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Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2016
Apr. 14, 2017
Jun. 30, 2016
Document and Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2016    
Entity Registrant Name FLEXPOINT SENSOR SYSTEMS INC    
Entity Central Index Key 0000925660    
Current Fiscal Year End Date --12-31    
Document Fiscal Year Focus 2016    
Document Fiscal Period Focus FY    
Entity Filer Category Smaller Reporting Company    
Entity Common Stock, Shares Outstanding   78,363,464  
Entity Public Float     $ 3,797,178
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer No    
CONSOLIDATED BALANCE SHEETS - USD ($)
Dec. 31, 2016
Dec. 31, 2015
Current Assets    
Cash and cash equivalents $ 22,706
Accounts receivable, net of allowance of $102,140 and $7,140 84,499 98,557
Notes receivable, net of allowance of $86,806 and $0 86,806
Deposits and prepaid expenses 9,348 11,949
Total Current Assets 93,847 220,018
Long-Term Deposits 6,550 6,550
Property and Equipment, net of accumulated depreciation of $586,767 and $586,394 10,823
Patents and Proprietary Technology, net of accumulated amortization of $876,037 and $793,103 96,358 179,292
Goodwill 4,896,917 4,896,917
Total Assets 5,104,495 5,302,777
Current Liabilities    
Accounts payable 172,602 160,437
Accounts payable - related party 1,420 322
Accrued liabilities 741,778 375,244
Convertible notes payable, net of discount of $0 and $763,352 1,184,660 205,105
Convertible notes payable to related party, net of discount of $0 and $0 20,000 40,000
Derivative liabilities 76,295
Total Liabilities 2,196,755 781,108
Commitments and contingencies
Stockholders' Equity    
Preferred stock - $0.001 par value; 1,000,000 shares authorized; no shares issued or outstanding
Common stock - $0.001 par value; 100,000,000 shares authorized; 78,363,464 shares and 71,627,114 shares issued and outstanding, respectively 78,363 71,627
Stock subscriptions receivable 9,958
Additional paid-in capital 29,052,188 28,569,711
Accumulated deficit (26,222,811) (24,129,627)
Total Stockholders' Equity 2,907,740 4,521,669
Total Liabilities and Stockholders' Equity $ 5,104,495 $ 5,302,777
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
Dec. 31, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]    
Accounts receivable, allowance for bad debts $ 102,140 $ 7,140
Notes receivable, net of allowance 86,806 0
Property and Equipment, accumulated depreciation 586,767 586,394
Patents and Proprietary Technology, accumulated amortization 876,037 793,103
Convertible notes payable, discount 0 763,352
Convertible notes payable to related party, discount $ 0 $ 0
Preferred stock, par value per share $ 0.001 $ 0.001
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value per share $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 78,363,464 71,627,114
Common stock, shares outstanding 78,363,464 71,627,114
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Income Statement [Abstract]    
Engineering, Contract and Testing Revenue $ 314,494 $ 138,347
Operating Costs and Expenses    
Amortization of patents and proprietary technology 82,934 101,389
Cost of revenue 23,055 6,707
Administrative and marketing expense 878,584 896,003
Research and development expense 318,445 279,138
Total Operating Costs and Expenses 1,303,018 1,283,237
Other Income (Expense)    
Interest expense (1,068,389) (1,591,993)
Interest income 47 6,396
Loss on extinguishment of debt (915) (168,286)
Gain on stock debt exchange 156,743
Loss on change in fair value of derivative liabilities (35,403)
Net Other Income (Expense) (1,104,660) (1,597,140)
Net Loss $ (2,093,184) $ (2,742,030)
Basic and Diluted Loss Per Common Share $ (0.03) $ (0.05)
Basic and Diluted Weighted-Average Common Shares Outstanding 72,404,678 60,339,443
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Subscriptions Payable [Member]
Accumulated Deficit [Member]
Total
Balance at Dec. 31, 2014 $ 53,377 $ 24,990,927 $ (21,387,594) $ 3,656,710
Balance, shares at Dec. 31, 2014 53,377,114        
Beneficial conversion features 2,287,505 2,287,505
Shares issued for convertible notes $ 14,850 760,223 775,073
Shares issued for convertible notes, shares 14,850,000        
Shares issued in settlement of accrued liabilities $ 3,400 282,400 $ 285,800
Shares issued in settlement of accrued liabilities, shares 3,400,000        
Stock issued for stock subscription, shares         18,250,000
Stock subscription receivable 9,958 $ 9,958
Stock options issued 248,656 248,656
Net loss (2,742,030) (2,742,030)
Balance at Dec. 31, 2015 $ 71,627 28,569,711 9,958 (24,129,627) $ 4,521,669
Balance, shares at Dec. 31, 2015 71,627,114       71,627,114
Prior-period adjustment (160,000) $ (160,000)
Beneficial conversion features 118,083 118,083
Shares issued for convertible notes $ 6,650 328,368 335,018
Shares issued for convertible notes, shares 6,650,000        
Stock issued for stock subscription $ 86 9,872 (9,958)
Stock issued for stock subscription, shares 86,350       6,736,350
Stock options issued 26,154 $ 26,154
Net loss (2,093,184) (2,093,184)
Balance at Dec. 31, 2016 $ 78,363 $ 29,052,188 $ (26,222,811) $ 2,907,740
Balance, shares at Dec. 31, 2016 78,363,464       78,363,464
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Cash Flows from Operating Activities:    
Net loss $ (2,093,184) $ (2,742,030)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation 373
Bad debt expense 181,806 4,539
Stock-based compensation 26,154 248,656
Stock subscription for compensation 9,958
Amortization of patents and proprietary technology 82,934 101,389
Amortization of discount on note payable 922,327 1,473,341
Loss (Gain) on extinguishment of debt 915 168,286
Loss (Gain) on conversion of notes payable to common stock (156,743)
Loss (Gain) on change in fair value of derivative liabilities 35,403
Changes in operating assets and liabilities:    
Accounts receivable (80,942) (24,048)
Deposits and prepaid expenses 2,601 (60)
Accounts payable 12,165 (28,641)
Accounts payable - related party 1,098 (390)
Accrued liabilities 402,219 368,816
Net Cash Used in Operating Activities (506,131) (576,927)
Cash Flows from Investing Activities:    
Note receivable interest income (6,336)
Payment for note receivable (51,157)
Payment for equipment (11,196)
Payments for patents (2,181)
Net Cash Used in Investing Activities (11,196) (59,674)
Cash Flows from Financing Activities:    
Proceeds from borrowings under note payable 51,000
Proceeds from borrowings under convertible note payable 460,000 590,000
Proceeds from borrowings under convertible note payable - related party 20,000
Proceeds from bank overdrafts 14,621
Net Cash Provided by Financing Activities 494,621 641,000
Net Change in Cash and Cash Equivalents (22,706) 4,399
Cash and Cash Equivalents at Beginning of Period 22,706 18,307
Cash and Cash Equivalents at End of Period 22,706
Supplemental Cash Flow Information:    
Cash paid for income taxes
Cash paid for interest
Supplemental Disclosure on Noncash Investing and Financing Activities    
Convertible notes issued in debt extinguishments 1,049,824
Recognition of discounts on convertible notes payable 137,426 2,287,505
Recognition of discounts on convertible notes payable 40,892
Common shares issued in conversion of debt 335,018 775,073
Common shares issued in conversion of accrued liabilities 285,800
Stock issued for subscription payable $ 9,958
NATURE OF BUSINESS
12 Months Ended
Dec. 31, 2016
Accounting Policies [Abstract]  
NATURE OF BUSINESS

NOTE 1 NATURE OF BUSINESS

 

Nature of Operations – Flexpoint Sensor Systems, Inc. (the Company) is located in Draper, Utah. The Company’s activities to date have included acquiring equipment and enhancing technology, obtaining financing, limited production and seeking long-term manufacturing contracts. The Company’s operations are in designing, engineering, manufacturing and selling sensor technology and equipment using flexible potentiometer technology. Through December 31, 2016 the Company continued to manufacture products and sensors to fill customer orders and provide engineering and design work.

 

Principles of Consolidation – The accompanying consolidated financial statements include the accounts of Flexpoint Sensor Systems, Inc. and its wholly owned subsidiary, Flexpoint International,  LLC.  Intercompany transactions and accounts have been eliminated in consolidation.

 

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.

 

Cash and Cash Equivalents – Cash and cash equivalents are considered to be cash and a highly liquid security with original maturities of three months or less.

 

Fair Value Measurements - The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the party’s own credit risk.

 

Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

 

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

 

The carrying value of the Company’s cash, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

 

The Company has classified the inputs used in valuing its derivative liabilities as Level 3 inputs. The Company valued its derivatives using the binomial lattice model. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed below are that of volatility and market price of the underlying common stock of the Company.

