10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2016

or

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

For the transition period from                                                          to                                                    

Commission file number 001-08696

 

CALMARE THERAPEUTICS INCORPORATED
(Exact name of registrant as specified in its charter) www.calmaretherapeutics.com
Delaware	36-2664428
(State or other jurisdiction of incorporation or organization)	(I. R. S. Employer Identification No.)
1375 Kings Highway East, Suite 400 Fairfield, Connecticut 06824
(Address of principal executive offices)

(203) 368-6044

(Registrant’s telephone number, including area code)

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

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

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.

Yes x No ¨

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

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

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

Yes ¨ No x

The number of shares of the registrant’s common stock outstanding as of June 30, 2016 was 28,787,831 shares.

CALMARE THERAPEUTICS INCORPORATED

INDEX TO QUARTERLY REPORT ON FORM 10-Q

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Interim Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets at June 30, 2016 (unaudited) and December 31, 2015	3
	Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2016 and June 30, 2015	4-5
	Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the six months ended June 30, 2016 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2016 and June 30, 2015	7
	Notes to Condensed Consolidated Interim Financial Statements (unaudited)	8-25
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25-34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	36
Item 6.	Exhibits	36
Signatures		37

2

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Interim Financial Statements

CALMARE THERAPEUTICS INCORPORATED AND SUBSIDIARY

Condensed Consolidated Balance Sheets

	June 30, 2016			December 31, 2015
	(Unaudited)
Assets
Current Assets:
Cash	$	64,548		$	49,801
Receivables, net of allowance of $317,659 at both June 30, 2016 and December 31, 2015		8,235			33,081
Inventory		3,998,220			4,028,220
Prepaid expenses and other current assets		21,346			58,034
Total current assets		4,092,349			4,169,136
Property and equipment, net		15,463			23,726
Security deposits		15,000			15,000
TOTAL ASSETS	$	4,122,812		$	4,207,862
Liabilities and Shareholders' Deficit
Current Liabilities:
Accounts payable	$	1,639,868		$	1,895,382
Liabilities under claims purchase agreement		1,995,320			1,995,320
Accounts payable, GEOMC		4,182,380			4,182,380
Accrued expenses and other liabilities		2,668,810			2,248,024
Notes payable		5,180,567			3,785,063
Deferred revenue		6,400			6,400
Series C convertible preferred stock derivative liability		88,979			66,177
Series C convertible preferred stock liability		375,000			375,000
Total current liabilities		16,137,324			14,553,746
Note payable – long-term		-			67,919
Commitments and Contingencies
Shareholders’ deficit:
5% preferred stock, $25 par value, 35,920 shares authorized, 2,427 shares issued and outstanding		60,675			60,675
Series B preferred stock, $0.001 par value, 20,000 shares authorized, no shares issued and outstanding		-			-
Series C convertible preferred stock, $1,000 par value, 750 shares authorized, 375 shares issued and outstanding		-			-
Common stock, $.01 par value, 100,000,000 shares authorized, 28,787,831 shares issued and outstanding at June 30, 2016 and 28,515,888 shares issued and outstanding at December 31, 2015		287,877			285,158
Capital in excess of par value		48,997,725			48,611,413
Accumulated deficit		(61,360,789	)		(59,371,049	)
Total shareholders’ deficit		(12,014,512	)		(10,413,803	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	4,122,812		$	4,207,862

See accompanying notes

3

PART I. FINANCIAL INFORMATION (Continued)

CALMARE THERAPEUTICS INCORPORATED AND SUBSIDIARY

Condensed Consolidated Statements of Operations

(Unaudited)

	Three months ended			Three months ended
	June 30, 2016			June 30, 2015
Revenue
Product sales	$	195,000		$	200,000
Cost of product sales		49,540			45,943
Gross profit from product sales		145,460			154,057
Other Revenue
Retained royalties		9,257			2,256
Other income		10,933			17,026
Total other revenue		20,190			19,282
Operating expenses
Selling expenses		56,262			43,104
Personnel and consulting expenses		417,001			366,901
General and administrative expenses		311,045			326,522
Total operating expenses		784,308			736,527
Operating loss		(618,658	)		(563,188	)
Other expense
Interest expense		470,363			204,669
Unrealized loss on derivative instruments		22,802			10,903
Total other expense		493,165			215,572
Loss before income taxes		(1,111,823	)		(778,760	)
Provision (benefit) for income taxes		-			-
Net loss	$	(1,111,823	)	$	(778,760	)
Basic and diluted loss per share	$	(0.04	)	$	(0.03	)
Basic and diluted weighted average number of common shares outstanding:		28,753,289			27,862,908

See accompanying notes

4

PART I. FINANCIAL INFORMATION (Continued)

CALMARE THERAPEUTICS INCORPORATED AND SUBSIDIARY

Condensed Consolidated Statements of Operations

(Unaudited)

	Six months ended			Six months ended
	June 30, 2016			June 30, 2015
Revenue
Product sales	$	251,250		$	207,950
Cost of product sales		73,985			48,240
Gross profit from product sales		177,265			159,710
Other Revenue
Retained royalties		9,326			4,648
Other income		24,221			25,533
Total other revenue		33,547			30,181
Operating expenses
Selling expenses		62,819			44,340
Personnel and consulting expenses		866,057			874,379
General and administrative expenses		485,944			650,161
Total operating expenses		1,414,820			1,568,880
Operating loss		(1,204,008	)		(1,378,989	)
Other expense
Interest expense		762,930			390,531
Loss on conversion of notes		-			2,588
Unrealized loss on derivative instruments		22,802			10,903
Total other expense		785,732			404,022
Loss before income taxes		(1,989,740	)		(1,783,011	)
Provision (benefit) for income taxes		-			-
Net loss	$	(1,989,740	)	$	(1,783,011	)
Basic and diluted loss per share	$	(0.07	)	$	(0.07	)
Basic and diluted weighted average number of common shares outstanding:		28,639,424			27,318,467

See accompanying notes

5

PART I. FINANCIAL INFORMATION (Continued)

CALMARE THERAPEUTICS INCORPORATED AND SUBSIDIARY

Condensed Consolidated Statement of Changes in Shareholders' Deficit

For the Six Months Ended June 30, 2016

(Unaudited)

	Preferred Stock				Common Stock				Capital					Total
	Shares outstanding		Amount		Shares outstanding		Amount		In excess of par value		Accumulated deficit			shareholders’ deficit
Balance January 1, 2016		2,427	$	60,675		28,515,888	$	285,158	$	48,611,413	$	(59,371,049	)	$	(10,413,803	)
Net loss		-		-		-		-		-		(1,989,740	)		(1,989,740	)
Common stock issued to directors		-		-		10,000		100		1,800		-			1,900
Stock option compensation expense		-		-		-		-		1,080		-			1,080
Stock grant to employee						261,943		2,619		47,150					49,769
Warrant and beneficial conversion feature on notes payable		-		-		-		-		336,282		-			336,282
Balance June 30, 2016		2,427	$	60,675		28,787,831	$	287,877	$	48,997,725	$	(61,360,789	)	$	(12,014,512	)

See accompanying notes

6

PART I. FINANCIAL INFORMATION (Continued)

CALMARE THERAPEUTICS INCORPORATED AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six months ended			Six months ended
	June 30, 2016			June 30, 2015
Cash flows from operating activities:
Net loss	$	(1,989,740	)	$	(1,783,011	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		8,263			8,363
Stock option compensation expense		1,080			24,175
Share-based compensation – common stock		1,900			2,125
Common stock and warrants issued to consultants		-			182,600
Debt discount amortization		463,867			112,069
Unrealized loss on derivative instruments		22,802			10,903
Loss on conversion of notes		-			2,588
Changes in assets and liabilities:
Receivables		24,846			1,271
Prepaid expenses and other current assets		36,688			152,442
Inventory		30,000			20,000
Accounts payable, accrued expenses and other liabilities		215,041			762,283
Deferred revenue		-			(5,905	)
Net cash used in operating activities		(1,185,253	)		(510,097	)
Cash flows from financing activities:
Proceeds from notes payable		1,200,000			257,000
Repayment of note and warrant settlement		-			(42,500	)
Proceeds from common stock and warrants		-			365,000
Net cash provided by financing activities		1,200,000			579,500
Net increase in cash		14,747			69,403
Cash at beginning of period		49,801			5,745
Cash at end of period	$	64,548		$	75,148

Supplemental disclosure of non-cash transactions:

During the six months ended June 30, 2015, the Company issued 500,000 shares with a fair value of $80,000 to an advisory firm for consulting services. The Company amortized the $80,000 over the service period and recorded $20,000 and $40,000 of expense in the quarter and six months ended June 30, 2015, respectively. 

During the quarter ended March 31, 2015, the Company issued 120,000 shares to an advisory firm for consulting services. The shares vested in two tranches, with 60,000 shares vesting in the quarter ended December 31, 2014 and remaining 60,000 shares vesting in the quarter ended March 31, 2015. The Company recorded consulting expenses of $10,800 in the quarter ended December 31, 2014 and $27,600 of consulting expenses in the quarter ended March 31, 2015. In each instance, the expense was based on the fair value on the vesting date.

During the quarter ended March 31, 2015, the Company issued 333,333 stock warrants for consulting services performed and recorded consulting expense of $75,000 for the fair value of the warrants.

During the quarter ended March 31, 2015, the Company allocated $59,480 of convertible note proceeds for the fair value of warrants and beneficial conversion feature to additional paid-in capital.

During the six months ended June 30, 2016, the Company allocated $336,282 of convertible note proceeds for the fair value of warrants and beneficial conversion feature to additional paid-in capital.

See accompanying notes

7

PART I. FINANCIAL INFORMATION (Continued)

CALMARE THERAPEUTICS INCORPORATED AND SUBSIDIARY

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited)

1. BASIS OF PRESENTATION

The interim condensed consolidated financial information presented in the accompanying condensed consolidated financial statements and notes hereto is unaudited.

Calmare Therapeutics Incorporated and its majority-owned (56.1%) subsidiary, Vector Vision, Inc., (collectively, the “Company,” "we,” “our,” or “us”), is a medical device company developing and commercializing innovative products and technologies for chronic neuropathic pain and wound care affliction patients. The Company’s flagship medical device, the Calmare^® Pain Therapy Device (the “Calmare Device”), is the world’s only non-invasive and non-addictive modality that can successfully treat chronic, neuropathic pain.

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, Vector Vision, Inc. Inter-company accounts and transactions have been eliminated in consolidation.

We believe we have made all adjustments necessary, consisting only of normal recurring adjustments, to present the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. The results for the three and six months ended June 30, 2016 are not necessarily indicative of the results that can be expected for the full year ending December 31, 2016.

The interim unaudited condensed consolidated financial statements and notes thereto, should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (“SEC”) on April 14, 2016.

During the three and six months ended June 30, 2016, we had a significant concentration of revenues from the Calmare^® Device. The percentages of gross revenue (excluding retained royalties) attributed to sales and rentals of Calmare Devices, in the three months ended June 30, 2016 and June 30, 2015, were 98% and 95%, respectively. The percentages of gross revenue (excluding retained royalties) attributed to sales and rentals of Calmare Devices, in the six months ended June 30, 2016 and June 30, 2015, were 96% and 94%, respectively. Additionally, the percentage of gross revenue (excluding retained royalties) attributed to other Calmare Device related sales of equipment and training, in the three months ended June 30, 2016 and June 30, 2015, were 2% and 5%, respectively. The percentage of gross revenue (excluding retained royalties) attributed to other Calmare Device related sales of equipment and training, in the six months ended June 30, 2016 and June 30, 2015, were 4% and 6%, respectively. We continue to attempt to expand our sales activities for the Calmare Device and expect the majority of our revenues to come from this technology.

The Company has incurred operating losses since fiscal 2006 and has a working capital deficiency and shareholders’ deficiency at June 30, 2016. The Company has taken steps to reduce its operating expenses as well as increase revenue from sales of Calmare Devices and related sales. However, even at the reduced spending levels, should the anticipated increase in revenue from sales of Calmare Devices and related sales not occur the Company may not have sufficient cash flow to fund operations through 2016 and into 2017. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include adjustments to reflect the possible future effect of the recoverability and classification of assets or amounts and classifications of liabilities that may result from the outcome of this uncertainty.

The Company's continuation as a going concern is dependent upon its developing recurring revenue streams sufficient to cover operating costs. The Company does not have any significant individual cash or capital requirements in the budget going forward. If necessary, the Company will attempt to meet anticipated operating cash requirements by further reducing costs, issuing debt and/or equity, and/or pursuing sales of certain assets and technologies while we pursue licensing and distribution opportunities for our remaining legacy portfolio of technologies. There can be no assurance that the Company will be successful in such efforts. Failure to develop a recurring revenue stream sufficient to cover operating expenses could negatively affect the Company’s financial position.

8

Our liquidity requirements arise principally from our working capital needs, including funds needed to sell our current technologies and obtain new technologies or products, and protect and enforce our intellectual property rights, if necessary. We fund our liquidity requirements with a combination of cash on hand, debt and equity financing, sales of common stock and cash flows from operations, if any, including royalty legal awards. At June 30, 2016, the Company had outstanding debt in the form of promissory notes with a total principal amount of $6,059,000 and a carrying value of $5,667,000.

2. NET LOSS PER COMMON SHARE

The following sets forth the denominator used in the calculations of basic net loss per share and net loss per share assuming dilution:

	Three months ended		Three months ended		Six months ended		Six months ended
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Denominator for basic net loss per share, weighted average shares outstanding		28,753,289		27,862,908		28,639,424		27,318,467
Dilutive effect of common stock options		N/A		N/A		N/A		N/A
Dilutive effect of Series C convertible preferred stock, convertible debt and warrants		N/A		N/A		N/A		N/A
Denominator for diluted net loss per share, weighted average shares outstanding		28,753,289		27,862,908		28,639,424		27,318,467

Due to the net loss incurred for the three and six months ended June 30, 2016, and June 30, 2015, the denominator used in the calculation of basic net loss per share was the same as that used for net loss per share, assuming dilution, since the effect of any options, convertible preferred shares, convertible debt or warrants would have been anti-dilutive.

Potentially dilutive securities outstanding are summarized as follows:

	June 30,2016		June 30, 2015
Exercise of common stock options		1,698,500		1,742,500
Exercise of common stock warrants		12,213,276		6,452,248
Conversion of Series C convertible preferred stock		1,982,816		1,329,646
Conversion of convertible debt		18,500,915		6,305,390
Total		34,395,507		15,829,784

3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, as amended by ASU 2015-14, that outlines a single comprehensive model for entities to use in accounting for revenue recognition and supersedes most current revenue recognition guidance, including industry-specific guidance. The amendments in this accounting standard update are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. The amendments in this accounting standard update are effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted after December 31, 2016. The Company is currently assessing the impact that this standard will have on its consolidated financial statements. 

9

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern, which provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and the related footnote disclosure.  For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financials are issued.  When management identifies conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, the ASU also outlines disclosures that are required in the company’s footnotes based on whether or not there are any plans intended to mitigate the relevant conditions or events to alleviate the substantial doubt.  The ASU becomes effective for annual periods ending after December 15, 2016, and for any annual and interim periods thereafter.  Early application is permitted.  The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory – Simplifying the Measurement of Inventory, which requires that inventory be measured at the lower of cost and net realizable value. Prior to the issuance of the new guidance, inventory was measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to create efficiencies for preparers. Inventory measured using the last-in, first-out (LIFO) method and the retail inventory method are not impacted by the new guidance. The ASU becomes effective for fiscal years beginning after December 15, 2016, including interim periods with those fiscal years. Early application is permitted. We do not expect the adoption to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, to increase the transparency and comparability about leases among entities. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The ASU is effective for interim and annual periods beginning after December 15, 2018, and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation Improvements to Employee Share-Based Payment Accounting, which is intended to simplify certain aspects of the accounting for share-based payments to employees. The guidance in this standard requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled rather than recording excess tax benefits or deficiencies in additional paid-in capital. The guidance in this standard also allows an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The standard becomes effective for interim and annual periods beginning after December 15, 2016, and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

4. RECEIVABLES

Receivables consist of the following:

	June 30, 2016		December 31, 2015
Calmare device sales receivable, net of allowance of $210,284 at June 30, 2016 and December 31, 2015	$	1,000	$	31,827
Royalties, net of allowance of $101,154 at June 30, 2016 and December 31, 2015		-		-
Other, net of allowance of $6,221 at June 30, 2016 and December 31, 2015		7,235		1,254
Total	$	8,235	$	33,081

10

5. AVAILABLE-FOR-SALE AND EQUITY SECURITIES

The fair value of the equity securities we held were categorized as available-for-sale securities, which were carried at a fair value of zero, consisted of shares in Security Innovation and Xion Pharmaceutical Corporation (“Xion”). The Company owns 223,317 shares of stock in the privately held Security Innovation, an independent provider of secure software located in Wilmington, MA.

In September 2009 we announced the formation of a joint venture with Xion for the commercialization of our patented melanocortin analogues for treating sexual dysfunction and obesity. The Company received 60 shares of privately held Xion Pharmaceutical Corporation common stock in June 2010. The Company currently owns 30% of the outstanding stock of Xion Pharmaceutical Corporation.

6. FAIR VALUE MEASUREMENTS

The Company measures fair value in accordance with Topic 820 of the FASB Accounting Standards Codification (“ASC”), Fair Value Measurement (“ASC 820”), which provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described as follows:

Level 1 -	Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2 -	Inputs to the valuation methodology include:
	●	Quoted prices for similar assets or liabilities in active markets;
	●	Quoted prices for identical or similar assets or liabilities in inactive markets;
	●	Inputs other than quoted prices that are observable for the asset or liability;
	●	Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 -	Inputs to the valuation methodology are unobservable and significant to the fair value measurement

The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company values its derivative liability associated with the variable conversion feature on its Series C Convertible Preferred Stock (Note 12) based on the market price of its common stock. For each reporting period the Company calculates the amount of potential common stock that the Series C Preferred Stock could convert into based on the conversion formula (incorporating market value of our common stock) and multiplies those converted shares by the market price of its common stock on that reporting date. The total converted value is subtracted by the consideration paid to determine the fair value of the derivative liability. The Company classified the derivative liability of approximately at $89,000 and $66,000 at June 30, 2016 and December 31, 2015, respectively, in Level 2 of the fair value hierarchy.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value could result in a different fair value measurement at the reporting date.

11

The carrying amounts reported in our Condensed Consolidated Balance Sheet for cash, accounts receivable, liabilities under the claims purchase agreement, accounts payable, GEOMC, notes payable, deferred revenue, and preferred stock liability approximate fair value due to the short-term maturity of those financial instruments.

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	June 30, 2016		December 31, 2015
Prepaid insurance	$	5,671	$	47,931
Other		15,675		10,103
Prepaid expenses and other current assets	$	21,346	$	58,034

8. PROPERTY AND EQUIPMENT

Property and equipment, net, consist of the following:

	June 30, 2016			December 31, 2015
Property and equipment, gross	$	220,051		$	220,051
Accumulated depreciation and amortization		(204,588	)		(196,325	)
Property and equipment, net	$	15,463		$	23,726

Depreciation and amortization expense was $4,131 and $8,263, respectively, during the three and six months ended June 30, 2016, and $3,904 and $8,363, respectively, for the three and six months ended June 30, 2015.

9. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

	June 30, 2016		December 31, 2015
Royalties payable	$	525,823	$	487,739
Accrued compensation		-		49,769
Commissions payable		57,782		15,900
Accrued interest payable		1,862,128		1,589,256
Other		223,077		105,360
Accrued expenses and other liabilities, net	$	2,668,810	$	2,248,024

Excluded above is approximately $217,000 of accrued expenses and other liabilities at June 30, 2016 and December 31, 2015, that fall under the Liability Purchase Agreement (“LPA”) with ASC Recap, LLC (“ASC Recap”), and are expected to be repaid using the process as described in Note 10.  Because there can be no assurance that the Company will be successful in completing this process, the Company retains ultimate responsibility for these liabilities, until fully paid down.

