partners LLC [Member] | The Convertible Notes [Member]
Debt Instrument, Redemption Price, Percentage			140.00%
Repayments of Related Party Debt			$ 163,000
Common Stock [Member]
Stock Issued During Period, Shares, New Issues					66,667	3,804,860
Stock Issued During Period, Value, New Issues					$ 667
Stock Issued During Period, Shares, New Issues	1,666,667			548
Stock Issued During Period, Value, New Issues					$ 13,060,880
Class of Warrant or Right, Number of Securities Called by Warrants or Rights							862	862

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Note 9 - Retirement Savings Plan (Details Textual) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Defined Contribution Plan, Employer Matching Contribution, Percent of Match			100.00%		100.00%
Defined Contribution Plan, Maximum Annual Contributions Per Employee, Percent			4.00%		4.00%
Defined Contribution Plan, Employer Discretionary Contribution Amount	$ 7,401	$ 7,021	$ 28,196	$ 21,735

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Note 10 - Supplemental Cash Flow Data (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Interest Paid	$ 3	$ 226,960	$ 3	$ 237,121

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Note 11 - Investment Securities and Other Comprehensive Income (Loss) - Cost and Fair Values of Investment Securities Available-for-sale (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Mutual Fund [Member]
Mutual Funds	$ 572,309
Mutual Funds	4,579
Mutual Funds	576,888
Mutual Funds	$ 45,017	$ 38,283