 

Accounts Receivable – Trade accounts receivable are recorded at the time product is shipped or services are provided including any shipping and handling fees. Contracts associated with design and development engineering generally require a deposit of 50% of the quoted price prior to the commencement of work. The deposit is considered deferred income until the entire project is completed and accepted by the customer, at which time the entire contract price is billed to the customer and the deposit applied. The Company has established an allowance for bad debts based on a historical experience and an analysis of risk associated with the account balances.  The balance in the allowance account was $102,140 and $7,140 in the years ended December 31, 2016 and 2015, respectively.  

 

Inventories – Inventories are stated at the lower of cost or market. Cost is determined by using the first in, first out (FIFO) method.  

 

Going Concern– The Company suffered losses of $2,093,184 and $2,742,030 and used cash in operating activities of $506,131 and $576,927 during the years ended December 31, 2016 and 2015, respectively.  At December 31, 2016, the Company had an accumulated deficit of $26,222,811. These matters raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

 

From 2008 through 2016 the Company raised $4,959,278 in additional capital, including accrued interest, through the issuance of long and short-term notes to related and other parties. All of the notes had an annual interest rate of 10% or 15% and were secured by the Company’s business equipment. The notes also had a conversion feature for restricted common shares ranging from $0.05 to $0.20 per share with maturity dates of December 31, 2016.  In October 2015, the Company issued 3,400,000 shares of its restricted common stock to extinguish $330,000 of accrued liabilities arising from investor relations services at an average price of $0.084 per share. In November and December of 2015, $470,000 in convertible notes were converted into 9,400,000 shares of the Company’s restricted common stock at a conversion price of $0.05 per share.  

 

In June of 2016 a stock subscription in the amount of $9,958 was converted into 86,350 shares of restricted common stock. In November of 2016, $335,018 in convertible notes and accrued interest were converted into 6,650,000 shares of restricted common stock at an average conversion price of approximately $0.05 per share.

 

Property and Equipment – Property and equipment are stated at cost.  Additions and major improvements are capitalized while maintenance and repairs are charged to operations.  Upon trade-in, sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized. Depreciation is computed using the straight-line method and is recognized over the estimated useful lives of the property and equipment, which range from three to ten years.

 

Valuation of Long-lived Assets – The carrying values of the Company’s long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the projected discounted cash flows. Under similar analysis no impairment charge was taken during the year ended December 31, 2016.  Impairment tests will be conducted on an annual basis and, should they indicate a carrying value in excess of fair value, additional impairment charges may be required.

 

Intangible Assets – Costs to obtain or develop patents are capitalized and amortized over the remaining life of the patents, and technology rights are amortized over their estimated useful lives. The Company currently has the right to several patents and proprietary technology.  Patents and technology are amortized from the date the Company acquires or is awarded the patent or technology right, over their estimated useful lives, which range from 5 to 15 years.  An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows.  Under similar analysis there was no impairment charge taken during the year ended December 31, 2016.

 

Research and Development – Research and development costs are recognized as an expense during the period incurred, which is until the conceptual formulation, design, and testing of a process is completed and the process has been determined to be commercially viable.

 

Goodwill – Goodwill represents the excess of the Company’s reorganization value over the fair value of net assets of the Company upon emergence from bankruptcy. Goodwill is not amortized, but is tested for impairment annually, or at interim periods when a triggering event occurs using a fair value approach. According to Accounting Standards Codification (or “ASC”) 350-20 Intangibles – Goodwill and Other, a fair-value-based test is applied at the overall Company level. The test compares the fair value of the Company to the carrying value of its net assets. This test requires various judgments and estimates. The fair value of the Company is allocated to the Company’s assets and liabilities based upon their fair values with the excess fair value allocated to goodwill. An impairment of goodwill is measured as the excess of the carrying amount of goodwill over the determined fair value.

 

Revenue Recognition – Revenue is recognized when persuasive evidence of an arrangement exists, services have been provided or goods delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. Revenue from the sale of products is recorded at the time of shipment to the customers.  Revenue from research and development engineering contracts is recognized as the services are provided and accepted by the customer.  Revenue from contracts to license technology to others is deferred until all conditions under the contracts are met and then recognized as licensing royalty revenue over the remaining term of the contracts.  The Company does not provide extended warranties or guarantees on its products.

 

Stock-Based Compensation – The Company recognizes the cost of employee services received in exchange for stock options and awards of equity instruments based on the grant-date fair value of such options and awards, over the period they vest.   All share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense in operations over the requisite service period. For the years ended December 31, 2016 and 2015, the Company recognized expense for stock-based compensation of $26,154 and $248,656, respectively.

 

Basic and Diluted Loss Per Share – Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period.  Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. At December 31, 2016 and 2015, there were outstanding common share equivalents (options and convertible notes payable) which amounted to 23,399,094 and 16,165,502, respectively, of common stock. These common share equivalents were not included in the computation of diluted loss per share as their effect would have been anti-dilutive, thereby decreasing loss per common share.

 

Concentrations and Credit Risk - The Company has a few major customers who represents a significant portion of revenue, accounts receivable and notes receivable.  During the year ended December 31, 2016, a customer who manufacturers toys represented 38% of sales and represented 17% of accounts receivable.  A customer who is utilizing our technology for commercialization in shoes represented 68% of accounts receivable and 100% of notes receivable at December 31, 2016. The Company has a strong relationship with these customers and does not believe this concentration poses a significant risk, as their products are based entirely on the Company’s technologies.  The Company has the option, under one of the notes receivable, to convert the principal and interest into equity of the customer

 

Income Taxes - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards Board Accounting Codification (ASC) 740: Income Taxes.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized.

 

Recent Accounting Pronouncements –  In October 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-16, Income Taxes (Topic 740); Intra-Entity Transfers of Assets Other Than Inventory.  This ASU requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date.  The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory.  The tax consequences were previously deferred until the asset is sold to a third part or recovered through use.  This guidance will become effective on January 1, 2018.  

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230); Classification of Certain Cash Receipts and Cash Payments.  This ASU addresses the following eight specific cash flow issues:  Debt costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle.  This guidance will become effective on January 1, 2018. We do not expect the adoption of this ASU to have a material impact on our Consolidated Financial Statements.  

 

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718); Improvements to Employee Share-Based Payments Accounting.  The ASU changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows.  This guidance will become effective January 1, 2017.  We do not expect the adoption of this ASU to have a material impact on our Consolidated Financial Statements.

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2016-02, “Leases.”  This ASU requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to current accounting treatment.  This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases.  For public business entities, this ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein.  Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.  The Company is currently evaluating the impact of this ASU on its financial statements and disclosures.

 

The Company has reviewed all other FASB-issued ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods.  The Company has carefully considered the new pronouncements that alter previous GAAP and does not believe that any new or modified principles will have a material impact on the company’s reported financial position or operations in the near term.  The applicability of any standard is subject to the formal review of the Company’s financial management and certain standards are under consideration.

NOTES RECEIVABLE
12 Months Ended
Dec. 31, 2016
Receivables [Abstract]  
NOTES RECEIVABLE

NOTE 2 – NOTES RECEIVABLE

 

On June 23, 2010, the Company, along with David B. Beck, the Company's Director of Engineering, filed a complaint against R&D Products, LLC, Persimmon Investments, Inc. and Jules A. deGreef, the managing member of R&D Products, LLC. The complaint alleged that all of the intellectual properties owned by R&D Products and Mr. deGreef, specifically patented applications using Bend Sensor® technology that were filed jointly by Mr. Beck and Mr. deGreef, and later assigned solely to Mr. deGreef and R&D Products, are the property of the Company. The assignment by Mr. Beck of his rights in the patents and intellectual properties were improperly given and are the property of the Company. The Company believed that since Mr. Beck was an employee of the Company during the time that he became the primary creative force and inventor of the Bend Sensor® applications for R&D Products and Mr. deGreef, and the inventions and applications were created using Flexpoint resources, the Company claimed that such intellectual properties, patents, etc. filed by deGreef, Persimmon and R&D belong to Flexpoint and therefore is sought financial damages and ownership of all intellectual rights, patents and inventions created by Mr. Beck for deGreef, Persimmon and R&D Products.  

 

On April 9, 2013, the parties of the above referenced litigation reached a favorable universal settlement agreement that reinforces the Company's rights to the intellectual properties and their related products, including the medical bed. In order to secure the Company had exclusive rights to all patents and intellectual properties associated with this litigation the Company advanced to Mr. deGreef $25,000 to bring current all of the filing and maintenance fees for the patents detailed in the law suit. The advance is secured by a promissory note with an annual interest rate of 10% to be paid no later than December 31, 2015. During 2016 the Company established an allowance of $31,813 for the note receivable from Mr. deGreef.