10. LIABILITIES ASSIGNED TO LIABILITY PURCHASE AGREEMENT

During the third quarter of 2013, the Company negotiated a LPA with Southridge, Partners II, L.P. (“Southridge”). The LPA takes advantage of a provision in the Securities Act of 1933, Section 3(a)(10), that allows the exchange of claims, securities, or property for stock when the arrangement is approved for fairness by a court proceeding. The process, approved by the court in August 2013, has the potential to eliminate nearly $2.1 million of the Company’s financial obligations to existing creditors who agreed to participate and executed claims purchase agreements with Southridge’s affiliate ASC Recap accounting for $2,093,303 of existing payables, accrued expenses and other current liabilities, and notes payable. The process began with the issuance in September 2013 of 1,618,235 shares of the Company’s common stock to ASC Recap. During September and October 2013, ASC Recap sold the Company’s common stock and during the three months ended March 31, 2014 paid creditors approximately $80,000 from the proceeds and retained a service fee of approximately $27,000. During 2014, the Company also made cash payments of $18,000 for accrued expenses previously included in the LPA amount. As of August 22, 2016, no further shares of the Company’s common stock had been issued to ASC Recap to settle creditors’ balances.

12

There can be no assurance that the Company will be successful in completing this process with Southridge, and the Company retains ultimate responsibility for this debt, until fully paid.

11. NOTES PAYABLE

Notes payable consist of the following:

Short term	June 30, 2016			December 31, 2015
90 day Convertible Notes (Chairman of the Board)	$	2,498,980		$	2,498,980
24 month Convertible Notes ($100,000 to Board member)		225,000			225,000
Series A-3 OID Convertible Notes and Warrants		14,353			14,353
Series B-2 OID Convertible Notes and Warrants		2,928,214			1,532,710
Short term notes payable, gross		5,666,547			4,271,043
Less LPA amount		(485,980	)		(485,980	)
Short term notes payable, net	$	5,180,567		$	3,785,063

Long term	June 30, 2016		December 31, 2015
Series B-1 OID Convertible Notes and Warrants	$	-	$	67,919

Details of notes payable as of June 30, 2016 are as follows:

Short term	Principal  Amount		Carrying Value			Cash Interest  Rate			Common  Stock  Conversion  Price		Maturity  Date
90 day Convertible Notes (Chairman of the Board)	$	2,498,980	$	2,498,980			6	%	$	1.05		Various 2014
24 month Convertible Notes ($100,000 to Board member)		225,000		225,000			6	%	$	1.05		3/2014 – 6/2014
Series A-3 OID Convertible Notes and Warrants		11,765		14,353	(1)		None		$	0.25		1/2015
Series B-2 OID Convertible Notes and Warrants		3,323,529		2,928,214			None		$	0.20 – 0.25		11/2015 – 03/2017
Short term notes payable, gross	$	6,059,274		5,666,547
Less LPA amount				(485,980	)
Short term notes payable, net			$	5,180,567

(1) Includes $2,588 of accrued loss on conversion of OID note.

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90 day Convertible Notes

The Company has issued 90-day notes payable to borrow funds from a director, now the chairman of our Board, as follows:

2013	$	1,188,980
2012		1,210,000
2011		100,000
Total	$	2,498,980

These notes have been extended several times and all bear 6.00% simple interest.  A conversion feature was added to the Notes when they were extended, which allows for conversion of the eligible principal amounts to common stock at any time after the six month anniversary of the effective date – the date the funds are received – at a rate of $1.05 per share.  Additional terms have been added to all Notes to include additional interest of 1% simple interest per month on all amounts outstanding for all Notes if extended beyond their original maturity dates and to provide the lender with a security interest in unencumbered inventory and intangible assets of the Company other than proceeds relating to the Calmare Device and accounts receivable.

Due to the Board’s February 10, 2014 decision authorizing management to nullify certain actions taken by prior management, the additional terms noted above were not approved and therefore, the additional interest for the extension of the Notes was not recorded.  During 2014, management has been in negotiations to modify the terms of the Notes. However, until those negotiations are resolved, the Company has agreed to honor the additional terms and as such, the Company recorded additional interest of approximately $207,000 and $188,000 during the six months ended June 30, 2016 and June 30, 2015, respectively, and has recorded additional interest in total of $1,214,000.

A total of $485,980 of the aforementioned notes issued between December 1, 2012 and March 31, 2013 fall under the LPA with ASC Recap, and are expected to be repaid using the process as described in Note 10.  Because there can be no assurance that the Company will be successful in completing this process, the Company retains ultimate responsibility for this debt, until fully paid down.  As a result, the Company continues to accrue interest on these notes and they remain convertible as described above.

24 month Convertible Notes

In March 2012, the Company issued a 24-month convertible promissory note to borrow $100,000. Additional 24-month convertible promissory notes were issued in April 2012 ($25,000) and in June 2012 ($100,000). All of the notes bear 6.00% simple interest. Conversion of the eligible principal amounts to common stock is allowed at any time at a rate of $1.05 per share.

As of June 30, 2016, the Company has not repaid the principal due on the March 2012 $100,000 note, the April 2012 $25,000 note or the June 2012 $100,000 note and is in default under the terms of the notes. As of June 30, 2016, there is also unpaid interest of $46,556 related to these notes.

Series A-3 Original Issue Discount Convertible Notes and Warrants

During the quarter ended March 31, 2014, the Company did a private offering of a third tranche of convertible notes and warrants, under which it issued $64,706 of convertible promissory notes for consideration of $55,000, the difference between the proceeds from the notes and principal amount consists of $9,706 of original issue discount. The notes are convertible at an initial conversion price of $0.25 per share any time after issuance thereby having an embedded beneficial conversion feature.

The note holders were also issued market-related warrants for 129,412 in shares of common stock. The warrants have an exercise price of $0.60 and a term of 2 years. The beneficial conversion feature, if any, and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

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The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of share into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		2 years
Volatility		184.88	%
Risk Free Rate		0.32	%

The proceeds of the Notes issued during the three months ended March 31, 2014 were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	32,390
Private Offering Warrants		14,845
Beneficial Conversion feature		7,765
Total	$	55,000

During the quarter ended June 30, 2014, certain holders of Series A-3 OID convertible notes and warrants delivered to the Company a notice of conversion related to the Series A-3 OID convertible notes. Due to the timing of receipt of the notices by the Company, certain Note holders (“Noteholders”) received their shares during the quarter ended June 30, 2014, while other Noteholders received or are due to receive their shares after June 30, 2014. Additionally, the Company offered certain Noteholders an inducement to convert their notes to shares. The inducement, when offered, provided Noteholders a conversion price of $0.20. All other original terms, including the warrant terms, remained the same. Upon notice of conversion and irrespective of whether the shares were delivered in the quarter ended June 30, 2014 or subsequent to June 30, 2014 to the Company: (i) accelerated and recognized as interest expense in the current period any remaining discount, and (ii) recognized a loss for the fair value of the additional shares offered as the conversion inducement.

Presented below is summary information related to the conversion:

Statement of Operations
Loss on conversion of notes	$	43,288
Accelerated interest expense	$	35,109
Balance Sheet
Shares issued as of June 30, 2014		798,825
Shares to be issued subsequent to June 30, 2014		529,415
Principal amount of notes converted	$	265,648

During the quarter ended March 31, 2015, a holder of Series A-3 OID convertible notes and warrants delivered to the Company a notice of conversion related to the Series A-3 OID convertible notes. Additionally, the Company offered the Noteholder an inducement to convert his/her notes to shares. The inducement provided the Noteholder a conversion price of $0.20. All other original terms, including the warrant terms, remained the same. Upon notice of conversion, the Company: (i) accelerated and recognized as interest expense in the current period any remaining discount, and (ii) recognized a loss for the fair value of the additional shares offered as the conversion inducement. As of June 30, 2016, the Company had not issued the shares due related to the conversion notice.

Presented below is summary information related to the conversion:

Statement of Operations
Loss on conversion of notes	$	2,588
Accelerated interest expense	$	-
Balance Sheet
Shares issued		-
Principal amount of notes converted	$	11,765

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Series B-1 Original Issue Discount Convertible Notes and Warrants

During the quarter ended March 31, 2014, the Company did a private offering of convertible notes and warrants, under which it issued $80,000 of convertible promissory notes for consideration of $65,000, the difference between the proceeds from the notes and principal amount consists of $15,000 of original issue discount. The notes are convertible at an initial conversion price of $0.35 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 185,714 in shares of common stock. The warrants have an exercise price of $0.45 and a 4-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of share into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		4 years
Volatility		151.52	%
Risk Free Rate		1.32	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	34,272
Private Offering Warrants		26,811
Beneficial Conversion feature		3,917
Total	$	65,000

The Series B-1 OID notes include an anti-dilution provision that if the Company issues more than 20 million shares of its common stock, subject to certain exceptions, the conversion price of the notes and the conversion price of the warrants would be subject to an automatic pre-determined price adjustment. During the quarter ended December 31, 2014 the Series B-1 OID noteholder and the Company agreed that this anti-dilution provision had been triggered and the Series B-1 OID note share conversion price was adjusted down to $0.23 per share, which increased the number of shares available upon conversion to 347,826. The anti-dilution provision in the Warrant changed the share purchase price downward to $0.33 per share but did not change the number of shares available under the Warrant.

As a result of the triggering of the above noted one time anti-dilution provision, the Company reallocated the proceeds of the Notes during the quarter ended December 31, 2014 as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	46,222
Private Offering Warrants		18,778
Total	$	65,000

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Series B-2 OID Convertible Notes and Warrants

During the quarter ended December 31, 2014, the Company did private offerings of convertible notes and warrants, under which it issued $358,824 of convertible promissory notes for consideration of $305,000, the difference between the proceeds from the notes and principal amount consists of $53,824 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 897,060 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of share into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		188.31	%
Risk Free Rate		0.11	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	224,679
Private Offering Warrants		57,854
Beneficial Conversion feature		22,467
Total	$	305,000

During the quarter ended June 30, 2015, a holder of Series B-2 OID convertible notes and warrants delivered to the Company a notice of conversion related to the Series B-2 OID convertible notes, with a principal amount of $5,882. In the quarter ended September 30, 2015, the Company issued 29,410 shares due related to the conversion notice.

As of June 30, 2016, the remaining notes have passed their maturity date. The Company has not repaid the amounts due on these notes and is in default under the terms of the notes.

During the quarter ended March 31, 2015, the Company did an additional private offering of convertible notes and warrants, under which it issued $302,353 of convertible promissory notes for consideration of $257,000, the difference between the proceeds from the notes and principal amount consists of $45,353 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 755,882 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term	1 year
Volatility	180.15-185.71	%
Risk Free Rate	0.18-0.22	%

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The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	197,521
Private Offering Warrants		46,097
Beneficial Conversion feature		13,382
Total	$	257,000

As of June 30, 2016, the remaining notes have passed their maturity date. The Company has not repaid the amounts due on these notes and is in default under the terms of the notes.

During the quarter ended September 30, 2015, the Company did an additional private offering of convertible notes and warrants, under which it issued $705,882 of convertible promissory notes for consideration of $600,000, the difference between the proceeds from the notes and principal amount consists of $105,882 of original issue discount. The notes are convertible at an initial conversion price of $0.25 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 1,411,764 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		171.36	%
Risk Free Rate		0.28	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	342,857
Private Offering Warrants		120,000
Beneficial Conversion feature		137,143
Total	$	600,000

During the quarter ended December 31, 2015, the Company did an additional private offering of convertible notes and warrants, under which it issued $470,588 of convertible promissory notes for consideration of $400,000, the difference between the proceeds from the notes and principal amount consists of $70,588 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 1,176,470 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

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The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		132.44	%
Risk Free Rate		0.66	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	361,991
Private Offering Warrants		38,009
Total	$	400,000

During the quarter ended March 31, 2016, the Company did an additional private offering of convertible notes and warrants, under which it issued $705,882 of convertible promissory notes for consideration of $600,000, the difference between the proceeds from the notes and principal amount consists of $105,882 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 3,529,412 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		136.24	%
Risk Free Rate		0.62	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	454,545
Private Offering Warrants		122,727
Beneficial Conversion feature		22,728
Total	$	600,000

During the quarter ended June 30, 2016, the Company did an additional private offering of convertible notes and warrants, under which it issued $705,882 of convertible promissory notes for consideration of $600,000, the difference between the proceeds from the notes and principal amount consists of $105,882 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 3,000,000 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

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The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term	1 year
Volatility	128.74-134.16	%
Risk Free Rate	0.55-0.61	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	409,174
Private Offering Warrants		111,243
Beneficial Conversion feature		79,583
Total	$	600,000

12. SHAREHOLDERS’ DEFICIENCY

Stock Option Plan

On May 2, 2011 the Company adopted and executed the Employees’ Directors’ and Consultants Stock Option Plan (the “Plan”). During the six months ended June 30, 2015, the Company granted 50,000 options to non-employee directors which were fully vested upon issuance.

We estimated the fair value of each option on the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions:

	Six months ended
	June 30, 2015
Dividend yield (1)		0.00	%
Expected volatility (2)		164.5	%
Risk-free interest rates (3)		1.61	%
Expected lives (2)		5.0 YEARS

(1)	We have not paid cash dividends on our common stock since 1981, and currently do not have plans to pay or declare cash dividends. Consequently, we used an expected dividend rate of zero for the valuations.
(2)	Estimated based on our historical experience. Volatility was based on historical experience over a period equivalent to the expected life in years.
(3)	Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the options granted.

No options were granted during the six months ended June 30, 2016. During the six months ended June 30, 2016, 300,000 options were cancelled and 40,000 options expired.

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During the three and six months ended June 30, 2016, the Company recognized expense of $7,180 and $14,360, respectively, for stock options issued to employees and realized a credit of $13,280 during the three months ended June 30, 2016 for options cancelled as a result of the January 2016 resignation of the Company’s Chief Financial Officer.

During the six months ended June 30, 2015, the Company recognized expense of $7,963 for stock options issued to directors and recognized expense of $8,106 and $16,212, respectively, for the three and six months ended June 30, 2015, for stock options issued to employees.

Preferred Stock

Holders of 5% preferred stock are entitled to receive, if, as, and when declared by the Board of Directors, out of funds legally available therefore, preferential non-cumulative dividends at the rate of $1.25 per share per annum, payable quarterly, before any dividends may be declared or paid upon or other distribution made in respect of any share of common stock. The 5% preferred stock is redeemable, in whole at any time or in part from time to time, on 30 days' notice, at the option of the Company, at a redemption price of $25. In the event of voluntary or involuntary liquidation, the holders of preferred stock are entitled to $25 per share in cash before any distribution of assets can be made to holders of common stock.

Each share of 5% preferred stock is entitled to one vote. Holders of 5% preferred stock have no preemptive or conversion rights. The preferred stock is not registered to be publicly traded.

The rights of the Series C Convertible Preferred Stock are as follows:

a) Dividend rights – The shares of Series C Convertible Preferred Stock accrue a 5% cumulative dividend on a quarterly basis and is payable on the last day of each fiscal quarter when declared by the Company’s Board. As of June 30, 2016, dividends declared were $112,548, of which $4,675 and $9,349 were declared during the three and six months ended June 30, 2016, respectively, and $93,802 have not been paid and are shown in accrued and other liabilities at June 30, 2016.

b) Voting rights – Holders of these shares of Series C Convertible Preferred Stock shall have voting rights equivalent to 1,000 votes per $1,000 par value Series C Convertible Preferred share voted together with the shares of Common Stock

c) Liquidation rights – Upon any liquidation these Series C Convertible Preferred Stock shares shall be treated as equivalent to shares of Common stock to which they are convertible.

d) Conversion rights – Holder has right to convert each share of Series C Convertible Preferred Stock at any time into shares of the Company's common stock at a conversion price for each share of common stock equal to 85% of the lower of (a) the closing market price at the date of notice of conversion or (b) the mid-point of the last bid price and the last ask price on the date of the notice of conversion. The variable conversion feature creates an embedded derivative that was bifurcated from the Series C Convertible Preferred Stock on the date of issuance and was recorded at fair value. The derivative liability will be recorded at fair value on each reporting date with any change recorded in the Statement of Operations as an unrealized (gain) loss on derivative instrument.

The Company recorded a convertible preferred stock derivative liability associated with the 375 shares of Series C Convertible Preferred Stock outstanding of $88,979 and $66,177 at June 30, 2016 and December 31, 2015, respectively.

The Company has classified the Series C Convertible Preferred Stock as a liability at June 30, 2016 and December 31, 2015 because the variable conversion feature may require the Company to settle the conversion in a variable number of its common shares.

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Common Stock

At its December 2, 2010 meeting, the CTI Board of Directors declared a dividend distribution of one right (each, a “Right”) for each outstanding share of common stock, par value $0.01, of the Company (the “Common Shares”). The dividend was payable to holders of record as of the close of business on December 2, 2010 (the “Record Date”). Issuance of the dividend may be triggered by an investor purchasing more than 20% of the outstanding shares of common stock.

On August 14, 2014 the shareholders approved an amendment to the Company’s certification of incorporation to effect up to a one-for-ten reverse stock split (the “reverse Stock Split” of the Company’s issued and authorized outstanding common stock. The Board of Directors, in its sole discretion, has discretion to implement the Reverse Stock Split. As of March 31, 2016, the Board of Directors has not implemented the Reverse Stock Split.

During the quarter ended March 31, 2015, the Company did a private offering of its common stock and warrants, for consideration of $75,000. 375,000 shares of common stock were issued at a per share price of $0.20. The common stock holders were also issued warrants to purchase 187,500 shares of common stock. The warrants have an exercise price of $0.60 and a 3-year term. The warrants were recorded to additional paid-in-capital. 

During the quarter ended March 31, 2015, the Company did a private offering of its common stock and warrants, for consideration of $500,000. 2,500,000 shares of common stock were issued at a per share price of $0.20. The common stock holders were also issued warrants to purchase 1,250,000 shares of common stock. The warrants have an exercise price of $0.60 and a 3-year term. The warrants were recorded to additional paid-in-capital. 

During the quarter ended March 31, 2015, the Company issued 500,000 shares with a fair value of $80,000 to an advisory firm for consulting services. The Company is amortizing the $80,000 over the service period and recorded $20,000 of expense in the quarter ended March 31, 2015. 

During the quarter ended March 31, 2015, the Company issued 120,000 shares to an advisory firm for consulting services. The shares vested in two tranches, with 60,000 shares vesting in the quarter ended December 31, 2014 and remaining 60,000 shares vesting in the quarter ended March 31, 2015. The Company recorded consulting expenses of $10,800 in the quarter ended December 31, 2014 and $27,600 of consulting expenses in the quarter ended March 31, 2015. In each instance, the expense was based on the fair value on the vesting date.

During the quarter ended March 31, 2015, the Company issued 333,333 stock warrants with a five year term for consulting services performed and recorded consulting expense of $75,000 for the fair value of the warrants.

During the quarter ended June 30, 2016, the Company issued 261,943 shares with a fair value of $49,769 to Conrad Mir, its President and CEO, for the remainder of his 2015 bonus and his 2015 unused accrued vacation.

On October 15, 2015 the shareholders approved an increase in the number of authorized shares of common stock from 40 million to 100 million.

The Company issued 10,000 and 12,500 shares of its common stock to non-employee directors under its Director Compensation Plan during the three months ended March 31, 2016 and 2015, respectively. The Company recorded expense of $1,900 and $2,125 for director stock compensation expense in the three months ended March 31, 2016 and 2015, respectively. No shares were issued under the Director Compensation Plan in the three months ended June 30, 2016 and June 30, 2015. Additionally, no expense was recorded in the three months ended June 30, 2016 and June 30, 2015.

