10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2017

¨ 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: 0-28666

AMERICAN BIO MEDICA CORPORATION

(Exact name of registrant as specified in its charter)

New York	14-1702188
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

122 Smith Road, Kinderhook, New York	12106
(Address of principal executive offices)	(Zip Code)

518-758-8158

(Registrant's telephone number, including area code)

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 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 x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)  x  Yes    ¨  No

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  ¨  Yes  x  No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

29,297,333 Common Shares as of August 14, 2017

American Bio Medica Corporation

Index to Quarterly Report on Form 10-Q

For the quarter ended June 30, 2017

PART I – FINANCIAL INFORMATION		PAGE
Item 1.	Condensed Financial Statements	3
	Condensed Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016	3
	Condensed Unaudited Statements of Operations for the three and six months ended June 30, 2017 and June 30, 2016	4
	Condensed Unaudited Statements of Cash Flows for the six months ended June 30, 2017 and June 30, 2016	6
	Notes to Condensed Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
Signatures		22

2

PART I - FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

American Bio Medica Corporation

Condensed Balance Sheets

	June 30,			December 31,
	2017			2016
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	138,000		$	156,000
Accounts receivable, net of allowance for doubtful accounts of $49,000 at June 30, 2017 and December 31, 2016		482,000			556,000
Inventory, net of allowance of $468,000 at June 30, 2017 and $449,000 at December 31, 2016		1,450,000			1,582,000
Prepaid expenses and other current assets		88,000			92,000
Total current assets		2,158,000			2,386,000
Property, plant and equipment, net		823,000			824,000
Patents, net		102,000			93,000
Other assets		21,000			21,000
Deferred finance costs – line of credit, net		31,000			47,000
Total assets	$	3,135,000		$	3,371,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	278,000		$	304,000
Accrued expenses and other current liabilities		263,000			276,000
Wages payable		268,000			299,000
Line of credit		594,000			639,000
Current portion of long-term debt		87,000			75,000
Total current liabilities		1,490,000			1,593,000
Long-term debt, net of current portion and deferred finance costs		725,000			753,000
Other long-term liabilities		25,000			0
Total liabilities		2,240,000			2,346,000
COMMITMENTS AND CONTINGENCIES
Stockholders' equity:
Preferred stock; par value $.01 per share; 5,000,000 shares authorized, none issued and outstanding at June 30, 2017 and December 31, 2016		0			0
Common stock; par value $.01 per share; 50,000,000 shares authorized; 29,297,333 issued and outstanding at June 30, 2017 and 28,842,788 issued and outstanding at December 31, 2016		293,000			288,000
Additional paid-in capital		21,105,000			21,037,000
Accumulated deficit		(20,503,000	)		(20,300,000	)
Total stockholders’ equity		895,000			1,025,000
Total liabilities and stockholders’ equity	$	3,135,000		$	3,371,000

The accompanying notes are an integral part of the condensed financial statements

3

American Bio Medica Corporation

Condensed Statements of Operations

(Unaudited)

	For The Six Months Ended
	June 30,
	2017			2016
Net sales	$	2,621,000		$	2,975,000
Cost of goods sold		1,491,000			1,636,000
Gross profit		1,130,000			1,339,000
Operating expenses:
Research and development		68,000			109,000
Selling and marketing		372,000			551,000
General and administrative		778,000			738,000
		1,218,000			1,398,000
Operating loss		(88,000	)		(59,000	)
Other income / (expense):
Interest expense		(134,000	)		(138,000	)
Other income, net		20,000			155,000
		(114,000	)		17,000
Net loss before tax		(202,000	)		(42,000	)
Income tax expense		(1,000	)		(1,000	)
Net loss	$	(203,000	)	$	(43,000	)
Basic and diluted loss per common share	$	(0.01	)	$	(0.00	)
Weighted average number of shares outstanding – basic & diluted		29,043,692			26,940,917

The accompanying notes are an integral part of the condensed financial statements

4

American Bio Medica Corporation

Condensed Statements of Operations

(Unaudited)