 

On April 1, 2015, the Company paid $51,157 for the assumption and assignment of a convertible promissory note receivable issued by Bend Tech, LLC (“Bend Tech”; one of the Company’s customers – see also Note 1, Concentrations and Credit Risk) and held by a third-party Bend Tech investor (“the Investor”).  The note bears interest at the rate of 10% per annum and had a maturity date of April 1, 2015.  The agreement allows the holder, at its option, to convert the note to a 5% ownership of Bend Tech.  The Company elected to take assignment of those conversion rights, reaching an agreement with the Investor to pay the principle and interest to the Investor at the due date.  Bend Tech is expected to become a more significant customer of the Company as it begins its product introductions, and the Company elected to pay off the note and put itself in position to either receive the payment plus interest of   convert the note into ownership of Bend Tech rather than have an outside investor make such conversion.  As of the date of this report, the note is in default and the Company has not exercised its conversion option. The Company has recorded a bad debt expense charge for the full amount of the note.  During 2016 the Company established an allowance of $54,993 for the note receivable from Bend Tech LLC.

DERIVATIVE INSTRUMENTS
12 Months Ended
Dec. 31, 2016
Derivative Instruments  
DERIVATIVE INSTRUMENTS

NOTE 3 – DERIVATIVE INSTRUMENTS

 

The derivative liability as of December 31, 2016, in the amount of $76,295 has a level 3 classification.

 

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31, 2016 and 2015:

 

           
    Total  
Balance, December 31, 2014     -
Recognition of derivative liabilities upon initial valuation     -
Change in fair value of derivative liabilities     -
Conversions of derivative liabilities into equity instruments     -
Balance, December 31, 2015     -
Recognition of derivative liabilities upon initial valuation     40,892
Change in fair value of derivative liabilities     35,403
Conversions of derivative liabilities into equity instruments     -
Balance, December 31, 2016     76,295

 

During the year ended 2016, the Company issued convertible promissory notes which are convertible into common stock. Due to the Company’s lack of authorized shares necessary to settle all convertible instruments, in accordance with ASC 815-40-25, the Company determined that the conversion features related to these notes are derivative instruments since we do not have control to increase the number of authorized shares to settle all convertible instruments.  The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of debenture and to fair value as of each subsequent reporting date.

 

At December 31, 2016, the Company marked to market the fair value of the derivatives and determined a fair value of $76,295. The Company recorded a loss from change in fair value of derivatives of $35,403 for the year ended December 31, 2016. The fair value of the embedded derivatives was determined using binomial lattice model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 116.02% to 143.14%, (3) weighted average risk-free interest rate of 0.18% to 0.85% (4) expected life of 0.08 to 1.00 years, and (5) the quoted market price of the Company’s common stock at each valuation date.

 

In accordance ASC 840-15-25, the Company has implemented a sequencing policy with respect to all outstanding convertible instruments. The Company evaluates its contracts based upon earliest issuance date.

 

Liabilities measured at fair value on a recurring basis are summarized as follows:

 

                               
    Level 1     Level 2     Level 3     Total
Derivative Liabilities     -       -       76,295       76,295
Total   $ -     $ -     $ 76,295     $ 76,295

 

PROPERTY AND EQUIPMENT
12 Months Ended
Dec. 31, 2016
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 4 – PROPERTY AND EQUIPMENT

 

Depreciation is computed using the straight-line method and is recognized over the estimated useful lives of the property and equipment, which range from three to ten years.  Depreciation expense was $373 and $-0- for the years ended December 31, 2016 and 2015, respectively and is included in the administrative and marketing expense on the statement of operations.   No impairment was recognized during the twelve months ended December 31, 2016. Property and equipment at December 31, 2016 and 2015 consisted of the following:

 

       
Property and Equipment      
December  31, 2016   2015
       
Machinery and equipment $         543,249    $            532,053 
Office equipment 40,455    40,455 
Furniture and fixtures 13,470    13,470 
Software 416    416 
       
Total Property and Equipment 597,590    586,394 
       
Less: Accumulated depreciation (586,767)   (586,394)
       
Net Property and Equipment $          10,823    $                   -0- 

 

GOODWILL AND INTANGIBLE ASSETS
12 Months Ended
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS

NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

 

Intangible Assets – The components of intangible assets at December 31, 2016 and 2015 were as follows:

 

           
December 31, 2016 Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount
           
Patents $           173,313   $           150,427    $            22,886
Proprietary Technology 799,082   725,610    73,472
Total Amortizing Asset $           972,395   $           876,037    $            96,358
           
December 31, 2015 Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount
           
Patents $             173,313   $            134,153    $            39,160
Proprietary Technology 799,082   658,950    140,132
Total Amortizing Asset $             972,395   $            793,103    $          179,292

 

Patent amortization was $16,274 and $19,789 for the year ended December 31, 2016 and 2015, respectively. Amortization related to proprietary technology was $66,660 and $81,600 for the years ended December 31, 2016 and 2015.  Patent and proprietary technology amortization is charged to operations.  

 

Estimated aggregate amortization expense for each of the next three years is $45,798 in 2017, $30,290 in 2018, and $20,270 in 2019, at which time the patents will be fully amortized.

 

Goodwill – Goodwill represents the excess of the Company’s reorganization value over the fair value of net assets of the Company upon emergence from bankruptcy. Goodwill is not amortized, but is tested for impairment annually, or when a triggering event occurs. As described in ASU 2010-28, ASU 2011-08 and ASC 350-20-35, the Company has adopted the two step goodwill impairment analysis that includes quantitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two – step goodwill impairment test. A fair-value-based test is applied at the overall Company level. The test compares the estimated fair value of the Company at the date of the analysis to the carrying value of its net assets. The analysis also requires various judgments and estimates, including general and macroeconomic conditions, industry and the Company’s targeted market conditions, as well as relevant entity-specific events; such as a change in the market for the Company’s products and services. After considering the qualitative factors that would indicate a need for interim impairment of goodwill and applying the two-step process described in ASC 350-20-35, paragraphs 4-13, management has determined that the value of Company’s assets is not, “more likely than not” less than the carrying value of the Company including goodwill, and that no impairment charge needs be recognized during the reporting periods.

 

Upon emerging from bankruptcy protection in 2004, the Company engaged Houlihan Valuation Advisors, an independent valuation firm, to assess the fair value of the Company’s goodwill, patents and other proprietary technology at the date of emergence.  The appraisal was completed during 2005.  The Company continues to evaluate the fair value of its intangible assets using similar methods as those used by the valuation firm.

INCOME TAXES
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 6 INCOME TAXES

 

There was no provision for, or benefit from, income tax during the years ended December 31, 2016 and 2015 respectively.  The components of the net deferred tax asset as of December 31, 2016 and 2015, including temporary differences and operating loss carry forwards that arose prior to reorganization from bankruptcy, are as follows:

 

     
December 31, 2016 2015
Operating loss carry forwards $            8,062,514 $           8,131,464 
Origination and amortization of interest on convertible notes 840,044 526,453 
Allowance for doubtful accounts 61,814
Change in derivative liabilities                      12,037                               - 
Options issued for services 646,764 637,872
Total Deferred Tax Assets $           9,623,173  $           9,295,789 
Valuation allowance (9,623,173) (9,295,789)
Net Deferred Tax Asset $                         -- $                         --

 

Federal and state net operating loss carry forwards at December 31, 2016 and 2015 were $22,742,451and $21,796,597, respectively. A portion of the net operating loss carry forwards includes losses incurred prior to February 24, 2004, when a change of greater than 50% in ownership of the Company occurred. As a result of the change of ownership, only a portion of the net operating loss carry forwards incurred prior to the change becomes available each year. The net operating loss carry forwards begin to expire in 2020.

 

The following is a reconciliation of the amount of benefit that would result from applying the federal statutory rate to pretax loss with the provision for income taxes for the years ended December 31, 2016 and 2015, respectively:

     
     
For the Years Ended December 31, 2016 2015
Tax at statutory rate (34%) $          (711,683) $          (877,090)
Options issued for services 8,892 84,543 
Origination and amortization of  interest on convertible notes 313,591  500,936 
Allowance for doubtful accounts 61,814 -
Change in derivative liabilities               12,037                      -
Change in valuation allowance (315,348) (292,411)
Provision for Income Taxes $                      --  $                     -- 

 

Under FASB ASC 740-10-05-6, tax benefits are recognized only for the tax positions that are more likely than not be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the company's tax return that do not meet these recognition and measurement standards.