13. CONTRACTUAL OBLIGATIONS AND CONTINGENCIES

As of June 30, 2016, the Company and its majority owned subsidiary, VVI, have remaining obligations, contingent upon receipt of certain revenues, to repay up to $165,788 and $199,334, respectively, in consideration of grant funding received in 1994 and 1995. The Company also is obligated to pay at the rate of 7.5% of its revenues, if any, from transferring rights to certain inventions supported by the grant funds. VVI is obligated to pay at rates of 1.5% of its net sales of supported products or 15% of its revenues from licensing supported products, if any.

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Contingencies – Litigation

Tim Conley (case pending) - On August 18, 2014, notice was issued to the Company that on June 23, 2014, Timothy Conley (the “Plaintiff”) filed a complaint against the Company, in the United States District Court for the District of Rhode Island. The complaint alleges that the Company’s former acting interim CEO, Johnnie Johnson, and Plaintiff entered into an agreement whereby the Company agreed to make payments to Plaintiff. Among other allegations, Plaintiff claims that the Company’s nonpayment to Plaintiff constitutes a breach of contract. The Company believes it has meritorious defenses to the allegations and the Company intends to vigorously defend against the litigation.

GEOMC (case pending) - On August 22, 2014, GEOMC filed a complaint against the Company in the United States District Court for the District of Connecticut. The complaint alleges that the Company and GEOMC entered into a security agreement whereby in exchange for GEOMC’s sale and delivery of the Scrambler Therapy devices (the “Devices”), the Company would grant GEOMC a security interest in the Devices. Among other allegations, GEOMC claims that the Company has failed to comply with the terms of the security agreement and seeks an order to the Court to replevy the Devices or collect damages. The Company believes it has meritorious defenses to the allegations and the Company intends to vigorously defend against the litigation. On February 4, 2016, the Company announced that it is discussing a settlement with GEOMC, however, to date, no settlement has been reached.

Summary – We may be a party to other legal actions and proceedings from time to time. We are unable to estimate legal expenses or losses we may incur, if any, or possible damages we may recover, and we have not recorded any potential judgment losses or proceeds in our financial statements to date. We record expenses in connection with these suits as incurred.

An unfavorable resolution of any or all matters, and/or our incurrence of significant legal fees and other costs to defend or prosecute any of these actions and proceedings may, depending on the amount and timing, have a material adverse effect on our consolidated financial position, results of operations or cash flows in a particular period.

The Company’s Distribution Rights, Marineo and Delta

On April 8, 2014, Mr. Giuseppe Marineo, Delta Research and Development (“Delta”), Mr. Marineo’s research company, and Delta International Services and Logistics (“DIS&L”), Delta’s commercial arm in which Mr. Marineo is the sole beneficiary of all proceeds as its founder and sole owner (collectively the “Group”), issued a press release (the “Group’s Press Release”) regarding the Company, stating that the Company did not have authority to sell, distribute and manufacture the Calmare Device as an exclusive agent of the Group. The Company issued a corporate response in a press release dated April 11, 2014 stating that the Group’s Press Release was inaccurate and has since been purged by the overseeing body of wire services. 

This issue between the Company and the Group is over the validity of a 2012 Amendment to a Sales and Representation Agreement (the “Amendment”) which, if valid and enforceable, may have compromised its rights to sell, distribute and manufacture the Calmare Device as an exclusive agent of the Group in the global marketplace, especially in the European, Middle Eastern and North African (“EMENA”) territory which was responsible for approximately 70% of gross Calmare Device sales in 2011. However, the Company believes that the Amendment is neither valid nor enforceable as it was never duly signed or authorized and subsequently deemed null and void. Therefore, the parties’ rights are determined by an earlier agreement whereby the Company still possesses the authority to sell, distribute and manufacture Calmare Devices as a world-wide exclusive agent of the Group.

On April 16, 2014, counsel for the Group (“Group Counsel”) sent a cease and desist letter (“Cease and Desist Letter”) to the Company, requesting a confirmation that the Company would no longer hold itself out as an agent of the Group permitted to sell, distribute and manufacture Calmare Devices world-wide including the EMENA territory.

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The Company responded on April 25, 2014 to the Cease and Desist Letter, disputing Group Counsel’s interpretation of the events surrounding the execution of the Amendment. At that time, the Company initiated an effort to find a reasonable and amicable resolution to the situation. To date, despite a number of attempts by the Company, the situation remains unresolved. The Company continues to properly sell and distribute Calmare Devices manufactured under the 2007 Agreement and the 2011 Amendment.

Unsigned Agreements

The Company uses two unrelated firms to provide marketing and investor relations services, CME Acuity (“CMEA”) and Legend Capital Management (“LCM”), respectively. The LCM and CMEA agreements were not signed due to an inability to come to final terms due to certain nuances in either agreement that included but were not limited to assignment of human capital and allowable performance based bonus(es). However, from the start date until June 30, 2016, the respective firms were being compensated for services rendered on a “pay-as-we go” basis (the “Arrangement”). The aforementioned Arrangement is expected to continue for the next few consecutive quarters until such time as their agreements can be consummated.

14. RELATED PARTY TRANSACTIONS

Our Board of Directors determined that when a director's services are outside the normal duties of a director, we compensate the director at the rate of $1,000 per day, plus expenses, which is the same amount we pay a director for attending a one-day Board meeting.  We classify these amounts as consulting expenses, included in personnel and consulting expenses.

As of June 30, 2016 and December 31, 2015, the Company has $357,200 and $302,500, respectively, owed in fees to current directors. All of the December 31, 2015 amount is in Accounts Payable while the June 30, 2016 amount is split $312,500 in Accounts Payable and $44,700 in Accrued Liabilities – Other.

At June 30, 2016, $2,598,980 of the outstanding Notes payable were Notes payable to related parties; $2,498,980 to the Chairman of the Board and $100,000 to another director.

Dr. Stephen J. D’Amato, the Company’s chief medical officer is also one of the managing members of Calmar Pain Relief, LLC. Calmar Pain Relief purchases from the Company electrodes for use with the Calmare Device. These electrodes are purchased at the same price as those purchased by other customers. In the first six months of 2016, purchases of electrodes by Calmar Pain Relief totaled $1,600.

Since October 15, 2015, the Company has a consulting agreement with VADM Robert T. Conway, Jr., U.S. Navy, (Ret) (the “Admiral”), a member of the Company’s Board of Directors. The agreement is for one year and includes compensation of a monthly retainer fee of $7,500 and a five year warrant to purchase 167,000 shares of common stock of the Company, fully vested on the date of issuance, at a strike price of $.60 per share with an aggregate estimated fair value of $33,734. As a result of this agreement, the Board of Directors has determined that the Admiral is no longer an independent director of the Company. As of June 30, 2016, the Company has $15,000 in consulting fees payable to the Admiral,

15. SUBSEQUENT EVENTS

On August 8, 2016, the Board of Directors approved a new series of preferred stock called Series D Convertible Preferred Stock. The Company intends to use this series of stock to raise new capital and to convert some of its existing debt to this new offering. 500,000 shares of this stock were authorized at a par value of $25.00 per share. The shares are convertible into Common Stock at 125 shares of Common Stock for each share of Series D Convertible Preferred Stock. Holders of shares of Series D Convertible Preferred Stock are entitled to receive, when, as and if declared by the Board, semi-annual dividends in the amount of $0.75 per share. Holders of shares of Series D Convertible Preferred Stock do not have any voting rights.

On August 8, 2016, the Board of Directors approved the 2016 Employees,’ Directors’ and Consultants Stock Option Plan. The Board authorized 2,500,000 shares of Common Stock as available to be granted under this Plan.

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On August 8, 2016, the Company granted 60,000 options to non-employee directors which were fully vested upon issuance. On the same day, the Company also granted 650,000 options to new employees, 75,000 options to current employees and 110,000 options to consultants. 20% of these options vest immediately and the remainder vest over a four year period. The strike price for all these options is $0.17 per share, which is the fair market value of the Company’s Common Stock at the close of business on August 8, 2016.

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

Forward-Looking Statements

Statements about our future expectations are “forward-looking statements” within the meaning of applicable Federal Securities Laws, and are not guarantees of future performance. When used in herein, the words “may,” “will,” “should,” “anticipate,” “believe,” “intend,” “plan,” “expect,” “estimate,” “approximate,” and similar expressions are intended to identify such forward-looking statements. These statements involve risks and uncertainties inherent in our business, including those set forth in Item 1A under the caption "Risk Factors," in our most recent Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission (“SEC”) on April 14, 2016, and other filings with the SEC, and are subject to change at any time. Our actual results could differ materially from these forward-looking statements. We undertake no obligation to update publicly any forward-looking statement.

Overview

Calmare Therapeutics Incorporated (the “Company”) was incorporated in Delaware in 1971 as Competitive Technologies, Inc., succeeding an Illinois corporation incorporated in 1968. Effective August 20, 2014, the Company changed its name from Competitive Technologies, Inc. to Calmare Therapeutics Incorporated. The Company and its majority-owned subsidiary, Vector Vision, Inc., (collectively, “we,” “our,” or “us”), is a medical device company developing and commercializing innovative products and technologies for chronic neuropathic pain and wound care affliction patients. The Company’s flagship medical device, the Calmare^® Pain Therapy Device (the “Calmare Device”), is the world’s only non-invasive and non-addictive modality that can successfully treat chronic, neuropathic pain.

In 2007, the Company entered into an agreement (the “2007 Agreement”) with Giuseppe Marineo (“Marineo”) and Delta Research and Development (“Delta”), Mr. Marineo’s wholly-owned company, collectively (the “Parties”), that secured the exclusive, worldwide sales and distribution rights to the science behind Calmare Pain Mitigation Therapy™ (the “Technology”). Today, this science is effectuated by the Company’s flagship medical device – the Calmare Device. Sales of our Calmare Device continue to be the major source of revenue for the Company. In 2011, the Company’s 2007 agreement was amended (the “2011 Amendment”) to extend the exclusivity rights afforded to the Company by the 2007 Agreement through March 31, 2016. The Company continues to properly sell and distribute Calmare Devices manufactured under the 2007 Agreement and the 2011 Amendment.

In July 2012, the Company and the Parties worked on a five-year extension to the 2011 Agreement (the “2012 Amendment”). However, the Company believes that the 2012 Amendment is neither valid nor enforceable as it was never duly signed or authorized and subsequently deemed null and void. Therefore, the Company’s rights are determined by the 2011 Amendment which provides the Company with the exclusive rights to manufacture and sell the Calmare Device worldwide using the Technology. The Company is negotiating an extension to the 2007 Agreement. The Company continues to properly sell and distribute Calmare Devices manufactured under the 2007 Agreement and the 2011 Amendment. (see the Company’s Distribution Rights, Marineo and Delta in Footnote 13. CONTRACTUAL OBLIGATIONS AND CONTINGENCIES and below)

In 2010, the Company became its own distributor for the Calmare Device in the U.S, contracting with 15 commissioned sales representatives. During 2011 and 2012, the Company and its representatives developed plans to increase awareness of the Calmare Device among critical medical specialties and began to implement those plans targeting specific customers and locations in 2012. Since then the Company has entered into multiple sales agreements for the Calmare Device. Sales to physicians and medical practices and to others with whom the Company had existing sales agreements continue to generate revenue for the Company. In June 15, 2010, the Company became a government contractor and was granted its first General Services Administration (“GSA”) contract (V797P-4300B) from the U.S. Veterans Administration (the “VA”) for Calmare Devices.

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Since 2010 the Company has controlled the sales process for its Calmare^® Device. We are the primary obligor, responsible for delivering devices as well as training our customer in the proper use of the Calmare Device. We deal directly with customers, setting pricing and providing training; work directly with the inventor of the technology to develop specifications and any changes thereto and to select and contract with manufacturing partners; and retain significant credit risk for amounts billed to customers. Therefore, all product sales are recorded following a gross revenue methodology.

We record in product sales the total funds earned from customers and record the costs of the Calmare device as cost of product sales, with gross profit from product sales being the result. The Technology supporting the Calmare Device has patent protection in Italy and the United States. Additional applications for patents have been filed internationally and are pending approval. The Calmare Device has CE Mark certification from the European Union as well as U.S. FDA 510(k) clearance.

The Company’s Distribution Rights, Marineo and Delta

On April 8, 2014, Mr. Giuseppe Marineo and Delta Research and Development (“Delta”), Mr. Marineo’s research company, and Delta International Services and Logistics (“DIS&L”), Delta’s commercial arm in which Mr. Marineo is the sole beneficiary of all proceeds as its founder and sole owner (collectively the “Group”), issued a press release (the “Group’s Press Release”) regarding the Company, stating that the Company did not have authority to sell, distribute and manufacture the Calmare Device as an exclusive agent of the Group. The Company issued a corporate response in a press release dated April 11, 2014 stating that the Group’s Press Release was inaccurate and has since been purged by the overseeing body of wire services.

This issue between the Company and the Group is over the validity of a 2012 Amendment to a Sales and Representation Agreement (the “Amendment”) which, if valid and enforceable, may have compromised its rights to sell, distribute and manufacture the Calmare Device as an exclusive agent of the Group in the global marketplace, especially in the European, Middle Eastern and North African (“EMENA”) territory which was responsible for approximately 70% of gross Calmare Device sales in 2011. However, the Company believes that the Amendment is neither valid nor enforceable as it was never duly signed or authorized and subsequently deemed null and void. Therefore, the parties’ rights are determined by an earlier agreement whereby the Company still possesses the authority to sell, distribute and manufacture Calmare Devices as a world-wide exclusive agent of the Group.

On April 16, 2014, counsel for the Group (“Group Counsel”) sent a cease and desist letter (“Cease and Desist Letter”) to the Company, requesting a confirmation that the Company would no longer hold itself out as an agent of the Group permitted to sell, distribute and manufacture Calmare Devices world-wide including the EMENA territory.

The Company responded on April 25, 2014 to the Cease and Desist Letter, disputing Group Counsel’s interpretation of the events surrounding the execution of the Amendment. At that time, the Company initiated an effort to find a reasonable and amicable resolution to the situation. To date, despite a number of attempts by the Company, the situation remains unresolved. The Company continues to properly sell and distribute Calmare Devices manufactured under the 2007 Agreement and the 2011 Amendment.

Presentation

All amounts in this Item 2 are rounded to the nearest thousand dollars.

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our financial condition and results of operations. This discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Notes thereto.

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Results of Operations – Three months ended June 30, 2016 vs. three months ended June 30, 2015

Summary of Results

Our net loss, for the quarter ended June 30, 2016, increased to $1,112,000 or $0.04 per basic and diluted share as compared with a net loss of $779,000 or $0.03 per basic and diluted share in the three months ended June 30, 2015. This net loss increase is primarily attributable to an increase in interest expense and a smaller increase in operating expenses.

Revenue and Gross Profit from Sales

Revenue from the sale and shipment of Calmare Devices in the three months ended June 30, 2016, decreased $5,000 to $195,000 as compared with $200,000 in the three months ended June 30, 2015.

Cost of product sales, in the three months ended June 30, 2016, increased $4,000 to $50,000 as compared with $46,000 in the three months ended June 30, 2015. This increase in cost of product sold is attributable to an understatement in excise tax due in the three months ended June 30, 2015.

Calmare Device sales, in the three months ended June 30, 2016 and June 30, 2015 were comprised of two (2) U.S. private sector sales each.

Due to the relatively long sales cycle for a Calmare Device, Calmare Device sales and related revenues and expenses can and will vary significantly from quarter to quarter.

Other Revenue

Retained royalties, in the three months ended June 30, 2016, increased $7,000 to $9,000 compared to $2,000 in the three months ended June 30, 2015. The increase is primarily the result of the timing of certain royalties that occurred in the three months ended June 30, 2016 as compared to the three months ended June 30, 2015.

Other income, for the three months ended June 30, 2016, decreased $6,000 to $11,000 as compared with $17,000 in the three months ended June 30, 2015. Other income includes:

	Three Months Ended  June 30, 2016		Three Months Ended June 30,  2015
Training payments and the sale of supplies i.e., electrodes and cables for use with Calmare Devices	$	5,000	$	11,000
Rental income from customers who were renting Calmare Devices from the Company	$	6,000	$	6,000

Expenses

Total expenses increased $324,000 or 34% to $1,277,000 in the three months ended June 30, 2016 as compared with $953,000 in the three months ended June 30, 2015.

Total operating expenses increased $47,000 or 6% to $784,000 in the three months ended June 30, 2016 as compared with $737,000 in the three months ended June 30, 2015.

Selling expenses increased 30% or $13,000 to $56,000 in the three months ended June 30, 2016 as compared with $43,000 in the three months ended June 30, 2015. This increase is the result of slightly higher commissions paid on the sales of the Devices in the second quarter of 2016 as compared to the second quarter of 2015.

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Personnel and consulting expenses, in the three months ended June 30, 2016, increased 14% or $50,000 to $417,000 as compared with $367,000 in the three months ended June 30, 2015. This increase is primarily attributable to an increase in personnel expenses reflecting new hires over the last twelve months offset by a decrease in consulting expenses.

General and administrative expenses, in the three months ended June 30, 2016, decreased 5% or $16,000 to $311,000 as compared with $327,000 in the three months ended June 30, 2015. The decrease was primarily the result of a decrease of $24,000 in corporate legal expense costs related to ongoing litigation. This decrease was offset by increases in other general and administrative expenses.

Interest expense, in the three months ended June 30, 2016, increased $265,000 or 129% to $470,000 as compared with $205,000 in the three months ended June 30, 2015 primarily as a result of the additional OID borrowings in 2015 and 2016.

Unrealized loss on derivative instruments, in the three months ended June 30, 2016, increased $12,000 or 109% to $23,000 as compared with $11,000 in the three months ended June 30, 2015. This reflects the impact of the Company’s common stock price on the Class C Preferred Stock at the end of each period.

Results of Operations – Six months ended June 30, 2016 vs. six months ended June 30, 2015

Summary of Results

Our net loss, for the six months ended June 30, 2016, increased to $1,990,000 or $0.07 per basic and diluted share as compared with a net loss of $1,783,000 or $0.07 per basic and diluted share in the six months ended June 30, 2015. This net loss increase is primarily attributable to an increase in interest expense partially offset by a decrease in operating expenses.

Revenue and Gross Profit from Sales

Revenue from the sale and shipment of Calmare Devices in the six months ended June 30, 2016, increased $43,000 to $251,000 as compared with $208,000 in the six months ended June 30, 2015.

Cost of product sales, in the six months ended June 30, 2016, increased $26,000 to $74,000 as compared with $48,000 in the six months ended June 30, 2015. This increase in cost of product sold is attributable to the increase in sales.

Calmare Device sales, in the six months ended June 30, 2016, were three (3) Calmare Devices, one to the U.S. military and two to the U. S. Private sector as compared with two (2) Devices to the U.S. private sector for the six months ended June 30, 2015.

Due to the relatively long sales cycle for a Calmare Device, Calmare Device sales and related revenues and expenses can and will vary significantly from quarter to quarter.

Other Revenue

Retained royalties, in the six months ended June 30, 2016, increased $4,000 to $9,000 compared to $5,000 for the six months ended June 30, 2015. The increase is primarily the result of the timing of certain royalties that occurred in the six months ended June 30, 2016 as compared to the six months ended June 30, 2015.

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Other income, for the six months ended June 30, 2016, decreased $2,000 to $24,000 as compared with $26,000 in the six months ended June 30, 2015. Other income includes:

	Six Months Ended June 30, 2016		Six Months Ended June 30, 2015
Training payments and the sale of supplies i.e., electrodes and cables for use with Calmare Devices	$	12,000	$	14,000
Rental income from customers who were renting Calmare Devices from the Company	$	12,000	$	12,000

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Expenses

Total expenses increased $228,000 or 12% to $2,201,000 in the six months ended June 30, 2016 as compared with $1,973,000 in the six months ended June 30, 2015.

Total operating expenses decreased $154,000 or 10% to $1,415,000 in the six months ended June 30, 2016 as compared with $1,569,000 in the six months ended June 30, 2015.