	For The Three Months Ended
	June 30,
	2017			2016
Net sales	$	1,306,000		$	1,505,000
Cost of goods sold		741,000			796,000
Gross profit		565,000			709,000
Operating expenses:
Research and development		22,000			55,000
Selling and marketing		176,000			282,000
General and administrative		388,000			351,000
		586,000			688,000
Operating (loss) / income		(21,000	)		21,000
Other income / (expense):
Interest expense		(69,000	)		(71,000	)
Other income, net		20,000			6,000
		(49,000	)		(65,000	)
Net loss before tax		(70,000	)		(44,000	)
Income tax expense		(1,000	)		0
Net loss	$	(71,000	)	$	(44,000	)
Basic and diluted loss per common share	$	(0.00	)	$	(0.00	)
Weighted average number of shares outstanding – basic & diluted		29,242,388			27,271,408

The accompanying notes are an integral part of the condensed financial statements

5

American Bio Medica Corporation

Condensed Statements of Cash Flows

(Unaudited)

	For The Six Months Ended
	June 30,
	2017			2016
Cash flows from operating activities:
Net loss	$	(203,000	)	$	(43,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		43,000			46,000
Amortization of debt issuance costs		63,000			59,000
Provision for slow moving and obsolete inventory		19,000			42,000
Share-based payment expense		23,000			36,000
Changes in:
Accounts receivable		74,000			(48,000	)
Inventory		113,000			93,000
Prepaid expenses and other current assets		54,000			19,000
Accounts payable		(26,000	)		3,000
Accrued expenses and other current liabilities		(13,000	)		(6,000	)
Wages payable		(31,000	)		(16,000	)
Net cash provided by operating activities		116,000			185,000
Cash flows from investing activities:
Patent application costs		(13,000	)		(6,000	)
Purchase of property, plant & equipment		(38,000	)		0
Net cash used in investing activities		(51,000	)		(6,000	)
Cash flows from financing activities:
Proceeds (payments) on debt financing		(38,000	)		(75,000	)
Proceeds from lines of credit		2,835,000			3,095,000
Payments on lines of credit		(2,880,000	)		(3,179,000	)
Net cash (used in) financing activities		(83,000	)		(159,000	)
Net (decrease in) / increase in cash and cash equivalents		(18,000	)		20,000
Cash and cash equivalents - beginning of period		156,000			158,000
Cash and cash equivalents - end of period	$	138,000		$	178,000
Supplemental disclosures of cash flow information
Cash paid during period for interest	$	71,000		$	79,000
Cash paid during period for taxes	$	1,000		$	1,000
Consulting expense prepaid with restricted stock	$	50,000		$	49,000
Debt issuance cost paid with restricted stock	$	0		$	96,000

The accompanying notes are an integral part of the condensed financial statements

6

Notes to condensed financial statements (unaudited)

June 30, 2017

Note A - Basis of Reporting

The accompanying unaudited interim condensed financial statements of American Bio Medica Corporation (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, these unaudited interim condensed financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statement presentation. These unaudited interim condensed financial statements should be read in conjunction with audited financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. In the opinion of management, the interim condensed financial statements include all normal, recurring adjustments which are considered necessary for a fair presentation of the financial position of the Company at June 30, 2017, the results of operations for the three and six month periods ended June 30, 2017 and June 30, 2016 and, cash flows for the six month periods ended June 30, 2017 and June 30, 2016.

Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of results that may be expected for the year ending December 31, 2017. Amounts at December 31, 2016 are derived from audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

During the six months ended June 30, 2017, there were no significant changes to the Company’s critical accounting policies, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

The preparation of these interim condensed financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates estimates, including those related to product returns, bad debts, inventories, income taxes, warranty obligations, contingencies and litigation. The Company bases estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

These unaudited interim condensed financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. The independent registered public accounting firm’s report on the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, contained an explanatory paragraph regarding the Company’s ability to continue as a going concern. As of the date of this report, our current cash balances, together with cash generated from future operations and amounts available under our credit facilities may not be sufficient to fund operations through August 2018. On May 1, 2017, we extended our line of credit. The new expiration date of our line of credit is June 29, 2020. The maximum availability on our line of credit remains to be $1,500,000. However, the amount available under our line of credit is based upon our accounts receivable and inventory. As of June 30, 2017, based on our availability calculation, there were no additional amounts available under our line of credit because we draw any balance available on a daily basis. If sales levels decline further, we will have reduced availability on our line of credit due to decreased accounts receivable balances. In addition, we would expect our inventory levels to decrease if sales levels decline further, and this also will result in reduced availability on our line of credit. If availability under our line of credit is not sufficient to satisfy our working capital and capital expenditure requirements, we will be required to obtain additional credit facilities or sell additional equity securities, or delay capital expenditures. There is no assurance that such financing will be available or that we will be able to complete financing on satisfactory terms, if at all.