 

The Company's policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits with the income tax expense. For the years ended December 31, 2016, and 2015, the Company did not recognized any interest or penalties in its Statement of Operations, nor did it have any interest or penalties accrued in its Balance sheet at December 31, 2016 and 2015 relating to unrecognized benefits.

 

The tax years 2016, 2015, 2014 and 2013 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject.

CONVERTIBLE NOTES PAYABLE
12 Months Ended
Dec. 31, 2016
Debt Disclosure [Abstract]  
CONVERTIBLE NOTES PAYABLE

NOTE 7 – CONVERTIBLE NOTES PAYABLE

 

Convertible Notes Payable – Third Parties

 

On August 8, 2011, the Company entered into a convertible note payable with a former Director for $40,000. This note is due on December 31, 2015, bears an annual interest rate of 10% annual interest (15% default interest) and is secured by business equipment.

 

During 2015, the Company secured additional financing to cover its ongoing operations in the amount of $590,000 by issuing various convertible notes bearing 10% annual interest (15% default interest), secured by business assets and carrying exercise prices ranging between $0.025 and $0.07 per share. Additionally during 2015, the Company issued $51,000 for a non-convertible note payable bearing 10% annual interest (15% default interest) and secured by the $51,157 note receivable held by the Company (see Note 2). During 2015, all of these notes (both convertible and non-convertible issued in 2014 and 2015) and accrued interest were either converted into common stock or extinguished and consolidated into two remaining convertible notes payable to two investors in principal amounts of $684,660 and $123,797 (with respective maturity dates of December 31, 2016 and November 30, 2016). Both notes are convertible at $0.05 per share, bear 10% annual interest rates (15% default interest) and are secured by business assets.

 

On January 20, 2016, the Company entered into a promissory convertible note with Capital Communications LLC for up to $300,000 which was funded in tranches of $50,000 for each of the six months thereafter.  Accordingly, on January 26, 2016, February 26, 2016, March 31, 2016, April 29, 2016, June 10, 2016 and July 7, 2016, the Company received proceeds for an aggregate total of $300,000 from Capital Communications LLC. The note has an annual interest rate of 10% and is secured by the Company's business equipment. The principal amount of the note, and all accrued interest is due and payable on or before December 31, 2016 and each note has a conversion feature for restricted common shares at $0.06 per share.

 

The fair value of the common stock at the date of the January 26, 2016 advance was $0.08, establishing an intrinsic value of $0.02, which created a Beneficial Conversion Feature (“BCF”) of $16,500.  The BCF was recorded as a debt discount and is being amortized over the life of the note.  The debt discount remaining as of December 31, 2016 was $0.

 

The fair value of the common stock at the date of the February 26, 2016 advance was $0.10, establishing an intrinsic value of $0.04, which created a BCF of $29,167.  The BCF was recorded as a debt discount and is being amortized over the life of the note.  The debt discount remaining as of December 31, 2016 was $0.

 

The fair value of the common stock at the date of the March 31, 2016 advance was $0.07, creating an intrinsic value of $0.01, which created a BCF of $5,333.  The BCF was recorded as a debt discount and is being amortized over the life of the note.  The debt discount remaining as of December 31, 2016 was $0.

 

Since the fair value of the common stock at the date of the April 29, 2016 advance was $0.05, no BCF was recorded.

 

The fair value of the common stock at the date of the June 10, 2016 advance was $0.07, establishing an intrinsic value of $0.01, which created a BCF of $5,750.  The BCF was recorded as a debt discount and is being amortized over the life of the note.  The debt discount remaining as of December 31, 2016 was $0.

 

The fair value of the common stock at the date of the July 7, 2016 advance was $0.09, creating an intrinsic value of $0.03, which created a BCF of $21,333.  The BCF was recorded as a debt discount and is being amortized over the life of the note.  The debt discount remaining as of December 31, 2016 was $0.

 

The Company entered into a new convertible promissory note for up to $300,000 from a third party on July 1, 2016.  The note has an annual interest rate of 10% and is secured by the Company’s equipment.  The note has a conversion feature for restricted common shares at $0.07 per share and a maturity date of December 31, 2016.  The Company drew $40,000 against that note on August 11, 2016, $40,000 on September 23, 2016, $40,000 on November 1, 2016, and $40,000 on December 1, 2016.

 

The fair value of the common stock at the date of the August 11, 2016 advance was $0.16, establishing an intrinsic value of $0.09, which created a BCF of $40,000.  The BCF was recorded as a debt discount and is being amortized over the life of the note.  The debt discount remaining as of December 31, 2016 was $0.

 

The fair value of the common stock at the date of the September 23, 2016 advance was $0.08, establishing an intrinsic value of $0.01, which created a BCF of $4,971.  The BCF was recorded as a debt discount and is being amortized over the life of the note. The debt discount remaining as of December 31, 2016 was $0.

 

The fair value of the common stock at the date of the November 1, 2016 advance was $0.08, establishing an intrinsic value of $0.01, which created a BCF of $5,657.  The BCF was recorded as a debt discount and is being amortized over the life of the note. The debt discount remaining as of December 31, 2016 was $0.

 

The fair value of the common stock at the date of the December 1, 2016 advance was $0.08, establishing an intrinsic value of $0.01, which created a BCF of $7,429.  The BCF was recorded as a debt discount and is being amortized over the life of the note. The debt discount remaining as of December 31, 2016 was $0.

 

At December 31, 2016, the principal balance of convertible notes payable was $1,184,660 the unamortized discount was $0 and interest accrued and unpaid was $118,055.  The Company recorded interest expense of $1,006,543 during the year ended December 31, 2016 as it amortized the discount charges generated by the issuance of convertible notes payable.

 

On November 21, 2016, the Board of Directors approved the conversion of $123,797 in convertible notes held by Liberty Partners, LLC, plus $12,821 in interest accrued and unpaid, to 2,700,000 shares of restricted common stock at an average conversion price of approximately $0.05 per share.  On November 22, 2016, the Board of Directors approved the conversion of $160,000 in convertible notes held by Compass Equity Partners, LLC, plus $38,400 in interest accrued and unpaid, to 3,950,000 shares of restricted common stock at an average conversion price of approximately $0.05 per share.  

 

Convertible Note Payable Related Parties

 

On July 1, 2016 and September 22, 2016, the Company issued two promissory notes for $10,000 each to an officer of the Company.  The notes bear interest at the rate of 10%, have a conversion feature for restricted common shares at $0.07 per share and a maturity date of December 31, 2016.

 

Since the fair value of the common stock at the date of the July 1, 2016 advance was $0.07, no BCF was recorded.

 

The fair value of the common stock at the date of the September 22, 2016 advance from an officer was $0.08, establishing an intrinsic value of $0.01, which created a BCF of $1,286.  The BCF was recorded as a debt discount and is being amortized over the life of the note.  The debt discount remaining as of December 31, 2016 was $0.

 

At December 31, 2016 the Convertible Notes Payable Related Parties principal was $20,000, the unamortized discount was $0 and interest accrued and unpaid was $621.  The Company recorded interest expense of $1,907 during the year ended December 31, 2016 as it amortized the discount charges generated by the issuance of convertible notes payable.

 

Due to the Company’s lack of authorized shares necessary to settle these convertible instruments, in accordance with ASC 815-40-25, the Company determined that the conversion features related to these notes are derivative instruments since we do not have control to increase the number of authorized shares to settle these convertible instruments. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of the Notes and to fair value as of each subsequent reporting date. At the inception of the Note, the Company determined the fair value of the derivatives were $40,892. The fair value of the embedded derivatives were determined using the Binominal Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 116.02% to 143.14%, (3) weighted average risk-free interest rate of 0..18% to 0.85% (4) expected life of 0.08 to 1.00 years, and (5) the quoted market price of the Company’s common stock at each valuation date.

 

The determined fair value of the aggregate derivatives of $40,892 was charged as a debt discount up to the net proceeds of the notes. For the year ended December 31, 2016, the Company amortized $40,892 of debt discount to current period operations as interest expense.

CAPITAL STOCK
12 Months Ended
Dec. 31, 2016
Stockholders' Equity Note [Abstract]  
CAPITAL STOCK

NOTE 8 CAPITAL STOCK

 

Preferred Stock – There are 1,000,000 shares of preferred stock with a par value of $0.001 per share authorized.  At December 31, 2016 and 2015, there were no shares of preferred stock issued or outstanding.

 

Common Stock – There are 100,000,000 shares of common stock with a par value of $0.001 per share authorized.  During the year ended December 31, 2016, there were 6,736,350 shares of common stock issued.  During the year ended December 31, 2015, there were 18,250,000 shares of common stock issued.  