Selling expenses increased 43% or $19,000 to $63,000 in the six months ended June 30, 2016 as compared with $44,000 in the six months ended June 30, 2015. This increase is primarily the result of paying commissions on one additional Device in 2016 as compared to 2015.

Personnel and consulting expenses, in the six months ended June 30, 2016, decreased 1% or $8,000 to $866,000 as compared with $874,000 in the six months ended June 30, 2015. This slight decrease is attributable to an $139,000 decrease in consulting costs offset by a $131,000 increase in personnel expenses as a result of recent hires.

General and administrative expenses, in the six months ended June 30, 2016, decreased 25% or $164,000 to $486,000 as compared with $650,000 in the six months ended June 30, 2015. The decrease was primarily the result of a decrease of $160,000 in corporate legal expense costs related to ongoing litigation.

Interest expense, in the six months ended June 30, 2016, increased $372,000 or 95% to $763,000 as compared with $391,000 in the six months ended June 30, 2015 primarily as a result of the additional OID borrowings in 2015 and 2016.

Unrealized loss on derivative instruments, in the six months ended June 30, 2016, increased $12,000 or 109% to $23,000 as compared with $11,000 in the six months ended June 30, 2015. This reflects the impact of the Company’s common stock price on the Class C Preferred Stock at the end of each period.

Financial Condition and Liquidity

Our liquidity requirements arise principally from our working capital needs, including funds needed to sell our current technologies and obtain new technologies or products, and protect and enforce our intellectual property rights, if necessary. We fund our liquidity requirements with a combination of cash on hand, debt and equity financing, sales of common stock and cash flows from operations, if any. At June 30, 2016, the Company had outstanding debt in the form of promissory notes with a total principal amount of $6,059,000 and a carrying value of $5,667,000.

Our future cash requirements depend on many factors, including results of our operations and marketing efforts, results and costs of our legal proceedings, and our equity financing. To achieve and sustain profitability, we are implementing a corporate reengineering effort, which commenced on September 26, 2013 under the direction of the Company’s president & CEO, Mr. Conrad Mir. This plan design will change the inherent design of the current distributor network and focus on opportunities within the US Departments of Defense (the “DOD”) and Veterans Affairs (“VA”), and set out to upgrade the Company’s current U.S. Food and Drug Administration (“FDA”) clearance designation for the Calmare Device to approval. Although we cannot be certain that we will be successful in these efforts, we believe the combination of our cash on hand and revenue from executing our strategic plan will be sufficient to meet our obligations of current and anticipated operating cash requirements.

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At June 30, 2016, cash was $65,000, as compared with $50,000 at December 31, 2015. Net cash used in operating activities was $(1,185,000) for the six months ended June 30, 2016 as compared to $(510,000) for the six months ended June 30, 2015, primarily reflecting an increase in net loss and debt discount amortization offset by a decrease in non-cash equity expenses, prepaid expenses and accounts payable. There was no investing activity year to date in both 2016 and 2015. Net cash provided by financing activities was $1,200,000 for the six months ended June 30, 2016 as compared to $580,000 for the six months ended June 30, 2015, primarily as a result of the Company’s debt and equity financing activities in both periods.

We currently have the benefit of using a portion of our accumulated net operating losses (“NOLs”) to eliminate any future regular federal and state income tax liabilities. We will continue to receive this benefit until we have utilized all of our NOLs, federal and state. However, we cannot determine when and if we will be profitable enough to utilize the benefit of the remaining NOLs before they expire.

Going Concern

The Company has incurred operating losses since fiscal 2006 and has a working capital deficiency at June 30, 2016. During the three months ended June 30, 2016 and 2015, we had a significant concentration of revenues from sales of our Calmare Devices. We continue to seek revenue from new and existing technologies or products to mitigate the concentration of revenues, and replace revenues from expiring licenses on other technologies.

Although we have taken steps to significantly reduce operating expenses going forward, even at these reduced spending levels, should the anticipated increase in revenue from sales of Calmare Devices and other technologies not occur, the Company may not have sufficient cash flow to fund operations through 2016 and into 2017. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company's continuation as a going concern is dependent upon its developing recurring revenue streams sufficient to cover operating costs. The Company does not have any significant individual cash or capital requirements in the budget going forward. If necessary, the Company will meet anticipated operating cash requirements by further reducing costs, issuing debt and /or equity, and / or pursuing sales of certain assets and technologies while we pursue licensing and distribution opportunities for our remaining portfolio of technologies. There can be no assurance that the Company will be successful in such efforts. To return to and sustain profitability, we must increase our revenue through sales of our Calmare Devices and other products and services related to the Devices. Our recent contract with the U.S. Government over five years will significantly improve our revenue streams. Failure to develop a recurring revenue stream sufficient to cover operating expenses would negatively affect the Company’s financial position.

Notes Payable

Details of notes payable as of June 30, 2016 are as follows:

Short term	Principal Amount		Carrying Value			Cash Interest Rate			Common Stock Conversion Price		Maturity Date
90 day Convertible Notes (Chairman of the Board)	$	2,498,980	$	2,498,980			6	%	$	1.05		Various 2014
24 month Convertible Notes ($100,000 to Board member)		225,000		225,000			6	%	$	1.05		3/2014 – 6/2014
Series A-3 OID Convertible Notes and Warrants		11,765		14,353	(1)		None		$	0.25		1/2015
Series B-2 OID Convertible Notes and Warrants		3,323,529		2,928,214			None		$	0.20 – 0.25		11/2015 – 03/2017
Short term notes payable, gross	$	6,059,274		5,666,547
Less LPA amount				(485,980	)
Short term notes payable, net			$	5,180,567

(1) Includes $2,588 of accrued loss on conversion of OID note.

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90 day Convertible Notes

The Company has issued 90-day notes payable to borrow funds from a director, now the chairman of our Board, as follows:

2013	$	1,188,980
2012		1,210,000
2011		100,000
Total	$	2,498,980

These notes have been extended several times and all bear 6.00% simple interest.  A conversion feature was added to the Notes when they were extended, which allows for conversion of the eligible principal amounts to common stock at any time after the six month anniversary of the effective date – the date the funds are received – at a rate of $1.05 per share.  Additional terms have been added to all Notes to include additional interest 1% simple interest per month on all amounts outstanding for all Notes if extended beyond their original maturity dates and to provide the lender with a security interest in unencumbered inventory and intangible assets of the Company other than proceeds relating to the Calmare Device and accounts receivable.

Due to the Board’s February 10, 2014 decision authorizing management to nullify certain actions taken by prior management, the additional terms noted above were not approved and therefore, the additional interest for the extension of the Notes was not recorded.  During 2014, management has been in negotiations to modify the terms of the Notes. However, until those negotiations are resolved, the Company has agreed to honor the additional terms and as such, the Company recorded additional interest of approximately $207,000 during the six months ended June 30, 2016, and has recorded additional interest in total of $1,214,000.

A total of $485,980 of the aforementioned notes issued between December 1, 2012 and March 31, 2013 fall under the liabilities purchase agreement with ASC Recap, and are expected to be repaid using the process as described in Note 10.  Because there can be no assurance that the Company will be successful in completing this process, the Company retains ultimate responsibility for this debt, until fully paid down.  As a result, the Company continues to accrue interest on these notes and they remain convertible as described above.

24 month Convertible Notes

 In March 2012, the Company issued a 24-month convertible promissory note to borrow $100,000. Additional 24-month convertible promissory notes were issued in April 2012 ($25,000) and in June 2012 ($100,000). All of the notes bear 6.00% simple interest. Conversion of the eligible principal amounts to common stock is allowed at any time after at a rate of $1.05 per share.

As of June 30, 2016 the Company has not repaid the principal due on the March 2012 $100,000 note, the April 2012 $25,000 note or the June 2012 $100,000 note and is in default under the terms of the notes. As of June 30, 2016, there is also unpaid interest of $46,556 related to these notes.

Series A-3 15% Original Issue Discount Convertible Notes and Warrants

During the quarter ended March 31, 2014, the Company did a private offering of a third tranche of convertible notes and warrants, under which it issued $64,706 of convertible promissory notes for consideration of $55,000, the difference between the proceeds from the notes and principal amount consists of $9,706 of original issue discount. The notes are convertible at an initial conversion price of $0.25 per share any time after issuance thereby having an embedded beneficial conversion feature.

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The note holders were also issued market-related warrants for 129,412 (third tranche) and 958,179 (all tranches) in shares of common stock. The warrants have exercise prices that range from $0.40 to $0.60 and a term of 2 years. The beneficial conversion feature, if any, and the warrants were recorded to additional paid-in-capital. The total debt discount is amortized over the life of the notes to interest expense.

Series B-1 Original Issue Discount Convertible Notes and Warrants

During the quarter ended March 31, 2014, the Company did a private offering of convertible notes and warrants, under which it issued $80,000 of convertible promissory notes for consideration of $65,000, the difference between the proceeds from the notes and principal amount consists of $15,000 of original issue discount. The notes are convertible at an initial conversion price of $0.35 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 185,714 in shares of common stock. The warrants have an exercise price of $0.45 and a 4-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The Series B-1 OID notes include an anti-dilution provision that if the Company issues more than 20 million shares of its common stock, subject to certain exceptions, the conversion price of the notes and the conversion price of the warrants would be subject to an automatic pre-determined price adjustment. During the quarter ended December 31, 2014 the Series B-1 OID noteholder and the Company agreed that this anti-dilution provision had been triggered and the Series B-1 OID note share conversion price was adjusted down to $0.23 per share, which increased the number of shares available upon conversion to 347,826. The anti-dilution provision in the Warrant changed the share purchase price downward to $0.33 per share but did not change the number of shares available under the Warrant.

Series B-2 OID Convertible Notes and Warrants

During 2014, the Company did a private offering of convertible notes and warrants, under which it issued $358,824 of convertible promissory notes for consideration of $305,000, the difference between the proceeds from the notes and principal amount consists of $53,824 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 897,060 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

During 2015, a holder of Series B-2 OID convertible notes and warrants delivered to the Company a notice of conversion related to the Series B-2 OID convertible notes, with a principal amount of $5,882. In 2015, the Company issued 29,410 shares due related to the conversion notice.

As of December 31, 2015, the remaining notes from 2014 have passed their maturity date. The Company has not repaid the amounts due on these notes and is in default under the terms of the notes.

During 2015, the Company did several private offerings of convertible notes and warrants, under which it issued $1,478,823 of convertible promissory notes for consideration of $1,257,000, the difference between the proceeds from the notes and principal amount consists of $221,823 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 3,344,116 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

33

As of June 30, 2016, $302,353 of the notes from 2015 have passed their maturity date. The Company has not repaid the amounts due on these notes and is in default under the terms of the notes.

During the quarter ended March 31, 2016, the Company did an additional private offering of convertible notes and warrants, under which it issued $705,882 of convertible promissory notes for consideration of $600,000, the difference between the proceeds from the notes and principal amount consists of $105,882 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 3,529,412 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

During the quarter ended June 30, 2016, the Company did an additional private offering of convertible notes and warrants, under which it issued $705,882 of convertible promissory notes for consideration of $600,000, the difference between the proceeds from the notes and principal amount consists of $105,882 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 3,000,000 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

Capital requirements

The Company’s business model does not require significant capital expenditures to manufacture and distribute the Calmare Device. For 2016, we expect our capital expenditures to be less than $100,000.

Contractual Obligations and Contingencies

Contingencies  

Our directors, officers, employees and agents may claim indemnification in certain circumstances.  

Many of our license and service agreements provide that upfront license fees, license fees and/or royalties we receive are applied against amounts that our clients or we have incurred for patent application, prosecution, issuance and maintenance costs.  If we incur such costs, we expense them as incurred, and reduce our expense if we are reimbursed from future fees and/or royalties we receive.  If the reimbursement belongs to our client, we record no revenue or expense.

As of June 30, 2016, the Company and its majority-owned subsidiary, VVI, have remaining obligations, contingent upon receipt of certain revenue, to repay up to $165,788 and $199,334, respectively, in consideration of grant funding received in 1994 and 1995. The Company also is obligated to pay at the rate of 7.5% of its revenues, if any, from transferring rights to certain inventions supported by the grant funds. VVI is obligated to pay at rates of 1.5% of its net sales of supported products or 15% of its revenues from licensing supported products, if any.

Critical Accounting Estimates

There have been no significant changes in our accounting estimates described under the caption “Critical Accounting Estimates” included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual report on Form 10-K for the year ended December 31, 2015.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

34

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

Management evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2014. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized, and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of June 30, 2016.

(b) Change in Internal Controls

During the period ending June 30, 2016, there were no changes in our internal control over financial reporting during that period that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Tim Conley (case pending) - On August 18, 2014, notice was issued to the Company that on June 23, 2014, Timothy Conley (the “Plaintiff”) filed a complaint against the Company in the United States District Court for the District of Rhode Island. The complaint alleges that the Company’s former acting interim CEO, Johnnie Johnson, and Plaintiff entered into an agreement whereby the Company agreed to make payments to Plaintiff. Among other allegations, Plaintiff claims that the Company’s nonpayment to Plaintiff constitutes a breach of contract. The Company believes it has meritorious defenses to the allegations and the Company intends to vigorously defend against the litigation.

GEOMC (case pending) - On August 22, 2014, GEOMC filed a complaint against the Company in the United States District Court for the District of Connecticut. The complaint alleges that the Company and GEOMC entered into a security agreement whereby in exchange for GEOMC’s sale and delivery of the Scrambler Therapy devices (the “Devices”), the Company would grant GEOMC a security interest in the Devices. Among other allegations, GEOMC claims that the Company has failed to comply with the terms of the security agreement and seeks an order to the Court to replevy the Devices or collect damages. The Company believes it has meritorious defenses to the allegations and the Company intends to vigorously defend against the litigation. On February 4, 2016, the Company announced that it is discussing a settlement with GEOMC, however, to date, no settlement has been reached.

Item 1A. Risk Factors

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K, filed with the SEC on April 14, 2016.

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

There were no unregistered sales of the Company’s equity securities during the quarter ended June 30, 2016, that were not otherwise disclosed in a Current Report on Form 8-K.

Item 3.  Defaults Upon Senior Securities

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company. 

Item 4.  Mine Safety Disclosures

Not applicable.

35

Item 5. Other Information

There is no other information required to be disclosed under this item which was not previously disclosed.

Item 6. Exhibits

Exhibit No	Description	Filing Method
3.1	Unofficial restated certificate of incorporation of the registrant as amended to date filed.(1)	Incorporated by reference
3.2	Bylaws of the registrant as amended effective October 14, 2005.(2)	Incorporated by reference
10.1	Securities Purchase Agreement with Tonaquint, Inc. dated July 16, 2013.(3)	Incorporated by reference
10.2	Equity Purchase Agreement with Southridge Partners II, L.P. dated September 10, 2013.(4)	Incorporated by reference
31.1	Certification by the Chief Executive Officer of Calmare Therapeutics Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).	Filed herewith
31.2	Certification by the Chief Financial Officer of Calmare Therapeutics Incorporated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).	Filed herewith
32.1	Certification by the Chief Executive Officer of Calmare Therapeutics Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).	Filed herewith
32.2	Certification by the Chief Financial Officer of Calmare Therapeutics Incorporated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).	Filed herewith
101.INS	XBRL Instance Document	Filed herewith
101.SCH	XBRL Taxonomy Schema	Filed herewith
101.CAL	XBRL Taxonomy Calculation Linkbase	Filed herewith
101.DEF	XBRL Taxonomy Definition Linkbase	Filed herewith
101.LAB	XBRL Taxonomy Label Linkbase	Filed herewith
101.PRE	XBRL Taxonomy Presentation Linkbase	Filed herewith

(1)	Filed as Exhibit 4.1 to the registrant’s registration statement on Form S-8 with the SEC on April 1, 1998.
(2)	Filed as Exhibit 3.2 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on December 12, 2005.
(3)	Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on September 5, 2013.
(4)	Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on September 11, 2013.

36

SIGNATURES

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

	CALMARE THERAPEUTICS INCORPORATED
	(the registrant)
	By	/s/ Conrad Mir
		Conrad Mir
		President and Chief Executive Officer
August 22, 2016		Authorized Signer (Duly Authorized Officer and Principal Executive Officer)
	By	/s/ Thomas P. Richtarich
		Thomas P. Richtarich
		Chief Financial Officer
August 22, 2016		Authorized Signer (Duly Authorized Officer and Principal Financial Officer)

37

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Conrad Mir, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Calmare Therapeutics Incorporated;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Conrad Mir
	Conrad Mir
	Principal Executive Officer

Dated: August 22, 2016

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Thomas P. Richtarich, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Calmare Therapeutics Incorporated;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Thomas P. Richtarich
	Thomas P. Richtarich
	Principal Financial Officer

Dated: August 22, 2016

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT of 2002

In connection with the Quarterly Report of Calmare Therapeutics Incorporated (the “Company”) on Form 10-Q for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), Conrad Mir, Chief Executive Officer of the Company, certifies, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

1.	The Quarterly Report, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Conrad Mir
	Conrad Mir
	Principal Executive Officer

Dated: August 22, 2016

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT of 2002

In connection with the Quarterly Report of Calmare Therapeutics Incorporated (the “Company”) on Form 10-Q for the period ended June 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), Thomas P. Richtarich, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:

1.	The Quarterly Report, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Thomas P. Richtarich
	Thomas P. Richtarich
	Principal Financial Officer

Dated: August 22, 2016

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2016 shares
Document and Entity Information [Abstract]
Entity Registrant Name	CALMARE THERAPEUTICS Inc
Entity Central Index Key	0000102198
Document Type	10-Q
Trading Symbol	CTTC
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	28,787,831
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2016

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Current Assets:
Cash	$ 64,548	$ 49,801
Receivables, net of allowance of $317,659 at both June 30, 2016 and December 31, 2015	8,235	33,081
Inventory	3,998,220	4,028,220
Prepaid expenses and other current assets	21,346	58,034
Total current assets	4,092,349	4,169,136
Property and equipment, net	15,463	23,726
Security deposits	15,000	15,000
TOTAL ASSETS	4,122,812	4,207,862
Current Liabilities:
Accounts payable	1,639,868	1,895,382
Liabilities under claims purchase agreement	1,995,320	1,995,320
Accounts payable, GEOMC	4,182,380	4,182,380
Accrued expenses and other liabilities	2,668,810	2,248,024
Notes payable	5,180,567	3,785,063
Deferred revenue	6,400	6,400
Series C convertible preferred stock derivative liability	88,979	66,177
Series C convertible preferred stock liability	375,000	375,000
Total current liabilities	16,137,324	14,553,746
Note payable - long-term		67,919
Commitments and Contingencies
Shareholders' deficit:
Common stock, $.01 par value, 100,000,000 shares authorized, 28,787,831 shares issued and outstanding at June 30, 2016 and 28,515,888 shares issued and outstanding at December 31, 2015	287,877	285,158
Capital in excess of par value	48,997,725	48,611,413
Accumulated deficit	(61,360,789)	(59,371,049)
Total shareholders' deficit	(12,014,512)	(10,413,803)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	4,122,812	4,207,862
5% Preferred Stock [Member]
Shareholders' deficit:
Preferred stock	60,675	60,675
Total shareholders' deficit	60,675	60,675
Series B Preferred Stock [Member]
Shareholders' deficit:
Preferred stock
Series C Preferred Stock [Member]
Shareholders' deficit:
Preferred stock

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Allowance on receivables	$ 317,659	$ 317,659
Common stock, par value (in dollars per share)	$ .01	$ .01
Common stock, authorized (in shares)	100,000,000	100,000,000
Common stock, issued	28,787,831	28,515,888
Common stock, outstanding	28,787,831	28,515,888
5% Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 25	$ 25
Preferred stock, authorized	35,920	35,920
Preferred stock, issued	2,427	2,427
Preferred stock, outstanding	2,427	2,427
Series B Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized	20,000	20,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Series C Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 1,000	$ 1,000
Preferred stock, authorized	750	750
Preferred stock, issued	375	375
Preferred stock, outstanding	375	375