Recently Adopted Accounting Standards

ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 was issued in July 2015. ASU 2015-11 applies to inventory measured using the first-in, first-out (“FIFO”) or average cost methods. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company adopted ASU 2015-11 in the quarter ended March 31, 2017, and it did not have a material impact on our financial position or results of operations.

7

ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. ASU 2016-09 was issued in March 2016 and it simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods. Early adoption is permitted. An entity that elects early adoption of the amendment under ASU 2016-09 must adopt all aspects of the amendment in the same period. The Company adopted ASU 2016-09 in the quarter ended March 31, 2017 and it did not have a material effect on our financial position or results of operations.

ASU 2015-17, “Income Taxes”. ASU 2015-17 was issued in December 2015 and addresses simplification of the presentation of deferred income taxes. The amendments in ASU 2015-17 require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement is that deferred tax liabilities and assets, net of a tax-paying component of an entity be offset and presented as two amounts; one current and one long-term. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption was permitted. The Company adopted ASU 2015-17 in the quarter ended March 31, 2017 and it did not have a material impact on our financial position or results of operations.

Accounting Standards Issued; Not Yet Adopted

ASU 2017-09, “Compensation – Stock Compensation (Topic 718)”. ASU 2017-09 was issued in May 2017. The amendment in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. More specifically, that an entity should account for the effects of modification unless all the following are met: 1) the fair value, calculated or intrinsic value of the modified award is the same fair value, calculated or intrinsic value of the original award immediately before the original award is modified, 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original grant is modified. The current disclosure requirements in Topic 718 apply regardless of whether accounting modification is applied. ASU 2017-09 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company is in the process of evaluating the impact of ASU 2017-09.

ASU 2017-07, “Compensation - Retirement Benefits”. ASU 2017-07 was issued in March 2017. The amendments in ASU 2017-07 require an employer to report the service cost component of pension and postretirement benefits in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations. In addition, only the service cost component will be eligible for capitalization as applicable following labor. ASU 2017-07 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance. The Company is in the process of evaluating the impact of ASU 2017-07.

ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350)”. ASU 2017-04 was issued in January 2017. The amendments in ASU 2017-04 indicate that an entity will no longer perform a hypothetical purchase price allocation to measure impairment, eliminating step 2 of the goodwill impairment test. Instead, impairment will be measured using the difference of the carrying amount to the fair value of the reporting unit. The ASU is effective prospectively for annual and interim periods in fiscal years beginning after December 15, 2019, but early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Company is in the process of evaluating the impact of ASU 2017-04.

ASU 2017-01, “Business Combinations (Topic 805)”. ASU 2017-01 was issued in January 2017. The amendments in ASU 2017-01 clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of ASU 2017-01.

8

ASU 2016-02, “Leases”. ASU 2016-02 was issued in February 2016 and it requires a lessee to recognize a lease liability and a right-of-use asset on its balance sheet for all leases, including operating leases, with a term greater than 12 months. Lease classification will determine whether a lease is reported as a financing transaction in the income statement and statement of cash flows. ASU 2016-02 does not substantially change lessor accounting, but it does make certain changes related to leases for which collectability of the lease payments is uncertain or there are significant variable payments. Additionally, ASU 2016-02 makes several other targeted amendments including a) revising the definition of lease payments to include fixed payments by the lessee to cover lessor costs related to ownership of the underlying asset such as for property taxes or insurance; b) narrowing the definition of initial direct costs which an entity is permitted to capitalize to include only those incremental costs of a lease that would not have been incurred if the lease had not been obtained; c) requiring seller-lessees in a sale-leaseback transaction to recognize the entire gain from the sale of the underlying asset at the time of sale rather than over the leaseback term; and d) expanding disclosures to provide quantitative and qualitative information about lease transactions. ASU 2016-02 is effective for all annual and interim periods beginning January 1, 2019, and is required to be applied retrospectively to the earliest period presented at the date of initial application, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2016-02.

ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 was issued in May 2014 and it provides guidance for revenue recognition. The core principle of ASU 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. Examples of the use of judgments and estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The update also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 provides for two transition methods to the new guidance: a retrospective approach and a modified retrospective approach. In August 2015, ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date” was issued as a revision to ASU 2014-09. ASU 2015-14 revised the effective date to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted but not prior to periods beginning after December 15, 2016 (i.e. the original adoption date per ASU No. 2014-09). The Company is currently evaluating the transition methods and the impact of adopting this ASU.