 

On January 12, 2015, the Board of Directors approved the conversion of $165,000 in convertible notes held by Capital Communications LLC, plus $33,023 in interest accrued and unpaid, to 2,800,000 shares of restricted common stock at an average conversion price of $0.07 per share

 

On January 20, 2015, the Board of Directors approved the conversion of $135,000 in convertible notes held by Empire Fund Managers, plus $23,760 in interest accrued and unpaid, to 2,650,000 shares of restricted common stock at an average conversion price of $0.06 per share.

 

In October 2015, the Board of Directors approved the issuance of 3,400,000 shares of restricted common stock to extinguish $330,000 in accrued liabilities arising from investor relations services, at an average price of $0.084 per share.

 

In November and December 2015, the Board of Directors approved the conversion of $470,000 in convertible notes to 9,400,000 shares of restricted common stock.   

 

In June 2016, the Board of Directors approved the issuance of 86,350 shares of restricted common stock to an employee to fully satisfy the terms of a stock subscription agreement.

 

In November 2016, the Board of Directors approved the conversion of $123,797 in convertible notes held by Liberty Partners, LLC, plus $12,821 in interest accrued and unpaid, to 2,700,000 shares of restricted common stock at an average price of approximately $0.05 per share.

 

In November 2016, the Board of Directors approved the conversion of $160,000 in convertible notes held by Compass Equity Partners, LLC, plus $38,400 in interest accrued and unpaid, to 3,950,000 shares of restricted common stock at an average price of approximately $0.05 per share.

STOCK OPTION PLANS
12 Months Ended
Dec. 31, 2016
Employee Service Share-based Compensation, Aggregate Disclosures [Abstract]  
STOCK OPTION PLANS

NOTE 9 STOCK OPTION PLANS

 

On August 25, 2005, the Board of Directors of the Company approved and adopted the 2005 Stock Incentive Plan (the Plan). The Plan became effective upon its adoption by the Board and continued in effect for ten years, terminating on August 25, 2015. This plan was approved by the stockholders of the Company at their annual meeting of shareholders on November 22, 2005. Under the Plan, the exercise price for all options issued will not be less than the average quoted closing market price of the Company’s trading common stock for the thirty day period immediately preceding the grant date plus a premium of ten percent. The maximum aggregate number of shares that may be awarded under the plan is 2,500,000 shares.  The Company continues to utilize the Black-Scholes option-pricing model for calculating the fair value of the options granted as defined by ASC Topic 718, which is an acceptable valuation approach under ASC 718. This model requires the input of subjective assumptions, including the expected price volatility of the underlying stock.

 

On August 24, 2015, the Board of Directors approved the issuance of options to purchase 2,185,000 shares of the Company’s common stock.  Of the total issued, 1,960,000 options were issued to replace options held by directors and employees which were to expire and 225,000 options were issued to new employees.  Of the options issued, 640,000 have an option price of $0.14 per share, 900,000 have an option price of $0.15 per share, 396,667 have an option price of $0.20 per share, and 33,333 have an option price of $0.25 per share.  Options issued as replacement shall have immediate vesting terms. Options which are not replacements shall vest over a two year four month period in equal installments on the last day of 2015, 2016 and 2017, respectively.  

 

Projected data related to the expected volatility and expected life of stock options is based upon historical and other information, and notably, the Company's common stock has limited trading history. Changes in these subjective assumptions can materially affect the fair value of the estimate, and therefore, the existing valuation models do not provide a precise measure of the fair value of the Company's employee stock options.

 

Between August 25, 2005 and December 31, 2016, the Company granted options to employees to purchase an aggregate 3,096,000 shares of common stock at exercise prices ranging from $0.15 to $2.07 per share.  The options vest over three years and expire 10 years from the date of grant.  The Company used the following assumptions in estimating the fair value of the options granted:

 

·

Market value at the time of issuance – Range of $0.14 to 2.07

·

Expected term – Range of 3.7 years to 10.0 years

·

Risk-free interest rate – Range of 1.60% to 4.93%

·

Dividend yield – 0%

·

Expected volatility – 200% to 424%

·

Weighted-average fair value - $0.16 to $2.07

 

As of the years ended December 31, 2005 through 2016, the Company recognized a total of $2,423,825 of stock-based compensation expense, which includes charges of $26,451 in 2016 and $248,656 in 2015, leaving $19,944 and $46,009 in unrecognized expense as of December 31, 2016 and 2015, respectively. There were 2,185,000 and 2,185,000 employee stock options outstanding at December 31, 2016 and 2015, respectively.  

 

A summary of all employee options outstanding and exercisable under the plan as of December 31, 2016, and changes during the year then ended is set forth below:

 

         
Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual  Life (Years) Aggregate Intrinsic Value
         
Outstanding at the beginning of period          2,185,000  $                0.16              9.66  $              --   
   Granted                      --                                 --                       --                     --   
   Expired                      --                                 --                       --                     --   
   Forfeited                      --                                 --                       --                     --   
Outstanding at the end of Period        2,185,000  $                 0.16              8.66 $             --   
Exercisable at the end of Period 1,970,000  $                 0.16              8.65     $              --

 

A summary of all employee options outstanding and exercisable under the plan as of December 31, 2015, and changes during the year then ended is set forth below:

 

         
Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual  Life (Years) Aggregate Intrinsic Value
         
Outstanding at the beginning of period          2,024,000  $                  1.10              1.65  $               --   
   Granted 2,185,000          0.16                    9.66                        --   
   Expired                      --                                  --                       --                      --   
   Forfeited (2,024,000) 1.10                    --                        --  
Outstanding at the end of Period        2,185,000  $                 0.16              9.66     $                 --     
Exercisable at the end of Period 1,755,000  $                 0.15              9.66 $                 --

 

COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 10 COMMITMENTS AND CONTINGENCIES

 

The Company currently occupies a manufacturing facility in Draper, Utah. The lease on the facility expired on December 31, 2014, at which time the Company entered into a three year extension which will expire on December 31, 2017.  Either party may terminate the lease upon 90 day written notice.  Under the terms of the lease the Company paid $8,950 per month in 2015 (the same rate as in 2014), paid $9,300 per month in 2016 and will pay $9,600 per month in 2017.

RELATED PARTY TRANSACTIONS
12 Months Ended
Dec. 31, 2016
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 11 – RELATED PARTY TRANSACTIONS

 

At December 31, 2016 and 2015, the Company had accounts payable of $1,420 and $322 to its Chief Executive Office for reimbursement of various operating expenses paid by him in the course of business.

 

On July 1, 2016 and September 22, 2016, the Company issued two promissory notes for $10,000 each to an officer of the Company.  The notes bear interest at the rate of 10%, have a conversion feature for restricted common shares at $0.07 per share and a maturity date of December 31, 2016.

REVISION OF PRIOR YEAR FINANCIAL STATEMENTS
12 Months Ended
Dec. 31, 2016
Revision Of Prior Year Financial Statements  
REVISION OF PRIOR YEAR FINANCIAL STATEMENTS

NOTE 12-REVISION OF PRIOR YEAR FINANCIAL STATEMENTS

 

The Company identified an error relating to the calculation of the gain on stock debt exchange during the year ended December, 2015. The effect of the error is to increase notes payable and net loss by $160,000 for the year ended December 31, 2015.

 

In accordance with the guidance provided by the SEC’s Staff Accounting Bulletin 99, Materiality and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements the Company has determined that the impact of adjustments relating to the correction of this accounting error are not material to previously issued annual audited consolidated financial statements.  Accordingly, these changes are disclosed herein and will be disclosed prospectively.  

 

As a result of the aforementioned correction of accounting errors, the relevant annual financial statements have been revised as follows:

Effects on financials for the Year Ended December 31, 2015:

 

       
  December 31, 2015
Consolidated Balance Sheet As Previously Reported Adjustment As Revised
       
Convertible debentures 45,105  160,000  205,105 
       
Accumulated deficit (23,969,627) (160,000) (24,129,627)
       
Total stockholders’ deficit 4,681,669 (160,000) 4,521,669

 

       
  For the Year Ended December 31, 2015
Consolidated Statement of Operations As Previously Reported Adjustment As Revised
       
Gain on stock debt exchange 316,743 (160,000) 156,743
       
Net other income (expense) (1,437,140) (160,000) (1,597,140)
Net loss for the period (2,582,030) (160,000) (2,742,030)
Loss per common share $ (0.04) $(0.01) $(0.05)
       

 

SUBSEQUENT EVENTS
12 Months Ended
Dec. 31, 2016
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 13 - SUBSEQUENT EVENTS

 

Subsequent to December 31, 2016, the Company has drawn $120,000 against the convertible note with Capital Communications, LLC dated July 1, 2016.