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue
Product sales	$ 195,000	$ 200,000	$ 251,250	$ 207,950
Cost of product sales	49,540	45,943	73,985	48,240
Gross profit from product sales	145,460	154,057	177,265	159,710
Other Revenue
Retained royalties	9,257	2,256	9,326	4,648
Other income	10,933	17,026	24,221	25,533
Total other revenue	20,190	19,282	33,547	30,181
Operating expenses
Selling expenses	56,262	43,104	62,819	44,340
Personnel and consulting expenses	417,001	366,901	866,057	874,379
General and administrative expenses	311,045	326,522	485,944	650,161
Total operating expenses	784,308	736,527	1,414,820	1,568,880
Operating loss	(618,658)	(563,188)	(1,204,008)	(1,378,989)
Other expense
Interest expense	470,363	204,669	762,930	390,531
Loss on conversion of notes				2,588
Unrealized loss on derivative instruments	22,802	10,903	22,802	10,903
Total other expense	493,165	215,572	785,732	404,022
Loss before income taxes	(1,111,823)	(778,760)	(1,989,740)	(1,783,011)
Provision (benefit) for income taxes
Net loss	$ (1,111,823)	$ (778,760)	$ (1,989,740)	$ (1,783,011)
Basic and diluted loss per share (in dollars per share)	$ (0.04)	$ (0.03)	$ (0.07)	$ (0.07)
Basic and diluted weighted average number of common shares outstanding: (in shares)	28,753,289	27,862,908	28,639,424	27,318,467

XML

Condensed Consolidated Statement of Changes in Shareholders' Deficit (Unaudited) - 6 months ended Jun. 30, 2016 - USD ($)	5% Preferred Stock [Member]	Common Stock [Member]	Capital In excess of par value [Member]	Accumulated deficit [Member]	Total
Balance at beginning at Dec. 31, 2015	$ 60,675	$ 285,158	$ 48,611,413	$ (59,371,049)	$ (10,413,803)
Balance at beginning (in shares) at Dec. 31, 2015	2,427	28,515,888
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss				(1,989,740)	(1,989,740)
Common stock issued to directors		$ 100	1,800		1,900
Common stock issued to directors (in shares)		10,000
Stock option compensation expense			1,080		1,080
Stock grant to employee		$ 2,619	47,150		49,769
Stock grant to employee (in shares)		261,943
Warrant and beneficial conversion feature on notes payable			336,282		336,282
Balance at end at Jun. 30, 2016	$ 60,675	$ 287,877	$ 48,997,725	$ (61,360,789)	$ (12,014,512)
Balance at end (in shares) at Jun. 30, 2016	2,427	28,787,831

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net loss	$ (1,989,740)	$ (1,783,011)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	8,263	8,363
Stock option compensation expense	1,080	24,175
Share-based compensation - common stock	1,900	2,125
Common stock and warrants issued to consultants		182,600
Debt discount amortization	463,867	112,069
Unrealized loss on derivative instruments	22,802	10,903
Loss on conversion of notes		2,588
Changes in assets and liabilities:
Receivables	24,846	1,271
Prepaid expenses and other current assets	36,688	152,442
Inventory	30,000	20,000
Accounts payable, accrued expenses and other liabilities	215,041	762,283
Deferred revenue		(5,905)
Net cash used in operating activities	(1,185,253)	(510,097)
Cash flows from financing activities:
Proceeds from notes payable	1,200,000	257,000
Repayment of note and warrant settlement		(42,500)
Proceeds from common stock and warrants		365,000
Net cash provided by financing activities	1,200,000	579,500
Net increase in cash	14,747	69,403
Cash at beginning of period	49,801	5,745
Cash at end of period	$ 64,548	$ 75,148

XML

BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

1. BASIS OF PRESENTATION

The interim condensed consolidated financial information presented in the accompanying condensed consolidated financial statements and notes hereto is unaudited.

Calmare Therapeutics Incorporated and its majority-owned (56.1%) subsidiary, Vector Vision, Inc., (collectively, the “Company,” "we,” “our,” or “us”), is a medical device company developing and commercializing innovative products and technologies for chronic neuropathic pain and wound care affliction patients. The Company’s flagship medical device, the Calmare^® Pain Therapy Device (the “Calmare Device”), is the world’s only non-invasive and non-addictive modality that can successfully treat chronic, neuropathic pain.

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, Vector Vision, Inc. Inter-company accounts and transactions have been eliminated in consolidation.

We believe we have made all adjustments necessary, consisting only of normal recurring adjustments, to present the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the U.S. The results for the three and six months ended June 30, 2016 are not necessarily indicative of the results that can be expected for the full year ending December 31, 2016.

The interim unaudited condensed consolidated financial statements and notes thereto, should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (“SEC”) on April 14, 2016. 

During the three and six months ended June 30, 2016, we had a significant concentration of revenues from the Calmare^® Device. The percentages of gross revenue (excluding retained royalties) attributed to sales and rentals of Calmare Devices, in the three months ended June 30, 2016 and June 30, 2015, were 98% and 95%, respectively. The percentages of gross revenue (excluding retained royalties) attributed to sales and rentals of Calmare Devices, in the six months ended June 30, 2016 and June 30, 2015, were 96% and 94%, respectively. Additionally, the percentage of gross revenue (excluding retained royalties) attributed to other Calmare Device related sales of equipment and training, in the three months ended June 30, 2016 and June 30, 2015, were 2% and 5%, respectively. The percentage of gross revenue (excluding retained royalties) attributed to other Calmare Device related sales of equipment and training, in the six months ended June 30, 2016 and June 30, 2015, were 4% and 6%, respectively. We continue to attempt to expand our sales activities for the Calmare Device and expect the majority of our revenues to come from this technology. 

The Company has incurred operating losses since fiscal 2006 and has a working capital deficiency and shareholders’ deficiency at June 30, 2016. The Company has taken steps to reduce its operating expenses as well as increase revenue from sales of Calmare Devices and related sales. However, even at the reduced spending levels, should the anticipated increase in revenue from sales of Calmare Devices and related sales not occur the Company may not have sufficient cash flow to fund operations through 2016 and into 2017. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include adjustments to reflect the possible future effect of the recoverability and classification of assets or amounts and classifications of liabilities that may result from the outcome of this uncertainty.

The Company's continuation as a going concern is dependent upon its developing recurring revenue streams sufficient to cover operating costs. The Company does not have any significant individual cash or capital requirements in the budget going forward. If necessary, the Company will attempt to meet anticipated operating cash requirements by further reducing costs, issuing debt and/or equity, and/or pursuing sales of certain assets and technologies while we pursue licensing and distribution opportunities for our remaining legacy portfolio of technologies. There can be no assurance that the Company will be successful in such efforts. Failure to develop a recurring revenue stream sufficient to cover operating expenses could negatively affect the Company’s financial position. 

Our liquidity requirements arise principally from our working capital needs, including funds needed to sell our current technologies and obtain new technologies or products, and protect and enforce our intellectual property rights, if necessary. We fund our liquidity requirements with a combination of cash on hand, debt and equity financing, sales of common stock and cash flows from operations, if any, including royalty legal awards. At June 30, 2016, the Company had outstanding debt in the form of promissory notes with a total principal amount of $6,059,000 and a carrying value of $5,667,000.

XML

NET LOSS PER COMMON SHARE

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

NET LOSS PER COMMON SHARE

2. NET LOSS PER COMMON SHARE

The following sets forth the denominator used in the calculations of basic net loss per share and net loss per share assuming dilution:

	Three months ended		Three months ended		Six months ended		Six months ended
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Denominator for basic net loss per share, weighted average shares outstanding		28,753,289		27,862,908		28,639,424		27,318,467
Dilutive effect of common stock options		N/A		N/A		N/A		N/A
Dilutive effect of Series C convertible preferred stock, convertible debt and warrants		N/A		N/A		N/A		N/A
Denominator for diluted net loss per share, weighted average shares outstanding		28,753,289		27,862,908		28,639,424		27,318,467

Due to the net loss incurred for the three and six months ended June 30, 2016, and June 30, 2015, the denominator used in the calculation of basic net loss per share was the same as that used for net loss per share, assuming dilution, since the effect of any options, convertible preferred shares, convertible debt or warrants would have been anti-dilutive.

Potentially dilutive securities outstanding are summarized as follows:

	June 30,2016		June 30, 2015
Exercise of common stock options		1,698,500		1,742,500
Exercise of common stock warrants		12,213,276		6,452,248
Conversion of Series C convertible preferred stock		1,982,816		1,329,646
Conversion of convertible debt		18,500,915		6,305,390
Total		34,395,507		15,829,784

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Jun. 30, 2016

Accounting Changes and Error Corrections [Abstract]

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, as amended by ASU 2015-14, that outlines a single comprehensive model for entities to use in accounting for revenue recognition and supersedes most current revenue recognition guidance, including industry-specific guidance. The amendments in this accounting standard update are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. The amendments in this accounting standard update are effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted after December 31, 2016. The Company is currently assessing the impact that this standard will have on its consolidated financial statements. 

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern, which provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and the related footnote disclosure.  For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financials are issued.  When management identifies conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, the ASU also outlines disclosures that are required in the company’s footnotes based on whether or not there are any plans intended to mitigate the relevant conditions or events to alleviate the substantial doubt.  The ASU becomes effective for annual periods ending after December 15, 2016, and for any annual and interim periods thereafter.  Early application is permitted.  The Company is currently assessing the impact that this standard will have on its consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory – Simplifying the Measurement of Inventory, which requires that inventory be measured at the lower of cost and net realizable value. Prior to the issuance of the new guidance, inventory was measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to create efficiencies for preparers. Inventory measured using the last-in, first-out (LIFO) method and the retail inventory method are not impacted by the new guidance. The ASU becomes effective for fiscal years beginning after December 15, 2016, including interim periods with those fiscal years. Early application is permitted. We do not expect the adoption to have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, to increase the transparency and comparability about leases among entities. The new guidance requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The ASU is effective for interim and annual periods beginning after December 15, 2018, and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation Improvements to Employee Share-Based Payment Accounting, which is intended to simplify certain aspects of the accounting for share-based payments to employees. The guidance in this standard requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled rather than recording excess tax benefits or deficiencies in additional paid-in capital. The guidance in this standard also allows an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The standard becomes effective for interim and annual periods beginning after December 15, 2016, and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures.

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RECEIVABLES

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

RECEIVABLES

4. RECEIVABLES

Receivables consist of the following:

	June 30, 2016		December 31, 2015
Calmare device sales receivable, net of allowance of $210,284 at June 30, 2016 and December 31, 2015	$	1,000	$	31,827
Royalties, net of allowance of $101,154 at June 30, 2016 and December 31, 2015		-		-
Other, net of allowance of $6,221 at June 30, 2016 and December 31, 2015		7,235		1,254
Total	$	8,235	$	33,081

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AVAILABLE-FOR-SALE AND EQUITY SECURITIES

6 Months Ended

Jun. 30, 2016

Investments, Debt and Equity Securities [Abstract]

AVAILABLE-FOR-SALE AND EQUITY SECURITIES

5. AVAILABLE-FOR-SALE AND EQUITY SECURITIES

The fair value of the equity securities we held were categorized as available-for-sale securities, which were carried at a fair value of zero, consisted of shares in Security Innovation and Xion Pharmaceutical Corporation (“Xion”). The Company owns 223,317 shares of stock in the privately held Security Innovation, an independent provider of secure software located in Wilmington, MA.

In September 2009 we announced the formation of a joint venture with Xion for the commercialization of our patented melanocortin analogues for treating sexual dysfunction and obesity. The Company received 60 shares of privately held Xion Pharmaceutical Corporation common stock in June 2010. The Company currently owns 30% of the outstanding stock of Xion Pharmaceutical Corporation.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

6. FAIR VALUE MEASUREMENTS

The Company measures fair value in accordance with Topic 820 of the FASB Accounting Standards Codification (“ASC”), Fair Value Measurement (“ASC 820”), which provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described as follows:

Level 1 -	Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2 -	Inputs to the valuation methodology include:
	●	Quoted prices for similar assets or liabilities in active markets;
	●	Quoted prices for identical or similar assets or liabilities in inactive markets;
	●	Inputs other than quoted prices that are observable for the asset or liability;
	●	Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 -	Inputs to the valuation methodology are unobservable and significant to the fair value measurement

The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company values its derivative liability associated with the variable conversion feature on its Series C Convertible Preferred Stock (Note 12) based on the market price of its common stock. For each reporting period the Company calculates the amount of potential common stock that the Series C Preferred Stock could convert into based on the conversion formula (incorporating market value of our common stock) and multiplies those converted shares by the market price of its common stock on that reporting date. The total converted value is subtracted by the consideration paid to determine the fair value of the derivative liability. The Company classified the derivative liability of approximately at $89,000 and $66,000 at June 30, 2016 and December 31, 2015, respectively, in Level 2 of the fair value hierarchy.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value could result in a different fair value measurement at the reporting date. 

The carrying amounts reported in our Condensed Consolidated Balance Sheet for cash, accounts receivable, liabilities under the claims purchase agreement, accounts payable, GEOMC, notes payable, deferred revenue, and preferred stock liability approximate fair value due to the short-term maturity of those financial instruments.

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PREPAID EXPENSES AND OTHER CURRENT ASSETS

6 Months Ended

Jun. 30, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

PREPAID EXPENSES AND OTHER CURRENT ASSETS

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	June 30, 2016		December 31, 2015
Prepaid insurance	$	5,671	$	47,931
Other		15,675		10,103
Prepaid expenses and other current assets	$	21,346	$	58,034

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PROPERTY AND EQUIPMENT

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

8. PROPERTY AND EQUIPMENT

Property and equipment, net, consist of the following:

	June 30, 2016			December 31, 2015
Property and equipment, gross	$	220,051		$	220,051
Accumulated depreciation and amortization		(204,588	)		(196,325	)
Property and equipment, net	$	15,463		$	23,726

Depreciation and amortization expense was $4,131 and $8,263, respectively, during the three and six months ended June 30, 2016, and $3,904 and $8,363, respectively, for the three and six months ended June 30, 2015.

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ACCRUED EXPENSES AND OTHER LIABILITIES

6 Months Ended

Jun. 30, 2016

Payables and Accruals [Abstract]

ACCRUED EXPENSES AND OTHER LIABILITIES

9. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

	June 30, 2016		December 31, 2015
Royalties payable	$	525,823	$	487,739
Accrued compensation		-		49,769
Commissions payable		57,782		15,900
Accrued interest payable		1,862,128		1,589,256
Other		223,077		105,360
Accrued expenses and other liabilities, net	$	2,668,810	$	2,248,024

Excluded above is approximately $217,000 of accrued expenses and other liabilities at June 30, 2016 and December 31, 2015, that fall under the Liability Purchase Agreement (“LPA”) with ASC Recap, LLC (“ASC Recap”), and are expected to be repaid using the process as described in Note 10.  Because there can be no assurance that the Company will be successful in completing this process, the Company retains ultimate responsibility for these liabilities, until fully paid down.

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LIABILITIES ASSIGNED TO LIABILITY PURCHASE AGREEMENT

6 Months Ended

Jun. 30, 2016

Liabilities Assigned To Liability Purchase Agreement [Abstract]

LIABILITIES ASSIGNED TO LIABILITY PURCHASE AGREEMENT

10. LIABILITIES ASSIGNED TO LIABILITY PURCHASE AGREEMENT

During the third quarter of 2013, the Company negotiated a LPA with Southridge, Partners II, L.P. (“Southridge”). The LPA takes advantage of a provision in the Securities Act of 1933, Section 3(a)(10), that allows the exchange of claims, securities, or property for stock when the arrangement is approved for fairness by a court proceeding. The process, approved by the court in August 2013, has the potential to eliminate nearly $2.1 million of the Company’s financial obligations to existing creditors who agreed to participate and executed claims purchase agreements with Southridge’s affiliate ASC Recap accounting for $2,093,303 of existing payables, accrued expenses and other current liabilities, and notes payable. The process began with the issuance in September 2013 of 1,618,235 shares of the Company’s common stock to ASC Recap. During September and October 2013, ASC Recap sold the Company’s common stock and during the three months ended March 31, 2014 paid creditors approximately $80,000 from the proceeds and retained a service fee of approximately $27,000. During 2014, the Company also made cash payments of $18,000 for accrued expenses previously included in the LPA amount. As of August 22, 2016, no further shares of the Company’s common stock had been issued to ASC Recap to settle creditors’ balances.

There can be no assurance that the Company will be successful in completing this process with Southridge, and the Company retains ultimate responsibility for this debt, until fully paid.

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NOTES PAYABLE

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

NOTES PAYABLE

11. NOTES PAYABLE

Notes payable consist of the following:

Short term	June 30, 2016			December 31, 2015
90 day Convertible Notes (Chairman of the Board)	$	2,498,980		$	2,498,980
24 month Convertible Notes ($100,000 to Board member)		225,000			225,000
Series A-3 OID Convertible Notes and Warrants		14,353			14,353
Series B-2 OID Convertible Notes and Warrants		2,928,214			1,532,710
Short term notes payable, gross		5,666,547			4,271,043
Less LPA amount		(485,980	)		(485,980	)
Short term notes payable, net	$	5,180,567		$	3,785,063

Long term	June 30, 2016		December 31, 2015
Series B-1 OID Convertible Notes and Warrants	$	-	$	67,919

Details of notes payable as of June 30, 2016 are as follows:

Short term	Principal  Amount		Carrying Value			Cash Interest  Rate			Common  Stock  Conversion  Price		Maturity  Date
90 day Convertible Notes (Chairman of the Board)	$	2,498,980	$	2,498,980			6	%	$	1.05		Various 2014
24 month Convertible Notes ($100,000 to Board member)		225,000		225,000			6	%	$	1.05		3/2014 – 6/2014
Series A-3 OID Convertible Notes and Warrants		11,765		14,353	(1)		None		$	0.25		1/2015
Series B-2 OID Convertible Notes and Warrants		3,323,529		2,928,214			None		$	0.20 – 0.25		11/2015 – 03/2017
Short term notes payable, gross	$	6,059,274		5,666,547
Less LPA amount				(485,980	)
Short term notes payable, net			$	5,180,567

(1) Includes $2,588 of accrued loss on conversion of OID note.

90 day Convertible Notes

The Company has issued 90-day notes payable to borrow funds from a director, now the chairman of our Board, as follows:

2013	$	1,188,980
2012		1,210,000
2011		100,000
Total	$	2,498,980

These notes have been extended several times and all bear 6.00% simple interest.  A conversion feature was added to the Notes when they were extended, which allows for conversion of the eligible principal amounts to common stock at any time after the six month anniversary of the effective date – the date the funds are received – at a rate of $1.05 per share.  Additional terms have been added to all Notes to include additional interest of 1% simple interest per month on all amounts outstanding for all Notes if extended beyond their original maturity dates and to provide the lender with a security interest in unencumbered inventory and intangible assets of the Company other than proceeds relating to the Calmare Device and accounts receivable.

Due to the Board’s February 10, 2014 decision authorizing management to nullify certain actions taken by prior management, the additional terms noted above were not approved and therefore, the additional interest for the extension of the Notes was not recorded.  During 2014, management has been in negotiations to modify the terms of the Notes. However, until those negotiations are resolved, the Company has agreed to honor the additional terms and as such, the Company recorded additional interest of approximately $207,000 and $188,000 during the six months ended June 30, 2016 and June 30, 2015, respectively, and has recorded additional interest in total of $1,214,000.

A total of $485,980 of the aforementioned notes issued between December 1, 2012 and March 31, 2013 fall under the LPA with ASC Recap, and are expected to be repaid using the process as described in Note 10.  Because there can be no assurance that the Company will be successful in completing this process, the Company retains ultimate responsibility for this debt, until fully paid down.  As a result, the Company continues to accrue interest on these notes and they remain convertible as described above.