NATURE OF BUSINESS (Policies)
12 Months Ended
Dec. 31, 2016
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation – The accompanying consolidated financial statements include the accounts of Flexpoint Sensor Systems, Inc. and its wholly owned subsidiary, Flexpoint International,  LLC.  Intercompany transactions and accounts have been eliminated in consolidation.

Use of Estimates

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents – Cash and cash equivalents are considered to be cash and a highly liquid security with original maturities of three months or less.

Fair Value Measurements

Fair Value Measurements - The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the party’s own credit risk.

 

Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

 

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

 

The carrying value of the Company’s cash, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

 

The Company has classified the inputs used in valuing its derivative liabilities as Level 3 inputs. The Company valued its derivatives using the binomial lattice model. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed below are that of volatility and market price of the underlying common stock of the Company.

Accounts Receivable

Accounts Receivable – Trade accounts receivable are recorded at the time product is shipped or services are provided including any shipping and handling fees. Contracts associated with design and development engineering generally require a deposit of 50% of the quoted price prior to the commencement of work. The deposit is considered deferred income until the entire project is completed and accepted by the customer, at which time the entire contract price is billed to the customer and the deposit applied. The Company has established an allowance for bad debts based on a historical experience and an analysis of risk associated with the account balances.  The balance in the allowance account was $102,140 and $7,140 in the years ended December 31, 2016 and 2015, respectively.  

Inventories

Inventories – Inventories are stated at the lower of cost or market. Cost is determined by using the first in, first out (FIFO) method.  

Going Concern

Going Concern– The Company suffered losses of $2,093,184 and $2,742,030 and used cash in operating activities of $506,131 and $576,927 during the years ended December 31, 2016 and 2015, respectively.  At December 31, 2016, the Company had an accumulated deficit of $26,222,811. These matters raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

 

From 2008 through 2016 the Company raised $4,959,278 in additional capital, including accrued interest, through the issuance of long and short-term notes to related and other parties. All of the notes had an annual interest rate of 10% or 15% and were secured by the Company’s business equipment. The notes also had a conversion feature for restricted common shares ranging from $0.05 to $0.20 per share with maturity dates of December 31, 2016.  In October 2015, the Company issued 3,400,000 shares of its restricted common stock to extinguish $330,000 of accrued liabilities arising from investor relations services at an average price of $0.084 per share. In November and December of 2015, $470,000 in convertible notes were converted into 9,400,000 shares of the Company’s restricted common stock at a conversion price of $0.05 per share.  

 

In June of 2016 a stock subscription in the amount of $9,958 was converted into 86,350 shares of restricted common stock. In November of 2016, $335,018 in convertible notes and accrued interest were converted into 6,650,000 shares of restricted common stock at an average conversion price of approximately $0.05 per share.

Property and Equipment

Property and Equipment – Property and equipment are stated at cost.  Additions and major improvements are capitalized while maintenance and repairs are charged to operations.  Upon trade-in, sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized. Depreciation is computed using the straight-line method and is recognized over the estimated useful lives of the property and equipment, which range from three to ten years.

Valuation of Long-lived Assets

Valuation of Long-lived Assets – The carrying values of the Company’s long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the projected discounted cash flows. Under similar analysis no impairment charge was taken during the year ended December 31, 2016.  Impairment tests will be conducted on an annual basis and, should they indicate a carrying value in excess of fair value, additional impairment charges may be required.

Intangible Assets

Intangible Assets – Costs to obtain or develop patents are capitalized and amortized over the remaining life of the patents, and technology rights are amortized over their estimated useful lives. The Company currently has the right to several patents and proprietary technology.  Patents and technology are amortized from the date the Company acquires or is awarded the patent or technology right, over their estimated useful lives, which range from 5 to 15 years.  An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows.  Under similar analysis there was no impairment charge taken during the year ended December 31, 2016.

Research and Development

Research and Development – Research and development costs are recognized as an expense during the period incurred, which is until the conceptual formulation, design, and testing of a process is completed and the process has been determined to be commercially viable.

Goodwill

Goodwill – Goodwill represents the excess of the Company’s reorganization value over the fair value of net assets of the Company upon emergence from bankruptcy. Goodwill is not amortized, but is tested for impairment annually, or at interim periods when a triggering event occurs using a fair value approach. According to Accounting Standards Codification (or “ASC”) 350-20 Intangibles – Goodwill and Other, a fair-value-based test is applied at the overall Company level. The test compares the fair value of the Company to the carrying value of its net assets. This test requires various judgments and estimates. The fair value of the Company is allocated to the Company’s assets and liabilities based upon their fair values with the excess fair value allocated to goodwill. An impairment of goodwill is measured as the excess of the carrying amount of goodwill over the determined fair value.

Revenue Recognition

Revenue Recognition – Revenue is recognized when persuasive evidence of an arrangement exists, services have been provided or goods delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. Revenue from the sale of products is recorded at the time of shipment to the customers.  Revenue from research and development engineering contracts is recognized as the services are provided and accepted by the customer.  Revenue from contracts to license technology to others is deferred until all conditions under the contracts are met and then recognized as licensing royalty revenue over the remaining term of the contracts.  The Company does not provide extended warranties or guarantees on its products.

Stock-Based Compensation

Stock-Based Compensation – The Company recognizes the cost of employee services received in exchange for stock options and awards of equity instruments based on the grant-date fair value of such options and awards, over the period they vest.   All share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense in operations over the requisite service period. For the years ended December 31, 2016 and 2015, the Company recognized expense for stock-based compensation of $26,154 and $248,656, respectively.

Basic and Diluted Loss Per Share

Basic and Diluted Loss Per Share – Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period.  Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. At December 31, 2016 and 2015, there were outstanding common share equivalents (options and convertible notes payable) which amounted to 23,399,094 and 16,165,502, respectively, of common stock. These common share equivalents were not included in the computation of diluted loss per share as their effect would have been anti-dilutive, thereby decreasing loss per common share.

Concentrations and Credit Risk

Concentrations and Credit Risk - The Company has a few major customers who represents a significant portion of revenue, accounts receivable and notes receivable.  During the year ended December 31, 2016, a customer who manufacturers toys represented 38% of sales and represented 17% of accounts receivable.  A customer who is utilizing our technology for commercialization in shoes represented 68% of accounts receivable and 100% of notes receivable at December 31, 2016. The Company has a strong relationship with these customers and does not believe this concentration poses a significant risk, as their products are based entirely on the Company’s technologies.  The Company has the option, under one of the notes receivable, to convert the principal and interest into equity of the customer

Income Taxes

Income Taxes - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards Board Accounting Codification (ASC) 740: Income Taxes.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized.

Recent Accounting Pronouncements

Recent Accounting Pronouncements –  In October 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-16, Income Taxes (Topic 740); Intra-Entity Transfers of Assets Other Than Inventory.  This ASU requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date.  The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory.  The tax consequences were previously deferred until the asset is sold to a third part or recovered through use.  This guidance will become effective on January 1, 2018.  

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230); Classification of Certain Cash Receipts and Cash Payments.  This ASU addresses the following eight specific cash flow issues:  Debt costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle.  This guidance will become effective on January 1, 2018. We do not expect the adoption of this ASU to have a material impact on our Consolidated Financial Statements.  

 

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718); Improvements to Employee Share-Based Payments Accounting.  The ASU changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows.  This guidance will become effective January 1, 2017.  We do not expect the adoption of this ASU to have a material impact on our Consolidated Financial Statements.

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2016-02, “Leases.”  This ASU requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to current accounting treatment.  This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases.  For public business entities, this ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein.  Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.  The Company is currently evaluating the impact of this ASU on its financial statements and disclosures.

 

The Company has reviewed all other FASB-issued ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods.  The Company has carefully considered the new pronouncements that alter previous GAAP and does not believe that any new or modified principles will have a material impact on the company’s reported financial position or operations in the near term.  The applicability of any standard is subject to the formal review of the Company’s financial management and certain standards are under consideration.