24 month Convertible Notes

In March 2012, the Company issued a 24-month convertible promissory note to borrow $100,000. Additional 24-month convertible promissory notes were issued in April 2012 ($25,000) and in June 2012 ($100,000). All of the notes bear 6.00% simple interest. Conversion of the eligible principal amounts to common stock is allowed at any time at a rate of $1.05 per share.

As of June 30, 2016, the Company has not repaid the principal due on the March 2012 $100,000 note, the April 2012 $25,000 note or the June 2012 $100,000 note and is in default under the terms of the notes. As of June 30, 2016, there is also unpaid interest of $46,556 related to these notes.

Series A-3 Original Issue Discount Convertible Notes and Warrants

During the quarter ended March 31, 2014, the Company did a private offering of a third tranche of convertible notes and warrants, under which it issued $64,706 of convertible promissory notes for consideration of $55,000, the difference between the proceeds from the notes and principal amount consists of $9,706 of original issue discount. The notes are convertible at an initial conversion price of $0.25 per share any time after issuance thereby having an embedded beneficial conversion feature.

The note holders were also issued market-related warrants for 129,412 in shares of common stock. The warrants have an exercise price of $0.60 and a term of 2 years. The beneficial conversion feature, if any, and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of share into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		2 years
Volatility		184.88	%
Risk Free Rate		0.32	%

The proceeds of the Notes issued during the three months ended March 31, 2014 were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	32,390
Private Offering Warrants		14,845
Beneficial Conversion feature		7,765
Total	$	55,000

During the quarter ended June 30, 2014, certain holders of Series A-3 OID convertible notes and warrants delivered to the Company a notice of conversion related to the Series A-3 OID convertible notes. Due to the timing of receipt of the notices by the Company, certain Note holders (“Noteholders”) received their shares during the quarter ended June 30, 2014, while other Noteholders received or are due to receive their shares after June 30, 2014. Additionally, the Company offered certain Noteholders an inducement to convert their notes to shares. The inducement, when offered, provided Noteholders a conversion price of $0.20. All other original terms, including the warrant terms, remained the same. Upon notice of conversion and irrespective of whether the shares were delivered in the quarter ended June 30, 2014 or subsequent to June 30, 2014 to the Company: (i) accelerated and recognized as interest expense in the current period any remaining discount, and (ii) recognized a loss for the fair value of the additional shares offered as the conversion inducement.

Presented below is summary information related to the conversion:

Statement of Operations
Loss on conversion of notes	$	43,288
Accelerated interest expense	$	35,109
Balance Sheet
Shares issued as of June 30, 2014		798,825
Shares to be issued subsequent to June 30, 2014		529,415
Principal amount of notes converted	$	265,648

During the quarter ended March 31, 2015, a holder of Series A-3 OID convertible notes and warrants delivered to the Company a notice of conversion related to the Series A-3 OID convertible notes. Additionally, the Company offered the Noteholder an inducement to convert his/her notes to shares. The inducement provided the Noteholder a conversion price of $0.20. All other original terms, including the warrant terms, remained the same. Upon notice of conversion, the Company: (i) accelerated and recognized as interest expense in the current period any remaining discount, and (ii) recognized a loss for the fair value of the additional shares offered as the conversion inducement. As of June 30, 2016, the Company had not issued the shares due related to the conversion notice.

Presented below is summary information related to the conversion:

Statement of Operations
Loss on conversion of notes	$	2,588
Accelerated interest expense	$	-
Balance Sheet
Shares issued		-
Principal amount of notes converted	$	11,765

Series B-1 Original Issue Discount Convertible Notes and Warrants

During the quarter ended March 31, 2014, the Company did a private offering of convertible notes and warrants, under which it issued $80,000 of convertible promissory notes for consideration of $65,000, the difference between the proceeds from the notes and principal amount consists of $15,000 of original issue discount. The notes are convertible at an initial conversion price of $0.35 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 185,714 in shares of common stock. The warrants have an exercise price of $0.45 and a 4-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of share into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		4 years
Volatility		151.52	%
Risk Free Rate		1.32	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	34,272
Private Offering Warrants		26,811
Beneficial Conversion feature		3,917
Total	$	65,000

The Series B-1 OID notes include an anti-dilution provision that if the Company issues more than 20 million shares of its common stock, subject to certain exceptions, the conversion price of the notes and the conversion price of the warrants would be subject to an automatic pre-determined price adjustment. During the quarter ended December 31, 2014 the Series B-1 OID noteholder and the Company agreed that this anti-dilution provision had been triggered and the Series B-1 OID note share conversion price was adjusted down to $0.23 per share, which increased the number of shares available upon conversion to 347,826. The anti-dilution provision in the Warrant changed the share purchase price downward to $0.33 per share but did not change the number of shares available under the Warrant.

As a result of the triggering of the above noted one time anti-dilution provision, the Company reallocated the proceeds of the Notes during the quarter ended December 31, 2014 as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	46,222
Private Offering Warrants		18,778
Total	$	65,000

Series B-2 OID Convertible Notes and Warrants

During the quarter ended December 31, 2014, the Company did private offerings of convertible notes and warrants, under which it issued $358,824 of convertible promissory notes for consideration of $305,000, the difference between the proceeds from the notes and principal amount consists of $53,824 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 897,060 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of share into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		188.31	%
Risk Free Rate		0.11	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	224,679
Private Offering Warrants		57,854
Beneficial Conversion feature		22,467
Total	$	305,000

During the quarter ended June 30, 2015, a holder of Series B-2 OID convertible notes and warrants delivered to the Company a notice of conversion related to the Series B-2 OID convertible notes, with a principal amount of $5,882. In the quarter ended September 30, 2015, the Company issued 29,410 shares due related to the conversion notice.

As of June 30, 2016, the remaining notes have passed their maturity date. The Company has not repaid the amounts due on these notes and is in default under the terms of the notes.

During the quarter ended March 31, 2015, the Company did an additional private offering of convertible notes and warrants, under which it issued $302,353 of convertible promissory notes for consideration of $257,000, the difference between the proceeds from the notes and principal amount consists of $45,353 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 755,882 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term	1 year
Volatility	180.15-185.71	%
Risk Free Rate	0.18-0.22	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	197,521
Private Offering Warrants		46,097
Beneficial Conversion feature		13,382
Total	$	257,000

As of June 30, 2016, the remaining notes have passed their maturity date. The Company has not repaid the amounts due on these notes and is in default under the terms of the notes.

During the quarter ended September 30, 2015, the Company did an additional private offering of convertible notes and warrants, under which it issued $705,882 of convertible promissory notes for consideration of $600,000, the difference between the proceeds from the notes and principal amount consists of $105,882 of original issue discount. The notes are convertible at an initial conversion price of $0.25 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 1,411,764 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		171.36	%
Risk Free Rate		0.28	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	342,857
Private Offering Warrants		120,000
Beneficial Conversion feature		137,143
Total	$	600,000

During the quarter ended December 31, 2015, the Company did an additional private offering of convertible notes and warrants, under which it issued $470,588 of convertible promissory notes for consideration of $400,000, the difference between the proceeds from the notes and principal amount consists of $70,588 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 1,176,470 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense. 

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		132.44	%
Risk Free Rate		0.66	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	361,991
Private Offering Warrants		38,009
Total	$	400,000

During the quarter ended March 31, 2016, the Company did an additional private offering of convertible notes and warrants, under which it issued $705,882 of convertible promissory notes for consideration of $600,000, the difference between the proceeds from the notes and principal amount consists of $105,882 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 3,529,412 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		136.24	%
Risk Free Rate		0.62	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	454,545
Private Offering Warrants		122,727
Beneficial Conversion feature		22,728
Total	$	600,000

During the quarter ended June 30, 2016, the Company did an additional private offering of convertible notes and warrants, under which it issued $705,882 of convertible promissory notes for consideration of $600,000, the difference between the proceeds from the notes and principal amount consists of $105,882 of original issue discount. The notes are convertible at an initial conversion price of $0.20 per share any time after issuance thereby having an embedded beneficial conversion feature. The note holders were also issued market-related warrants for 3,000,000 in shares of common stock. The warrants have an exercise price of $0.60 and a 1-year term. The beneficial conversion feature and the warrants were recorded to additional paid-in-capital. The Company allocated the proceeds received to the notes, the beneficial conversion feature and the warrants on a relative fair value basis at the time of issuance. The total debt discount is amortized over the life of the notes to interest expense.

The beneficial conversion feature was valued at the intrinsic value on the issuance date. The intrinsic value represents the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the note is convertible. We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term	1 year
Volatility	128.74-134.16	%
Risk Free Rate	0.55-0.61	%

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	409,174
Private Offering Warrants		111,243
Beneficial Conversion feature		79,583
Total	$	600,000

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SHAREHOLDERS' DEFICIENCY

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

SHAREHOLDERS' DEFICIENCY

12. SHAREHOLDERS’ DEFICIENCY

Stock Option Plan

On May 2, 2011 the Company adopted and executed the Employees’ Directors’ and Consultants Stock Option Plan (the “Plan”). During the six months ended June 30, 2015, the Company granted 50,000 options to non-employee directors which were fully vested upon issuance.

We estimated the fair value of each option on the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions:

	Six months ended
	June 30, 2015
Dividend yield (1)		0.00	%
Expected volatility (2)		164.5	%
Risk-free interest rates (3)		1.61	%
Expected lives (2)		5.0 YEARS

(1)	We have not paid cash dividends on our common stock since 1981, and currently do not have plans to pay or declare cash dividends. Consequently, we used an expected dividend rate of zero for the valuations.
(2)	Estimated based on our historical experience. Volatility was based on historical experience over a period equivalent to the expected life in years.
(3)	Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the options granted.

No options were granted during the six months ended June 30, 2016. During the six months ended June 30, 2016, 300,000 options were cancelled and 40,000 options expired. 

During the three and six months ended June 30, 2016, the Company recognized expense of $7,180 and $14,360, respectively, for stock options issued to employees and realized a credit of $13,280 during the three months ended June 30, 2016 for options cancelled as a result of the January 2016 resignation of the Company’s Chief Financial Officer.

During the six months ended June 30, 2015, the Company recognized expense of $7,963 for stock options issued to directors and recognized expense of $8,106 and $16,212, respectively, for the three and six months ended June 30, 2015, for stock options issued to employees.

Preferred Stock

Holders of 5% preferred stock are entitled to receive, if, as, and when declared by the Board of Directors, out of funds legally available therefore, preferential non-cumulative dividends at the rate of $1.25 per share per annum, payable quarterly, before any dividends may be declared or paid upon or other distribution made in respect of any share of common stock. The 5% preferred stock is redeemable, in whole at any time or in part from time to time, on 30 days' notice, at the option of the Company, at a redemption price of $25. In the event of voluntary or involuntary liquidation, the holders of preferred stock are entitled to $25 per share in cash before any distribution of assets can be made to holders of common stock.

Each share of 5% preferred stock is entitled to one vote. Holders of 5% preferred stock have no preemptive or conversion rights. The preferred stock is not registered to be publicly traded.

The rights of the Series C Convertible Preferred Stock are as follows:

a) Dividend rights – The shares of Series C Convertible Preferred Stock accrue a 5% cumulative dividend on a quarterly basis and is payable on the last day of each fiscal quarter when declared by the Company’s Board. As of June 30, 2016, dividends declared were $112,548, of which $4,675 and $9,349 were declared during the three and six months ended June 30, 2016, respectively, and $93,802 have not been paid and are shown in accrued and other liabilities at June 30, 2016.

b) Voting rights – Holders of these shares of Series C Convertible Preferred Stock shall have voting rights equivalent to 1,000 votes per $1,000 par value Series C Convertible Preferred share voted together with the shares of Common Stock

c) Liquidation rights – Upon any liquidation these Series C Convertible Preferred Stock shares shall be treated as equivalent to shares of Common stock to which they are convertible.

d) Conversion rights – Holder has right to convert each share of Series C Convertible Preferred Stock at any time into shares of the Company's common stock at a conversion price for each share of common stock equal to 85% of the lower of (a) the closing market price at the date of notice of conversion or (b) the mid-point of the last bid price and the last ask price on the date of the notice of conversion. The variable conversion feature creates an embedded derivative that was bifurcated from the Series C Convertible Preferred Stock on the date of issuance and was recorded at fair value. The derivative liability will be recorded at fair value on each reporting date with any change recorded in the Statement of Operations as an unrealized (gain) loss on derivative instrument.

The Company recorded a convertible preferred stock derivative liability associated with the 375 shares of Series C Convertible Preferred Stock outstanding of $88,979 and $66,177 at June 30, 2016 and December 31, 2015, respectively.

The Company has classified the Series C Convertible Preferred Stock as a liability at June 30, 2016 and December 31, 2015 because the variable conversion feature may require the Company to settle the conversion in a variable number of its common shares. 

Common Stock

At its December 2, 2010 meeting, the CTI Board of Directors declared a dividend distribution of one right (each, a “Right”) for each outstanding share of common stock, par value $0.01, of the Company (the “Common Shares”). The dividend was payable to holders of record as of the close of business on December 2, 2010 (the “Record Date”). Issuance of the dividend may be triggered by an investor purchasing more than 20% of the outstanding shares of common stock.

On August 14, 2014 the shareholders approved an amendment to the Company’s certification of incorporation to effect up to a one-for-ten reverse stock split (the “reverse Stock Split” of the Company’s issued and authorized outstanding common stock. The Board of Directors, in its sole discretion, has discretion to implement the Reverse Stock Split. As of March 31, 2016, the Board of Directors has not implemented the Reverse Stock Split.

During the quarter ended March 31, 2015, the Company did a private offering of its common stock and warrants, for consideration of $75,000. 375,000 shares of common stock were issued at a per share price of $0.20. The common stock holders were also issued warrants to purchase 187,500 shares of common stock. The warrants have an exercise price of $0.60 and a 3-year term. The warrants were recorded to additional paid-in-capital. 

During the quarter ended March 31, 2015, the Company did a private offering of its common stock and warrants, for consideration of $500,000. 2,500,000 shares of common stock were issued at a per share price of $0.20. The common stock holders were also issued warrants to purchase 1,250,000 shares of common stock. The warrants have an exercise price of $0.60 and a 3-year term. The warrants were recorded to additional paid-in-capital. 

During the quarter ended March 31, 2015, the Company issued 500,000 shares with a fair value of $80,000 to an advisory firm for consulting services. The Company is amortizing the $80,000 over the service period and recorded $20,000 of expense in the quarter ended March 31, 2015. 

During the quarter ended March 31, 2015, the Company issued 120,000 shares to an advisory firm for consulting services. The shares vested in two tranches, with 60,000 shares vesting in the quarter ended December 31, 2014 and remaining 60,000 shares vesting in the quarter ended March 31, 2015. The Company recorded consulting expenses of $10,800 in the quarter ended December 31, 2014 and $27,600 of consulting expenses in the quarter ended March 31, 2015. In each instance, the expense was based on the fair value on the vesting date.

During the quarter ended March 31, 2015, the Company issued 333,333 stock warrants with a five year term for consulting services performed and recorded consulting expense of $75,000 for the fair value of the warrants.

During the quarter ended June 30, 2016, the Company issued 261,943 shares with a fair value of $49,769 to Conrad Mir, its President and CEO, for the remainder of his 2015 bonus and his 2015 unused accrued vacation.

On October 15, 2015 the shareholders approved an increase in the number of authorized shares of common stock from 40 million to 100 million.

The Company issued 10,000 and 12,500 shares of its common stock to non-employee directors under its Director Compensation Plan during the three months ended March 31, 2016 and 2015, respectively. The Company recorded expense of $1,900 and $2,125 for director stock compensation expense in the three months ended March 31, 2016 and 2015, respectively. No shares were issued under the Director Compensation Plan in the three months ended June 30, 2016 and June 30, 2015. Additionally, no expense was recorded in the three months ended June 30, 2016 and June 30, 2015.

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CONTRACTUAL OBLIGATIONS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

CONTRACTUAL OBLIGATIONS AND CONTINGENCIES

13. CONTRACTUAL OBLIGATIONS AND CONTINGENCIES

As of June 30, 2016, the Company and its majority owned subsidiary, VVI, have remaining obligations, contingent upon receipt of certain revenues, to repay up to $165,788 and $199,334, respectively, in consideration of grant funding received in 1994 and 1995. The Company also is obligated to pay at the rate of 7.5% of its revenues, if any, from transferring rights to certain inventions supported by the grant funds. VVI is obligated to pay at rates of 1.5% of its net sales of supported products or 15% of its revenues from licensing supported products, if any. 

Contingencies – Litigation

Tim Conley (case pending) - On August 18, 2014, notice was issued to the Company that on June 23, 2014, Timothy Conley (the “Plaintiff”) filed a complaint against the Company, in the United States District Court for the District of Rhode Island. The complaint alleges that the Company’s former acting interim CEO, Johnnie Johnson, and Plaintiff entered into an agreement whereby the Company agreed to make payments to Plaintiff. Among other allegations, Plaintiff claims that the Company’s nonpayment to Plaintiff constitutes a breach of contract. The Company believes it has meritorious defenses to the allegations and the Company intends to vigorously defend against the litigation.

GEOMC (case pending) - On August 22, 2014, GEOMC filed a complaint against the Company in the United States District Court for the District of Connecticut. The complaint alleges that the Company and GEOMC entered into a security agreement whereby in exchange for GEOMC’s sale and delivery of the Scrambler Therapy devices (the “Devices”), the Company would grant GEOMC a security interest in the Devices. Among other allegations, GEOMC claims that the Company has failed to comply with the terms of the security agreement and seeks an order to the Court to replevy the Devices or collect damages. The Company believes it has meritorious defenses to the allegations and the Company intends to vigorously defend against the litigation. On February 4, 2016, the Company announced that it is discussing a settlement with GEOMC, however, to date, no settlement has been reached.

Summary – We may be a party to other legal actions and proceedings from time to time. We are unable to estimate legal expenses or losses we may incur, if any, or possible damages we may recover, and we have not recorded any potential judgment losses or proceeds in our financial statements to date. We record expenses in connection with these suits as incurred.

An unfavorable resolution of any or all matters, and/or our incurrence of significant legal fees and other costs to defend or prosecute any of these actions and proceedings may, depending on the amount and timing, have a material adverse effect on our consolidated financial position, results of operations or cash flows in a particular period.

The Company’s Distribution Rights, Marineo and Delta

On April 8, 2014, Mr. Giuseppe Marineo, Delta Research and Development (“Delta”), Mr. Marineo’s research company, and Delta International Services and Logistics (“DIS&L”), Delta’s commercial arm in which Mr. Marineo is the sole beneficiary of all proceeds as its founder and sole owner (collectively the “Group”), issued a press release (the “Group’s Press Release”) regarding the Company, stating that the Company did not have authority to sell, distribute and manufacture the Calmare Device as an exclusive agent of the Group. The Company issued a corporate response in a press release dated April 11, 2014 stating that the Group’s Press Release was inaccurate and has since been purged by the overseeing body of wire services. 

This issue between the Company and the Group is over the validity of a 2012 Amendment to a Sales and Representation Agreement (the “Amendment”) which, if valid and enforceable, may have compromised its rights to sell, distribute and manufacture the Calmare Device as an exclusive agent of the Group in the global marketplace, especially in the European, Middle Eastern and North African (“EMENA”) territory which was responsible for approximately 70% of gross Calmare Device sales in 2011. However, the Company believes that the Amendment is neither valid nor enforceable as it was never duly signed or authorized and subsequently deemed null and void. Therefore, the parties’ rights are determined by an earlier agreement whereby the Company still possesses the authority to sell, distribute and manufacture Calmare Devices as a world-wide exclusive agent of the Group.

On April 16, 2014, counsel for the Group (“Group Counsel”) sent a cease and desist letter (“Cease and Desist Letter”) to the Company, requesting a confirmation that the Company would no longer hold itself out as an agent of the Group permitted to sell, distribute and manufacture Calmare Devices world-wide including the EMENA territory. 