DERIVATIVE INSTRUMENTS (Tables)
12 Months Ended
Dec. 31, 2016
Derivative Instruments Tables  
Schedule of Changes in Level 3 Financial Liabilities

 

           
    Total  
Balance, December 31, 2014     -
Recognition of derivative liabilities upon initial valuation     -
Change in fair value of derivative liabilities     -
Conversions of derivative liabilities into equity instruments     -
Balance, December 31, 2015     -
Recognition of derivative liabilities upon initial valuation     40,892
Change in fair value of derivative liabilities     35,403
Conversions of derivative liabilities into equity instruments     -
Balance, December 31, 2016     76,295

 

Schedule of Liabilities Measured at Fair Value on Recurring Basis

 

                               
    Level 1     Level 2     Level 3     Total
Derivative Liabilities     -       -       76,295       76,295
Total   $ -     $ -     $ 76,295     $ 76,295

 

PROPERTY AND EQUIPMENT (Tables)
12 Months Ended
Dec. 31, 2016
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment

 

       
Property and Equipment      
December  31, 2016   2015
       
Machinery and equipment $         543,249    $            532,053 
Office equipment 40,455    40,455 
Furniture and fixtures 13,470    13,470 
Software 416    416 
       
Total Property and Equipment 597,590    586,394 
       
Less: Accumulated depreciation (586,767)   (586,394)
       
Net Property and Equipment $          10,823    $                   -0- 

 

GOODWILL AND INTANGIBLE ASSETS (Tables)
12 Months Ended
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Intangible Assets

 

           
December 31, 2016 Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount
           
Patents $           173,313   $           150,427    $            22,886
Proprietary Technology 799,082   725,610    73,472
Total Amortizing Asset $           972,395   $           876,037    $            96,358
           
December 31, 2015 Gross Carrying Amount   Accumulated Amortization   Net Carrying Amount
           
Patents $             173,313   $            134,153    $            39,160
Proprietary Technology 799,082   658,950    140,132
Total Amortizing Asset $             972,395   $            793,103    $          179,292

 

INCOME TAXES (Tables)
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Schedule of Deferred Tax Asset

 

     
December 31, 2016 2015
Operating loss carry forwards $            8,062,514 $           8,131,464 
Origination and amortization of interest on convertible notes 840,044 526,453 
Allowance for doubtful accounts 61,814
Change in derivative liabilities                      12,037                               - 
Options issued for services 646,764 637,872
Total Deferred Tax Assets $           9,623,173  $           9,295,789 
Valuation allowance (9,623,173) (9,295,789)
Net Deferred Tax Asset $                         -- $                         --

 

Schedule of Effective Income Tax Rate Reconciliation

     
     
For the Years Ended December 31, 2016 2015
Tax at statutory rate (34%) $          (711,683) $          (877,090)
Options issued for services 8,892 84,543 
Origination and amortization of  interest on convertible notes 313,591  500,936 
Allowance for doubtful accounts 61,814 -
Change in derivative liabilities               12,037                      -
Change in valuation allowance (315,348) (292,411)
Provision for Income Taxes $                      --  $                     -- 

 

STOCK OPTION PLANS (Tables)
12 Months Ended
Dec. 31, 2016
Employee Service Share-based Compensation, Aggregate Disclosures [Abstract]  
Schedule of Stock Option Activity

 

         
Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual  Life (Years) Aggregate Intrinsic Value
         
Outstanding at the beginning of period          2,185,000  $                0.16              9.66  $              --   
   Granted                      --                                 --                       --                     --   
   Expired                      --                                 --                       --                     --   
   Forfeited                      --                                 --                       --                     --   
Outstanding at the end of Period        2,185,000  $                 0.16              8.66 $             --   
Exercisable at the end of Period 1,970,000  $                 0.16              8.65     $              --

 

A summary of all employee options outstanding and exercisable under the plan as of December 31, 2015, and changes during the year then ended is set forth below:

 

         
Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual  Life (Years) Aggregate Intrinsic Value
         
Outstanding at the beginning of period          2,024,000  $                  1.10              1.65  $               --   
   Granted 2,185,000          0.16                    9.66                        --   
   Expired                      --                                  --                       --                      --   
   Forfeited (2,024,000) 1.10                    --                        --  
Outstanding at the end of Period        2,185,000  $                 0.16              9.66     $                 --     
Exercisable at the end of Period 1,755,000  $                 0.15              9.66 $                 --

 

REVISION OF PRIOR YEAR FINANCIAL STATEMENTS (Tables)
12 Months Ended
Dec. 31, 2016
Revision Of Prior Year Financial Statements Tables  
Schedule of Effects on Financials

 

       
  December 31, 2015
Consolidated Balance Sheet As Previously Reported Adjustment As Revised
       
Convertible debentures 45,105  160,000  205,105 
       
Accumulated deficit (23,969,627) (160,000) (24,129,627)
       
Total stockholders’ deficit 4,681,669 (160,000) 4,521,669

 

       
  For the Year Ended December 31, 2015
Consolidated Statement of Operations As Previously Reported Adjustment As Revised
       
Gain on stock debt exchange 316,743 (160,000) 156,743
       
Net other income (expense) (1,437,140) (160,000) (1,597,140)
Net loss for the period (2,582,030) (160,000) (2,742,030)
Loss per common share $ (0.04) $(0.01) $(0.05)
       

 