The Company responded on April 25, 2014 to the Cease and Desist Letter, disputing Group Counsel’s interpretation of the events surrounding the execution of the Amendment. At that time, the Company initiated an effort to find a reasonable and amicable resolution to the situation. To date, despite a number of attempts by the Company, the situation remains unresolved. The Company continues to properly sell and distribute Calmare Devices manufactured under the 2007 Agreement and the 2011 Amendment.

Unsigned Agreements

The Company uses two unrelated firms to provide marketing and investor relations services, CME Acuity (“CMEA”) and Legend Capital Management (“LCM”), respectively. The LCM and CMEA agreements were not signed due to an inability to come to final terms due to certain nuances in either agreement that included but were not limited to assignment of human capital and allowable performance based bonus(es). However, from the start date until June 30, 2016, the respective firms were being compensated for services rendered on a “pay-as-we go” basis (the “Arrangement”). The aforementioned Arrangement is expected to continue for the next few consecutive quarters until such time as their agreements can be consummated.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

14. RELATED PARTY TRANSACTIONS

Our Board of Directors determined that when a director's services are outside the normal duties of a director, we compensate the director at the rate of $1,000 per day, plus expenses, which is the same amount we pay a director for attending a one-day Board meeting.  We classify these amounts as consulting expenses, included in personnel and consulting expenses.

As of June 30, 2016 and December 31, 2015, the Company has $357,200 and $302,500, respectively, owed in fees to current directors. All of the December 31, 2015 amount is in Accounts Payable while the June 30, 2016 amount is split $312,500 in Accounts Payable and $44,700 in Accrued Liabilities – Other.

At June 30, 2016, $2,598,980 of the outstanding Notes payable were Notes payable to related parties; $2,498,980 to the Chairman of the Board and $100,000 to another director.

Dr. Stephen J. D’Amato, the Company’s chief medical officer is also one of the managing members of Calmar Pain Relief, LLC. Calmar Pain Relief purchases from the Company electrodes for use with the Calmare Device. These electrodes are purchased at the same price as those purchased by other customers. In the first six months of 2016, purchases of electrodes by Calmar Pain Relief totaled $1,600.

Since October 15, 2015, the Company has a consulting agreement with VADM Robert T. Conway, Jr., U.S. Navy, (Ret) (the “Admiral”), a member of the Company’s Board of Directors. The agreement is for one year and includes compensation of a monthly retainer fee of $7,500 and a five year warrant to purchase 167,000 shares of common stock of the Company, fully vested on the date of issuance, at a strike price of $.60 per share with an aggregate estimated fair value of $33,734. As a result of this agreement, the Board of Directors has determined that the Admiral is no longer an independent director of the Company. As of June 30, 2016, the Company has $15,000 in consulting fees payable to the Admiral,

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

15. SUBSEQUENT EVENTS

On August 8, 2016, the Board of Directors approved a new series of preferred stock called Series D Convertible Preferred Stock. The Company intends to use this series of stock to raise new capital and to convert some of its existing debt to this new offering. 500,000 shares of this stock were authorized at a par value of $25.00 per share. The shares are convertible into Common Stock at 125 shares of Common Stock for each share of Series D Convertible Preferred Stock. Holders of shares of Series D Convertible Preferred Stock are entitled to receive, when, as and if declared by the Board, semi-annual dividends in the amount of $0.75 per share. Holders of shares of Series D Convertible Preferred Stock do not have any voting rights.

On August 8, 2016, the Board of Directors approved the 2016 Employees,’ Directors’ and Consultants Stock Option Plan. The Board authorized 2,500,000 shares of Common Stock as available to be granted under this Plan. 

On August 8, 2016, the Company granted 60,000 options to non-employee directors which were fully vested upon issuance. On the same day, the Company also granted 650,000 options to new employees, 75,000 options to current employees and 110,000 options to consultants. 20% of these options vest immediately and the remainder vest over a four year period. The strike price for all these options is $0.17 per share, which is the fair market value of the Company’s Common Stock at the close of business on August 8, 2016.

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NET LOSS PER COMMON SHARE (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of basic net loss per share

The following sets forth the denominator used in the calculations of basic net loss per share and net loss per share assuming dilution:

	Three months ended		Three months ended		Six months ended		Six months ended
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015
Denominator for basic net loss per share, weighted average shares outstanding		28,753,289		27,862,908		28,639,424		27,318,467
Dilutive effect of common stock options		N/A		N/A		N/A		N/A
Dilutive effect of Series C convertible preferred stock, convertible debt and warrants		N/A		N/A		N/A		N/A
Denominator for diluted net loss per share, weighted average shares outstanding		28,753,289		27,862,908		28,639,424		27,318,467

Schedule of potentially dilutive securities outstanding

Potentially dilutive securities outstanding are summarized as follows:

	June 30,2016		June 30, 2015
Exercise of common stock options		1,698,500		1,742,500
Exercise of common stock warrants		12,213,276		6,452,248
Conversion of Series C convertible preferred stock		1,982,816		1,329,646
Conversion of convertible debt		18,500,915		6,305,390
Total		34,395,507		15,829,784

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RECEIVABLES (Tables)

6 Months Ended

Jun. 30, 2016

Receivables [Abstract]

Schedule of receivables

Receivables consist of the following:

	June 30, 2016		December 31, 2015
Calmare device sales receivable, net of allowance of $210,284 at June 30, 2016 and December 31, 2015	$	1,000	$	31,827
Royalties, net of allowance of $101,154 at June 30, 2016 and December 31, 2015		-		-
Other, net of allowance of $6,221 at June 30, 2016 and December 31, 2015		7,235		1,254
Total	$	8,235	$	33,081

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

6 Months Ended

Jun. 30, 2016

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following:

	June 30, 2016		December 31, 2015
Prepaid insurance	$	5,671	$	47,931
Other		15,675		10,103
Prepaid expenses and other current assets	$	21,346	$	58,034

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PROPERTY AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2016

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment, net, consist of the following:

	June 30, 2016			December 31, 2015
Property and equipment, gross	$	220,051		$	220,051
Accumulated depreciation and amortization		(204,588	)		(196,325	)
Property and equipment, net	$	15,463		$	23,726

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ACCRUED EXPENSES AND OTHER LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2016

Payables and Accruals [Abstract]

Schedule of accrued expenses and other liabilities

Accrued expenses and other liabilities consist of the following:

	June 30, 2016		December 31, 2015
Royalties payable	$	525,823	$	487,739
Accrued compensation		-		49,769
Commissions payable		57,782		15,900
Accrued interest payable		1,862,128		1,589,256
Other		223,077		105,360
Accrued expenses and other liabilities, net	$	2,668,810	$	2,248,024

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NOTES PAYABLE (Tables)

6 Months Ended

Jun. 30, 2016

Schedule of notes payable

Notes payable consist of the following:

Short term	June 30, 2016			December 31, 2015
90 day Convertible Notes (Chairman of the Board)	$	2,498,980		$	2,498,980
24 month Convertible Notes ($100,000 to Board member)		225,000			225,000
Series A-3 OID Convertible Notes and Warrants		14,353			14,353
Series B-2 OID Convertible Notes and Warrants		2,928,214			1,532,710
Short term notes payable, gross		5,666,547			4,271,043
Less LPA amount		(485,980	)		(485,980	)
Short term notes payable, net	$	5,180,567		$	3,785,063

Long term	June 30, 2016		December 31, 2015
Series B-1 OID Convertible Notes and Warrants	$	-	$	67,919

Schedule of notes payable details

Details of notes payable as of June 30, 2016 are as follows:

Short term	Principal  Amount		Carrying Value			Cash Interest  Rate			Common  Stock  Conversion  Price		Maturity  Date
90 day Convertible Notes (Chairman of the Board)	$	2,498,980	$	2,498,980			6	%	$	1.05		Various 2014
24 month Convertible Notes ($100,000 to Board member)		225,000		225,000			6	%	$	1.05		3/2014 – 6/2014
Series A-3 OID Convertible Notes and Warrants		11,765		14,353	(1)		None		$	0.25		1/2015
Series B-2 OID Convertible Notes and Warrants		3,323,529		2,928,214			None		$	0.20 – 0.25		11/2015 – 03/2017
Short term notes payable, gross	$	6,059,274		5,666,547
Less LPA amount				(485,980	)
Short term notes payable, net			$	5,180,567

(1) Includes $2,588 of accrued loss on conversion of OID note.

Schedule of 90 day convertible notes

The Company has issued 90-day notes payable to borrow funds from a director, now the chairman of our Board, as follows:

2013	$	1,188,980
2012		1,210,000
2011		100,000
Total	$	2,498,980

Private Placement [Member] | 15% Series A-3 OID Convertible Notes And Warrants [Member] | Warrant [Member]

Schedule of valuation techniques

We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		2 years
Volatility		184.88	%
Risk Free Rate		0.32	%

Schedule of proceeds from debt

The proceeds of the Notes issued during the three months ended March 31, 2014 were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	32,390
Private Offering Warrants		14,845
Beneficial Conversion feature		7,765
Total	$	55,000

Schedule of debt conversion

Presented below is summary information related to the conversion:

Statement of Operations
Loss on conversion of notes	$	43,288
Accelerated interest expense	$	35,109
Balance Sheet
Shares issued as of June 30, 2014		798,825
Shares to be issued subsequent to June 30, 2014		529,415
Principal amount of notes converted	$	265,648

Presented below is summary information related to the conversion:

Statement of Operations
Loss on conversion of notes	$	2,588
Accelerated interest expense	$	-
Balance Sheet
Shares issued		-
Principal amount of notes converted	$	11,765

Private Placement [Member] | Series B-1 OID Convertible Notes And Warrants [Member] | Warrant [Member]

Schedule of valuation techniques

We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		4 years
Volatility		151.52	%
Risk Free Rate		1.32	%

Schedule of proceeds from debt

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	34,272
Private Offering Warrants		26,811
Beneficial Conversion feature		3,917
Total	$	65,000

As a result of the triggering of the above noted one time anti-dilution provision, the Company reallocated the proceeds of the Notes during the quarter ended December 31, 2014 as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	46,222
Private Offering Warrants		18,778
Total	$	65,000

Private Placement [Member] | Series B-2 OID Convertible Notes And Warrants [Member] | Warrant [Member]

Schedule of valuation techniques

We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		188.31	%
Risk Free Rate		0.11	%

We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term	1 year
Volatility	180.15-185.71	%
Risk Free Rate	0.18-0.22	%

We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		171.36	%
Risk Free Rate		0.28	%

We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		132.44	%
Risk Free Rate		0.66	%

We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term		1 year
Volatility		136.24	%
Risk Free Rate		0.62	%

We estimated the fair value of the warrants on the issue date using a Black-Scholes pricing model with the following assumptions:

	Warrants
Expected term	1 year
Volatility	128.74-134.16	%
Risk Free Rate	0.55-0.61	%

Schedule of proceeds from debt

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	224,679
Private Offering Warrants		57,854
Beneficial Conversion feature		22,467
Total	$	305,000

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	197,521
Private Offering Warrants		46,097
Beneficial Conversion feature		13,382
Total	$	257,000

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	342,857
Private Offering Warrants		120,000
Beneficial Conversion feature		137,143
Total	$	600,000

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	361,991
Private Offering Warrants		38,009
Total	$	400,000

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	454,545
Private Offering Warrants		122,727
Beneficial Conversion feature		22,728
Total	$	600,000

The proceeds of the Notes were allocated to the components as follows:

	Proceeds allocated at issue date
Private Offering Notes	$	409,174
Private Offering Warrants		111,243
Beneficial Conversion feature		79,583
Total	$	600,000

XML

SHAREHOLDERS' DEFICIENCY (Tables)

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

Schedule of fair value of option weighted average assumptions

We estimated the fair value of each option on the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions:

	Six months ended
	June 30, 2015
Dividend yield (1)		0.00	%
Expected volatility (2)		164.5	%
Risk-free interest rates (3)		1.61	%
Expected lives (2)		5.0 YEARS

(1)	We have not paid cash dividends on our common stock since 1981, and currently do not have plans to pay or declare cash dividends. Consequently, we used an expected dividend rate of zero for the valuations.
(2)	Estimated based on our historical experience. Volatility was based on historical experience over a period equivalent to the expected life in years.
(3)	Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the options granted.

XML

Supplemental Disclosure of Non-cash Transactions (Details Narrative) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2016	Jun. 30, 2015
Common stock issued for consulting services					500,000
Common stock issued for consulting services, value				$ 1,900	$ 80,000
Consulting expense	$ 20,000				40,000
Allocation of proceeds from convertible note for the fair value of warrants and beneficial conversion feature to additional paid-in capital				336,282
Stock issuance amortized expense					$ 80,000
Advisory Firm [Member]
Common stock issued for consulting services		500,000
Common stock issued for consulting services, value		$ 80,000
Consulting expense			$ 10,800
Stock issuance amortized expense		$ 80,000
Advisory Firm (Consulting Services) [Member]
Common stock issued for consulting services		120,000
Stock issuance amortized expense		$ 27,600	$ 10,800
Vested In Two Tranches [Member]
Common shares issued advisory services, shares		60,000	60,000
Warrant [Member]
Common stock issued for consulting services		333,333
Common stock issued for consulting services, value		$ 75,000
Warrant [Member] | Advisory Firm [Member]
Common stock issued for consulting services		333,333
Capital In excess of par value [Member]
Common stock issued for consulting services, value				1,800
Allocation of proceeds from convertible note for the fair value of warrants and beneficial conversion feature to additional paid-in capital		$ 59,480		$ 336,282

XML

BASIS OF PRESENTATION (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Principal amount	$ 6,059,274		$ 6,059,274
Carrying amount	5,666,547		5,666,547		$ 4,271,043
Promissory Notes [Member]
Principal amount	6,059,000		6,059,000
Carrying amount	$ 5,667,000		$ 5,667,000
Sales and Rentals [Member]
Percentage of revenue	98.00%	95.00%	96.00%	94.00%
Sales Of Equipment and Training [Member]
Percentage of revenue	2.00%	5.00%	4.00%	6.00%
Vector Vision, Inc. [Member]
Ownership percentage	56.10%		56.10%

XML

NET LOSS PER COMMON SHARE (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Denominator for basic net loss per share, weighted average shares outstanding	28,753,289	27,862,908	28,639,424	27,318,467
Dilutive effect of common stock options
Dilutive effect of Series C convertible preferred stock, convertible debt and warrants
Denominator for diluted net loss per share, weighted average shares outstanding	28,753,289	27,862,908	28,639,424	27,318,467

XML

NET LOSS PER COMMON SHARE (Details 1) - shares	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	34,395,507	15,829,784
Exercise Of Common Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	1,698,500	1,742,500
Exercise Of Common Stock Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	12,213,276	6,452,248
Conversion Of Series C Convertible Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	1,982,816	1,329,646
Conversion Of Convertible Debt [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	18,500,915	6,305,390

XML

RECEIVABLES (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Receivables [Abstract]
Calmare device sales receivable, net of allowance of $210,284 at June 30, 2016 and December 31, 2015	$ 1,000	$ 31,827
Royalties, net of allowance of $101,154 at June 30, 2016 and December 31, 2015
Other, net of allowance of $6,221 at June 30, 2016 and December 31, 2015	7,235	1,254
Total	8,235	33,081
Calmare device sales receivable, allowance	210,284	210,284
Royalties, allowance	101,154	101,154
Other, allowance	$ 6,221	$ 6,221

XML

AVAILABLE-FOR-SALE AND EQUITY SECURITIES (Details Narrative) - USD ($)	Jun. 30, 2016	Sep. 30, 2009
Security Innovation, Inc. [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, fair value	$ 0
Number of shares held	223,317
Xion Pharmaceutical Corporation [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of shares held		60
Percentage of shares outstanding owned		30.00%

XML

FAIR VALUE MEASUREMENTS (Details Narrative) - Series C Preferred Stock [Member] - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Derivative liability	$ 88,979	$ 66,177
Level 2 [Member]
Derivative liability	$ 89,000	$ 66,000

XML

PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid insurance	$ 5,671	$ 47,931
Other	15,675	10,103
Prepaid expenses and other current assets	$ 21,346	$ 58,034

XML

PROPERTY AND EQUIPMENT (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Property, Plant and Equipment [Abstract]
Property and equipment, gross	$ 220,051	$ 220,051
Accumulated depreciation and amortization	(204,588)	(196,325)
Property and equipment, net	$ 15,463	$ 23,726

XML

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Property, Plant and Equipment [Abstract]
Depreciation and amortization expense	$ 4,131	$ 3,904	$ 8,263	$ 8,363

XML

ACCRUED EXPENSES AND OTHER LIABILITIES (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Payables and Accruals [Abstract]
Royalties payable	$ 525,823	$ 487,739
Accrued compensation		49,769
Commissions payable	57,782	15,900
Accrued interest payable	1,862,128	1,589,256
Other	223,077	105,360
Accrued expenses and other liabilities, net	$ 2,668,810	$ 2,248,024

XML

ACCRUED EXPENSES AND OTHER LIABILITIES (Details Narrative) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Accrued expenses and other liabilities	$ 2,668,810	$ 2,248,024
Liabilities Purchase Agreement [Member] | Southridge's Affiliate ASC Recap [Member]
Accrued expenses and other liabilities	$ 217,000	$ 217,000

XML

LIABILITIES ASSIGNED TO LIABILITY PURCHASE AGREEMENT (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2014	Sep. 30, 2013	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2014
Decrease in financial obligation			$ 215,041	$ 762,283
Liabilities Purchase Agreement [Member] | Southridge's Affiliate ASC Recap [Member]
Decrease in financial obligation		$ 2,100,000
Number of common stock issued		1,618,235
Repayment of creditors	$ 80,000
Service fee	$ 27,000
Liabilities Purchase Agreement [Member] | Southridge, Partners II, L.P. [Member]
Payables, accrued expenses and other current liabilities		$ 2,093,303
Repayment of accrued expense					$ 18,000

XML

NOTES PAYABLE (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015	Mar. 31, 2013
Short term notes payable, gross	$ 5,666,547	$ 4,271,043
Less LPA amount	(485,980)	(485,980)
Short term notes payable, net	5,180,567	3,785,063
Long term notes payable, net		67,919
90 Day Convertible Notes [Member]
Less LPA amount			$ 485,980
90 Day Convertible Notes [Member] | Mr.Peter Brennan [Member]
Short term notes payable, gross	2,498,980	2,498,980
24 Month Convertible Notes [Member]
Short term notes payable, gross	225,000	225,000
24 Month Convertible Notes [Member] | Borad Members [Member]
Short term notes payable, gross	100,000	100,000
15% Series A-3 OID Convertible Notes And Warrants [Member]
Short term notes payable, gross	14,353	14,353
Series B-1 OID Convertible Notes And Warrants [Member]
Long term notes payable, net		67,919
Series B-2 OID Convertible Notes And Warrants [Member]
Short term notes payable, gross	$ 2,928,214	$ 1,532,710

XML

NOTES PAYABLE (Details 1) - USD ($)

6 Months Ended

Jun. 30, 2016

Dec. 31, 2015

Dec. 31, 2014

Mar. 31, 2013

Jun. 30, 2012

Apr. 30, 2012

Mar. 31, 2012

Principal Amount

$ 6,059,274

Carrying Value

5,666,547

Short term notes payable, gross

5,666,547

$ 4,271,043

Less LPA amount

(485,980)

(485,980)

Short term notes payable, net

5,180,567

3,785,063

90 Day Convertible Notes [Member]

Less LPA amount

$ 485,980

90 Day Convertible Notes [Member] | Mr.Peter Brennan [Member]

Principal Amount

2,498,980

Carrying Value

$ 2,498,980

Cash Interest Rate

6.00%

Common Stock Conversion Price (in dollars per share)

$ 1.05

Maturity Date

Various 2014

Short term notes payable, gross

$ 2,498,980

2,498,980

24 Month Convertible Notes [Member]

Principal Amount

$ 100,000

$ 25,000

Carrying Value

$ 225,000

Cash Interest Rate

6.00%

6.00%

Common Stock Conversion Price (in dollars per share)

$ 1.05

$ 1.05

Maturity Date

3/2014 – 6/2014

Short term notes payable, gross

$ 225,000

225,000

24 Month Convertible Notes [Member] | Borad Members [Member]

Principal Amount

100,000

$ 100,000

Carrying Value

100,000

Short term notes payable, gross

100,000

100,000

15% Series A-3 OID Convertible Notes And Warrants [Member]

Principal Amount

^[1]

11,765

Carrying Value

^[1]

$ 14,353

Common Stock Conversion Price (in dollars per share)

$ 0.25

Maturity Date

1/2015

Short term notes payable, gross

$ 14,353

14,353

Accrued loss on conversion

2,588

Series B-1 OID Convertible Notes And Warrants [Member]

Common Stock Conversion Price (in dollars per share)

$ 0.23

Series B-2 OID Convertible Notes And Warrants [Member]

Principal Amount

3,323,529

Carrying Value

$ 2,928,214

Maturity Date

11/2015 – 03/2017

Short term notes payable, gross

$ 2,928,214

$ 1,532,710

Series B-2 OID Convertible Notes And Warrants [Member] | Minimum [Member]

Common Stock Conversion Price (in dollars per share)

$ 0.20

Series B-2 OID Convertible Notes And Warrants [Member] | Maximum [Member]

Common Stock Conversion Price (in dollars per share)

$ 0.25

[1] Includes $2,588 of accrued loss on conversion of OID note.