NATURE OF BUSINESS (Details) - USD ($)
1 Months Ended 2 Months Ended 12 Months Ended 108 Months Ended
Nov. 30, 2016
Jun. 30, 2016
Oct. 31, 2015
Dec. 31, 2015
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2016
Sep. 22, 2016
Jul. 01, 2016
Nature Of Business [Line Items]                  
Accounts receivable, allowance for bad debts       $ 7,140 $ 102,140 $ 7,140 $ 102,140    
Net loss         2,093,184 2,742,030      
Cash used in operating activities         506,131 576,927      
Accumulated deficit       24,129,627 26,222,811 24,129,627 26,222,811    
Proceeds from notes payable - related parties         20,000 $ 4,959,278    
Conversion of note payable, conversion price per share               $ 0.07 $ 0.07
Impairment of intangible assets                
Stock-based compensation expense for employees         $ 26,154 $ 248,656      
Anti-dilutive securities excluded from computation of earnings per share amount         23,399,094 16,165,502      
Loss on extinguishment of the debt         $ (915) $ (168,286)      
Minimum [Member]                  
Nature Of Business [Line Items]                  
Debt instrument, interest rate         10.00%   10.00%    
Conversion of note payable, conversion price per share         $ 0.05   $ 0.05    
Intangible assets, useful lives         5 years        
Property and equipment, useful life         3 years        
Maximum [Member]                  
Nature Of Business [Line Items]                  
Debt instrument, interest rate         15.00%   15.00%    
Conversion of note payable, conversion price per share         $ 0.20   $ 0.20    
Intangible assets, useful lives         15 years        
Property and equipment, useful life         10 years        
Sales [Member] | Customer One [Member]                  
Nature Of Business [Line Items]                  
Risk percentage         38.00%        
Accounts Receivable [Member] | Customer One [Member]                  
Nature Of Business [Line Items]                  
Risk percentage         17.00% 68.00%      
Notes Receivable [Member] | Customer One [Member]                  
Nature Of Business [Line Items]                  
Risk percentage         100.00%        
Restricted Stock [Member]                  
Nature Of Business [Line Items]                  
Convertible debt, amount converted $ 335,018 $ 9,958   $ 470,000          
Shares issued from conversion of convertible debt 6,650,000 86,350   9,400,000          
Common stock, price per share $ 0.05   $ 0.084 $ 0.05   $ 0.05      
Shares issued in settlement of accrued liabilities, shares     3,400,000            
Accrued liabilities extinguished from issuance of restricted common stock     $ 330,000            
NOTES RECEIVABLE (Details) - USD ($)
12 Months Ended
Apr. 09, 2013
Dec. 31, 2016
Legal Proceedings [Line Items]    
Payment for note receivable   $ 51,157
Maturity date   Apr. 01, 2015
Conversion right, ownership percentage   5.00%
Notes Receivable One [Member] | Bend Tech LLC [Member]    
Legal Proceedings [Line Items]    
Allowance of notes receivables   $ 54,993
Notes Receivable One [Member] | Mr. deGreef [Member]    
Legal Proceedings [Line Items]    
Allowance of notes receivables   $ 31,813
Notes Receivable One [Member] | Settled Litigation [Member] | R&D Products, LLC [Member]    
Legal Proceedings [Line Items]    
Interest rate 10.00%  
Notes receivable $ 25,000  
DERIVATIVE INSTRUMENTS (Narrative) (Details) - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Derivative liabilities $ 76,295
Loss on change in fair value of derivative liabilities $ (35,403)
Derivative Classification [Member]    
Dividend yield 0.00%  
Derivative Classification [Member] | Minimum [Member]    
Expected volatility 116.02%  
Risk-free interest rate 0.18%  
Expected life 9 months 18 days  
Derivative Classification [Member] | Maximum [Member]    
Expected volatility 143.14%  
Risk-free interest rate 0.85%  
Expected life 1 year  
DERIVATIVE INSTRUMENTS (Schedule of Changes in Level 3 Financial Liabilities) (Details) - Derivative Financial Instruments, Liabilities [Member] - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Balance
Recognition of derivative liabilities upon initial valuation 40,892
Change in fair value of derivative liabilities 35,403
Conversions of derivative liabilities into equity instruments
Balance $ 76,295
DERIVATIVE INSTRUMENTS (Schedule of Liabilities Measured at Fair Value on Recurring Basis) (Details) - Fair Value, Measurements, Recurring [Member]
Dec. 31, 2016
USD ($)
Liabilities, fair value $ 76,295
Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value 76,295
Level 1 [Member]  
Liabilities, fair value
Level 1 [Member] | Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value
Level 2 [Member]  
Liabilities, fair value
Level 2 [Member] | Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value
Level 3 [Member]  
Liabilities, fair value 76,295
Level 3 [Member] | Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value $ 76,295
PROPERTY AND EQUIPMENT (Details) - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Property and Equipment    
Total Property and Equipment $ 597,590 $ 586,394
Less: Accumulated depreciation (586,767) (586,394)
Net Property and Equipment 10,823
Depreciation 373
Impairment of long-lived assets
Minimum [Member]    
Property and Equipment    
Property and equipment, estimated useful lives 3 years  
Maximum [Member]    
Property and Equipment    
Property and equipment, estimated useful lives 10 years  
Machinery and Equipment [Member]    
Property and Equipment    
Total Property and Equipment $ 543,249 532,053
Office Equipment [Member]    
Property and Equipment    
Total Property and Equipment 40,455 40,455
Furniture and Fixtures [Member]    
Property and Equipment    
Total Property and Equipment 13,470 13,470
Software [Member]    
Property and Equipment    
Total Property and Equipment $ 416 $ 416
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Components of Intangible Assets    
Gross Carrying Amount $ 972,395 $ 972,395
Accumulated Amortization 876,037 793,103
Net Carrying Amount 96,358 179,292
Amortization expense 82,934 101,389
Estimated aggregate amortization expense:    
2017 45,798  
2018 30,290  
2019 20,270  
Goodwill impairment  
Patents [Member]    
Components of Intangible Assets    
Gross Carrying Amount 173,313 173,313
Accumulated Amortization 150,427 134,153
Net Carrying Amount 22,886 39,160
Amortization expense 16,274 19,789
Proprietary Technology [Member]    
Components of Intangible Assets    
Gross Carrying Amount 799,082 799,082
Accumulated Amortization 725,610 658,950
Net Carrying Amount 73,472 140,132
Amortization expense $ 66,660 $ 81,600
INCOME TAXES (Narrative) (Details) - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Income Tax Disclosure [Abstract]    
Federal and state net operating loss carry forwards $ 22,742,451 $ 21,796,597
Net operating loss carryforwards, expiration dates Dec. 31, 2020  
Interest and penalties expense from unrecognized tax benefits
Accrued interest and penalties for unrecognized tax benefits
INCOME TAXES (Schedule of Deferred Tax Assets) (Details) - USD ($)
Dec. 31, 2016
Dec. 31, 2015
Deferred tax assets, net:    
Operating loss carry forwards $ 8,062,514 $ 8,131,464
Origination and amortization of interest on convertible notes 840,044 526,453
Allowance for doubtful accounts 61,814
Change in derivative liabilities 12,037  
Options issued for services 646,764 637,872
Total Deferred Tax Assets 9,623,173 9,295,789
Valuation allowance (9,623,173) (9,295,789)
Net Deferred Tax Asset
INCOME TAXES (Schedule of Effective Income Tax Rate Reconciliation) (Details) - USD ($)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Effective income tax rate reconciliation:    
Tax at statutory rate (34%) $ (711,683) $ (877,090)
Options issued for services 8,892 84,543
Origination and amortization of interest on convertible notes 313,591 500,936
Allowance for doubtful accounts 61,814
Change in derivative liabilities 12,037
Change in valuation allowance (315,348) (292,411)
Provision for Income Taxes
CONVERTIBLE NOTES PAYABLE (Details) - USD ($)
1 Months Ended 6 Months Ended 12 Months Ended
Jul. 01, 2016
Jan. 20, 2016
Dec. 31, 2016
Nov. 30, 2016
Nov. 22, 2016
Nov. 21, 2016
Sep. 30, 2016
Sep. 22, 2016
Aug. 31, 2016
Jul. 31, 2016
Jun. 30, 2016
Mar. 31, 2016
Feb. 26, 2016
Jan. 26, 2016
Jul. 07, 2016
Dec. 31, 2016
Dec. 31, 2015
Dec. 01, 2016
Nov. 01, 2016
Sep. 23, 2016
Aug. 11, 2016
Apr. 29, 2016
Debt Instrument [Line Items]                                            
Debt instrument, face amount $ 10,000             $ 10,000                            
Interest rate 10.00%             10.00%                            
Debt instrument, maturity date Dec. 31, 2016             Dec. 31, 2016                            
Proceeds from borrowings under convertible note payable                               $ 460,000 $ 590,000          
Interest expense                               1,006,543            
Convertible notes payable, balance     $ 1,184,660                         1,184,660            
Beneficial conversion feature                               118,083 2,287,505          
Discount balance     0                         0 763,352          
Accrued interest     $ 118,055                         118,055            
Debt instrument, conversion price $ 0.07             $ 0.07                            
Loss on extinguishment of the debt                               $ (915) (168,286)          
Liberty Partners, LLC [Member]                                            
Debt Instrument [Line Items]                                            
Conversion of convertible notes, amount       $ 123,797   $ 123,797                                
Conversion of convertible notes, interest accrued and unpaid, amount       $ 12,821   $ 12,821                                
Conversion of convertible notes, shares issued       2,700,000   2,700,000                                
Debt instrument, conversion price       $ 0.05   $ 0.05                                
Compass Equity Partners, LLC [Member]                                            
Debt Instrument [Line Items]                                            
Conversion of convertible notes, amount         $ 160,000                                  
Conversion of convertible notes, interest accrued and unpaid, amount         $ 38,400                                  
Conversion of convertible notes, shares issued         3,950,000                                  
Debt instrument, conversion price         $ 0.05                                  
Minimum [Member]                                            
Debt Instrument [Line Items]                                            
Debt instrument, interest rate     10.00%                         10.00%            
Debt instrument, conversion price     $ 0.05                         $ 0.05            
Maximum [Member]                                            
Debt Instrument [Line Items]                                            
Debt instrument, interest rate     15.00%                         15.00%            
Debt instrument, conversion price     $ 0.20                         $ 0.20            
Convertible Notes Payable to Related Party [Member]                                            
Debt Instrument [Line Items]                                            
Debt instrument, face amount     $ 40,000                         $ 40,000            
Debt instrument, issuance date                               Aug. 08, 2011            
Debt instrument, maturity date                               Dec. 31, 2015            
Debt instrument, interest rate     10.00%                         10.00%            
Debt instrument, default rate     15.00%                         15.00%            
Interest expense                               $ 1,907            
Convertible notes payable, balance     $ 20,000                         20,000            
Discount balance     0                         0            
Accrued interest     $ 621                         $ 621            
2015 Various Convertible Notes [Member]                                            
Debt Instrument [Line Items]                                            
Debt instrument, face amount                                 $ 590,000          
Debt instrument, interest rate                                 10.00%          
Debt instrument, default rate                                 15.00%          
2015 Various Convertible Notes [Member] | Minimum [Member]                                            
Debt Instrument [Line Items]                                            
Debt instrument, conversion price                                 $ 0.025          
2015 Various Convertible Notes [Member] | Maximum [Member]                                            
Debt Instrument [Line Items]                                            
Debt instrument, conversion price                                 $ 0.07          
Notes Payable Third Parties [Member]                                            
Debt Instrument [Line Items]                                            
Debt instrument, face amount                   $ 300,000             $ 51,000          
Debt instrument, issuance date                   Jul. 01, 2016                        
Debt instrument, maturity date                   Dec. 31, 2016                        
Debt instrument, interest rate                   10.00%             10.00%          
Debt instrument, default rate                                 15.00%          
Debt instrument, collateral amount                                 $ 51,157          
Debt instrument, conversion price                   $ 0.07                        
Drew amount of note                                   $ 40,000 $ 40,000 $ 40,000 $ 40,000  
New Convertible Notes Payable One [Member]                                            
Debt Instrument [Line Items]                                            
Debt instrument, face amount                                 $ 684,660          
Debt instrument, maturity date                                 Dec. 31, 2016          
Debt instrument, interest rate                                 10.00%          
Debt instrument, default rate                                 15.00%          
Debt instrument, conversion price                                 $ 0.05          
New Convertible Notes Payable Two [Member]                                            
Debt Instrument [Line Items]