XML

NOTES PAYABLE (Details 2) - USD ($)	Jun. 30, 2016	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
90 Day Convertible Notes [Member] | Mr.Peter Brennan [Member]
Total	$ 2,498,980	$ 1,188,980	$ 1,210,000	$ 100,000

XML

NOTES PAYABLE (Details 3) - Private Placement [Member] - 15% Series A-3 OID Convertible Notes And Warrants [Member] - Warrant [Member]	6 Months Ended
	Jun. 30, 2016
Expected term	2 years
Volatility	184.88%
Risk Free Rate	0.32%

XML

NOTES PAYABLE (Details 4) - USD ($)	3 Months Ended	6 Months Ended
	Mar. 31, 2014	Jun. 30, 2016	Jun. 30, 2015
Proceeds allocated to notes at issue date		$ 1,200,000	$ 257,000
Private Placement [Member]
Total	$ 55,000
Private Placement [Member] | Warrant [Member]
Proceeds allocated to warrants at issue date	14,845
Private Placement [Member] | 15% Series A-3 OID Convertible Notes And Warrants [Member]
Proceeds allocated to notes at issue date	32,390
Beneficial Conversion feature	7,765
Total	$ 55,000

XML

NOTES PAYABLE (Details 5) - Private Placement [Member] - 15% Series A-3 OID Convertible Notes And Warrants [Member] - USD ($)	3 Months Ended
	Mar. 31, 2015	Jun. 30, 2014
Statement of Operations
Loss on conversion of notes	$ 2,588	$ 43,288
Accelerated interest expense		$ 35,109
Balance Sheet
Shares issued		798,825
Shares to be issued subsequent		529,415
Principal amount of notes converted	$ 11,765	$ 265,648

XML

NOTES PAYABLE (Details 6) - Private Placement [Member] - Series B-1 OID Convertible Notes And Warrants [Member] - Warrant [Member]	3 Months Ended
	Mar. 31, 2014
Expected term	4 years
Volatility	151.52%
Risk Free Rate	1.32%

XML

NOTES PAYABLE (Details 7) - USD ($)	3 Months Ended								6 Months Ended		12 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2014
Proceeds allocated to notes at issue date									$ 1,200,000	$ 257,000
Private Placement [Member]
Total	$ 600,000					$ 257,000	$ 65,000	$ 65,000
Private Placement [Member] | Warrant [Member]
Proceeds allocated to warrants at issue date	$ 111,243	$ 122,727	$ 38,009	$ 120,000	$ 46,097	$ 46,097	57,854
Private Placement [Member] | Series B-1 OID Convertible Notes And Warrants [Member]
Proceeds allocated to notes at issue date								34,272			$ 46,222
Beneficial Conversion feature								3,917
Total								65,000
Private Placement [Member] | Series B-1 OID Convertible Notes And Warrants [Member] | Warrant [Member]
Proceeds allocated to warrants at issue date							$ 18,778	$ 26,811

XML

NOTES PAYABLE (Details 8) - Private Placement [Member] - Series B-2 OID Convertible Notes And Warrants [Member] - Warrant [Member]	3 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Mar. 31, 2015	Dec. 31, 2014
Expected term	1 year	1 year	1 year	1 year	1 year	1 year
Volatility		136.24%	132.44%	171.36%		188.31%
Risk Free Rate		0.62%	0.66%	0.28%		0.11%
Maximum [Member]
Volatility	134.16%				185.71%
Risk Free Rate	0.61%				0.22%
Minimum [Member]
Volatility	128.74%				180.15%
Risk Free Rate	0.55%				0.18%

XML

NOTES PAYABLE (Details 9) - USD ($)	3 Months Ended								6 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014	Jun. 30, 2016	Jun. 30, 2015
Private Offering Notes									$ 1,200,000	$ 257,000
Private Placement [Member]
Total	$ 600,000					$ 257,000	$ 65,000	$ 65,000
Private Placement [Member] | Warrant [Member]
Private Offering Warrants	111,243	$ 122,727	$ 38,009	$ 120,000	$ 46,097	46,097	57,854
Private Placement [Member] | Series B-2 OID Convertible Notes And Warrants [Member]
Private Offering Notes	409,174	454,545	361,991	342,857	197,521	197,521	224,679
Beneficial Conversion feature	79,583	22,728		137,143	$ 13,382	13,382	22,467
Total	$ 600,000	$ 600,000	$ 400,000	$ 600,000		$ 257,000	$ 305,000

XML

NOTES PAYABLE (Details Narrative)

3 Months Ended

6 Months Ended

Jun. 30, 2016

USD ($)

$ / shares

shares

Mar. 31, 2016

USD ($)

$ / shares

shares

Dec. 31, 2015

USD ($)

$ / shares

shares

Sep. 30, 2015

USD ($)

$ / shares

shares

Jun. 30, 2015

USD ($)

Mar. 31, 2015

USD ($)

$ / shares

shares

Dec. 31, 2014

USD ($)

N

$ / shares

shares

Jun. 30, 2014

USD ($)

$ / shares

shares

Mar. 31, 2014

USD ($)

$ / shares

shares

Jun. 30, 2016

USD ($)

$ / shares

shares

Jun. 30, 2015

USD ($)

shares

Mar. 31, 2013

USD ($)

Jun. 30, 2012

USD ($)

Apr. 30, 2012

USD ($)

Mar. 31, 2012

USD ($)

$ / shares

Liability purchase agreement amount

$ (485,980)

$ (485,980)

$ (485,980)

Principal amount

6,059,274

$ 6,059,274

Number of anti diluted securities | shares

34,395,507

15,829,784

Private Placement [Member]

Proceeds from notes payable

$ 55,000

Private Placement [Member]

Proceeds from notes payable

$ 600,000

$ 257,000

$ 65,000

$ 65,000

Private Placement [Member] | Warrant [Member]

Warrant exercise price (in dollars per share) | $ / shares

$ 0.60

Number of shares issued | shares

187,500

Warrant term

3 years

90 Day Convertible Notes [Member]

Liability purchase agreement amount

$ 485,980

90 Day Convertible Notes [Member] | Mr.Peter Brennan [Member]

Interest rate

6.00%

6.00%

Conversion price (in dollars per share) | $ / shares

$ 1.05

$ 1.05

Additional interest rate per month

1.00%

1.00%

Additonal interest expenses

$ 207,000

$ 188,000

Total additonal interest expenses

1,214,000

Principal amount

$ 2,498,980

$ 2,498,980

Description of maturity date

Various 2014

24 Month Convertible Notes [Member]

Interest rate

6.00%

6.00%

6.00%

Conversion price (in dollars per share) | $ / shares

$ 1.05

$ 1.05

$ 1.05

Principal amount

$ 100,000

$ 25,000

Accrued interest payable

$ 46,556

$ 46,556

Description of maturity date

3/2014 – 6/2014

24 Month Convertible Notes [Member] | Borad Members [Member]

Principal amount

$ 100,000

$ 100,000

$ 100,000

15% Series A-3 OID Convertible Notes And Warrants [Member]

Conversion price (in dollars per share) | $ / shares

$ 0.25

$ 0.25

Principal amount

^[1]

$ 11,765

$ 11,765

Description of maturity date

1/2015

15% Series A-3 OID Convertible Notes And Warrants [Member] | Private Placement [Member]

Conversion price (in dollars per share) | $ / shares

$ 0.20

$ 0.20

$ 0.25

Additonal interest expenses

$ 35,109

Principal amount

$ 64,706

Proceeds from notes payable

55,000

Debt issue discount

$ 9,706

Number of shares issued upon conversion | shares

798,825

15% Series A-3 OID Convertible Notes And Warrants [Member] | Private Placement [Member] | Warrant [Member]

Warrant exercise price (in dollars per share) | $ / shares

$ 0.60

Number of shares issued | shares

129,412

Warrant term

2 years

Series B-1 OID Convertible Notes And Warrants [Member]

Conversion price (in dollars per share) | $ / shares

$ 0.23

Number of shares available for conversion | N

347,826

Series B-1 OID Convertible Notes And Warrants [Member] | Private Placement [Member]

Conversion price (in dollars per share) | $ / shares

$ 0.35

Principal amount

$ 80,000

Proceeds from notes payable

65,000

Debt issue discount

$ 15,000

Number of anti diluted securities | shares

20,000,000

Series B-1 OID Convertible Notes And Warrants [Member] | Private Placement [Member] | Warrant [Member]

Warrant exercise price (in dollars per share) | $ / shares

$ 0.33

$ 0.45

Number of shares issued | shares

185,714

Warrant term

4 years

Series B-2 OID Convertible Notes And Warrants [Member]

Principal amount

$ 3,323,529

$ 3,323,529

Description of maturity date

11/2015 – 03/2017

Series B-2 OID Convertible Notes And Warrants [Member] | Private Placement [Member]

Conversion price (in dollars per share) | $ / shares

$ 0.20

$ 0.20

$ 0.20

$ 0.25

$ 0.20

$ 0.20

$ 0.20

Principal amount

$ 705,882

$ 705,882

$ 470,588

$ 705,882

$ 302,353

$ 358,824

$ 705,882

Proceeds from notes payable

600,000

600,000

400,000

600,000

257,000

305,000

Debt issue discount

$ 105,882

$ 105,882

$ 70,588

$ 105,882

$ 45,353

$ 53,824

$ 105,882

Debt original conversion

$ 5,882

Number of shares issued upon conversion | shares

29,410

Series B-2 OID Convertible Notes And Warrants [Member] | Private Placement [Member] | Warrant [Member]

Warrant exercise price (in dollars per share) | $ / shares

$ 0.60

$ 0.60

$ 0.60

$ 0.60

$ 0.60

$ 0.60

$ 0.60

Number of shares issued | shares

3,000,000

3,529,412

1,176,470

1,411,764

755,882

897,060

Warrant term

1 year

1 year

1 year

1 year

1 year

1 year

[1] Includes $2,588 of accrued loss on conversion of OID note.

XML

SHAREHOLDERS' DEFICIENCY (Details)	6 Months Ended
	Jun. 30, 2015
Stockholders' Equity Note [Abstract]
Dividend yield	0.00%	[1]
Expected volatility	164.50%	[2]
Risk-free interest rates	1.61%	[3]
Expected lives	5 years	[2]

[1] We have not paid cash dividends on our common stock since 1981, and currently do not have plans to pay or declare cash dividends. Consequently, we used an expected dividend rate of zero for the valuations.

[2] Estimated based on our historical experience. Volatility was based on historical experience over a period equivalent to the expected life in years.

[3] Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the options granted.

XML

SHAREHOLDERS' DEFICIENCY (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Recognized share based compensation expense			$ 1,080	$ 24,175
5% Preferred Stock [Member]
Divdend rate			5.00%
Preferential non-cumulative dividends, payable quarterly (in dollars per share)			$ 1.25
Preferred stock redemption price (in dollars per share)	$ 25		25
Preferred stock liquidation preference price (in dollars per share)	$ 25		$ 25
Series C Preferred Stock [Member]
Divdend rate			5.00%
Employees' Directors' And Consultants Stock Option Plan [Member]
Number of options cancelled			300,000
Number of options expired			40,000
Employees' Directors' And Consultants Stock Option Plan [Member] | Non-employee directors [Member]
Options granted				50,000
Employees' Directors' And Consultants Stock Option Plan [Member] | Employees [Member]
Recognized share based compensation expense	$ 7,180	$ 8,106	$ 14,360	$ 16,212
Employees' Directors' And Consultants Stock Option Plan [Member] | Mr. Thomas P. Richtarich [Member]
Number of options cancelled	13,280
Employees' Directors' And Consultants Stock Option Plan [Member] | Director [Member]
Recognized share based compensation expense				$ 7,963

XML

SHAREHOLDERS' DEFICIENCY (Details Narrative 1) - USD ($)

3 Months Ended

6 Months Ended

Aug. 14, 2014

Jun. 30, 2016

Mar. 31, 2016

Mar. 31, 2015

Dec. 31, 2014

Jun. 30, 2016

Jun. 30, 2015

Dec. 31, 2015

Oct. 15, 2015

Dec. 02, 2010

Common stock, par value (in dollars per share)

$ .01

$ .01

$ .01

Description of reverse stock split

One-for-ten reverse stock split.

Number of shares issued upon services

500,000

Value of shares issued upon services

$ 1,900

$ 80,000

Stock issuance amortized expense

80,000

Common stock, authorized revised

100,000,000

Common stock, authorized

100,000,000

100,000,000

100,000,000

40,000,000

Share based compensation expense

$ 1,900

$ 2,125

Mr. Conrad Mir [Member]

Value of shares issued upon new issue

$ 49,769

Number of shares issued upon new issue

261,943

Non-employee directors [Member] | Director Compensation Plan [Member]

Number of shares issued upon new issue

10,000

12,500

Share based compensation expense

$ 1,900

$ 2,125

Advisory Firm [Member]

Number of shares issued upon services

500,000

Value of shares issued upon services

$ 80,000

Stock issuance amortized expense

80,000

Share based compensation expense

$ 20,000

Advisory Firm (Consulting Services) [Member]

Number of shares issued upon services

120,000

Stock issuance amortized expense

$ 27,600

$ 10,800

Tranche Two [Member] | Advisory Firm (Consulting Services) [Member]

Number of shares issued upon services

60,000

60,000

Private Placement [Member]

Value of shares issued upon new issue

$ 75,000

Private Placement [Member] | Tranche One [Member]

Value of shares issued upon new issue

$ 500,000

Series C Preferred Stock [Member]

Description of voting rights

Equivalent to 1,000 votes per $1,000 par value.

Cumulative dividend rate

5.00%

Dividends declared

$ 4,675

$ 9,349

Dividend paid

112,548

Derivative liability

$ 88,979

$ 88,979

$ 66,177

Preferred stock, outstanding

375

375

375

Series C Preferred Stock [Member] | Accounts Payable and Accrued Liabilities [Member]

Dividend payable

$ 93,802

$ 93,802

Common Stock [Member]

Number of shares issued upon services

10,000

Value of shares issued upon services

$ 100

Common Stock [Member] | CTI Board of Directors [Member]

Common stock, par value (in dollars per share)

$ 0.01

Ownership of outstanding shares of common stock

20.00%

Common Stock [Member] | Private Placement [Member]

Number of shares issued upon new issue

375,000

Share price (in dollars per share)

$ 0.20

Common Stock [Member] | Private Placement [Member] | Tranche One [Member]

Number of shares issued upon new issue

2,500,000

Share price (in dollars per share)

$ 0.20

Warrant [Member]

Number of shares issued upon services

333,333

Value of shares issued upon services

$ 75,000

Warrant [Member] | Advisory Firm [Member]

Warrant term

5 years

Fair value of warrants

$ 75,000

Number of shares issued upon services

333,333

Warrant [Member] | Private Placement [Member]

Value of shares issued upon new issue

$ 75,000

Number of shares issued upon new issue

187,500

Exercise price (in dollars per share)

$ 0.60

Warrant term

3 years

Warrant [Member] | Private Placement [Member] | Tranche One [Member]

Value of shares issued upon new issue

$ 500,000

Number of shares issued upon new issue

1,250,000

Exercise price (in dollars per share)

$ 0.60

Warrant term

3 years

XML

CONTRACTUAL OBLIGATIONS AND CONTINGENCIES (Details Narrative) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2011
Gross Calmare Device sales, percentage		70.00%
Vector Vision, Inc. [Member]
Percentage of revenues obligation	7.50%
Vector Vision, Inc. [Member] | Supported Products [Member]
Percentage of net sales paid	1.50%
Vector Vision, Inc. [Member] | Licensing Supported Products [Member]
Percentage of revenues obligation	15.00%
Vector Vision, Inc. [Member] | Grant Funding Received In Nineteen Ninety Four [Member]
Contractual obligations	$ 165,788
Vector Vision, Inc. [Member] | Grant Funding Received In Nineteen Ninety Five [Member]
Contractual obligations	$ 199,334

XML

RELATED PARTY TRANSACTIONS (Details Narrtive) - USD ($)		3 Months Ended			6 Months Ended		12 Months Ended
	Oct. 15, 2015	Jun. 30, 2016	Jun. 30, 2015	Mar. 31, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Related Party Transaction [Line Items]
Director's service charges per day					$ 1,000
Notes payable to related parties		$ 2,598,980			2,598,980
Sales revenue		195,000	$ 200,000	$ 7,950	251,250	$ 207,950
Fees to directors					357,200		$ 302,500
Accounts payable		312,500			312,500
Accrued liabilities other		44,700			44,700
Chief Medical Officer [Member]
Related Party Transaction [Line Items]
Sales revenue					1,600
Robert T. Conway [Member]
Related Party Transaction [Line Items]
Officers compensation	$ 7,500
Exercise price of warrants	$ 0.60
Warrants term	5 years
Issued warrants to purchase shares of common stock	167,000
Aggregate estimate fair value of warrant	$ 33,734
Consulting fees payable					15,000
Board of Directors Chairman [Member]
Related Party Transaction [Line Items]
Notes payable to related parties		2,498,980			2,498,980
Director [Member]
Related Party Transaction [Line Items]
Notes payable to related parties		$ 100,000			$ 100,000

XML

SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member]

Aug. 08, 2016

$ / shares

shares

2016 Employees, Directors and Consultants Stock Option Plan [Member]

Subsequent Event [Line Items]

Number of shares authorized under plan

2,500,000

Description of award rights

20% of these options vest immediately and the remainder vest over a four year period.

Strike price (in dollars per share) | $ / shares

$ 0.17

2016 Employees, Directors and Consultants Stock Option Plan [Member] | Non-employee directors [Member]

Subsequent Event [Line Items]

Number of option granted

60,000

2016 Employees, Directors and Consultants Stock Option Plan [Member] | New Employees [Member]

Subsequent Event [Line Items]

Number of option granted

650,000

2016 Employees, Directors and Consultants Stock Option Plan [Member] | Current Employees [Member]

Subsequent Event [Line Items]

Number of option granted

75,000

2016 Employees, Directors and Consultants Stock Option Plan [Member] | Consultants [Member]

Subsequent Event [Line Items]

Number of option granted

110,000

Series D Convertible Preferred Stock [Member]

Subsequent Event [Line Items]

Number of shares authorized

500,000

Preferred stock, par value (in dollar per share) | $ / shares

$ 25.00

Number of shares issued upon conversion

125

Dividend payable semi-annualiy | $ / shares

$ 0.75