There are no other accounting pronouncements issues during the six months ended June 30, 2017 that are expected to have or that could have a significant impact on our financial position or results of operations.

Reclassifications

Certain items have been reclassified from the prior year to conform to the current year presentation.

Note B – Inventory

Inventory is comprised of the following:

	June 30, 2017			December 31, 2016
Raw Materials	$	1,043,000		$	1,028,000
Work In Process		393,000			385,000
Finished Goods		482,000			618,000
Allowance for slow moving and obsolete inventory		(468,000	)		(449,000	)
	$	1,450,000		$	1,582,000

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Note C – Net Loss Per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted average number of outstanding common shares during the period. Diluted net loss per common share includes the weighted average dilutive effect of stock options and warrants. Potential common shares outstanding as of June 30, 2017 and 2016:

	June 30, 2017		June 30, 2016
Warrants		2,060,000		2,385,000
Options		2,147,000		2,187,000
		4,207,000		4,572,000

The number of securities not included in the diluted net loss per share for the three and six months ended June 30, 2017 was 4,207,000, as their effect would have been anti-dilutive due to the net loss in each period.

The number of securities not included in the diluted net loss per share for the three and six months ended June 30, 2016 was 4,572,000, as their effect would have been anti-dilutive due to the net loss in each period.

Note D – Litigation/Legal Matters

In February 2017, the Company filed a complaint in the Supreme Court of the State of New York in Columbia County against Premier Biotech Inc., Premier Biotech Labs, LLC and its principals, including its President Todd Bailey, and Peckham Vocational Industries, Inc. (together the “Defendants”). Mr. Bailey formerly served as the Company’s Vice President of Sales and Marketing, and as a sales consultant until December 23, 2016. The complaint seeks preliminary and permanent injunctions and a temporary restraining order against Todd Bailey (for his benefit or the benefit of another party or entity) related to the solicitation of Company customers as well as damages related to any profits and revenues that would result from actions taken by the Defendants related to Company customers. In March 2017, the complaint was moved to the federal court in the Northern District of New York. In April 2017, the Defendants filed a motion to dismiss, to which the Company responded on April 21, 2017. As of the date of this report, the Company is awaiting the courts rulings on the parties’ motions.

In addition, from time to time, the Company may be named in legal proceedings in connection with matters that arise during the normal course of business. While the ultimate outcome of any such litigation cannot be predicted, if we are unsuccessful in defending any such litigation, the resulting financial losses could have an adverse effect on the financial position, results of operations and cash flows of the Company. We are aware of no significant litigation loss contingencies for which management believes it is both probable that a liability has been incurred and that the amount of the loss can be reasonably estimated.

Note E – Line of Credit and Debt

	June 30, 2017			December 31, 2016
Loan and Security Agreement with Cherokee Financial, LLC: 5 year note at an annual interest rate of 8% plus a 1% annual oversight fee, interest only and oversight fee paid quarterly with first payment being made on May 15, 2015, annual principal reduction payment of $75,000 due each year beginning on February 15, 2016, with a final balloon payment being due on February 15, 2020. Loan is collateralized by a first security interest in building, land and property.	$	1,050,000		$	1,125,000
Crestmark Line of Credit: Line of credit (with a current termination date of June 22, 2020) with interest payable at a variable rate based on WSJ Prime plus 2% with a floor or 5.25%; loan fee of 0.5% annually & monthly maintenance fee of 0.3% on actual loan balance from prior month. Early termination fee of 2% if terminated in year 2 or after (and prior to natural expiration). Loan is collateralized by first security interest in receivables and inventory.		594,000			639,000
Crestmark Equipment Term Loan: 38 month equipment loan related to the purchase of manufacturing equipment, at an interest rate of WSJ Prime Rate plus 3%; or 7.25% as of the date of this report.		37,000			0
		1,681,000			1,764,000
Less debt discount & issuance costs (Cherokee Financial, LLC Loan)		(250,000	)		(297,000	)
Total debt, net		1,431,000			1,467,000
Current portion		681,000			714,000
Long-term portion, net of current portion	$	750,000		$	753,000

10

LOAN AND SECURITY AGREEMENT WITH CHEROKEE FINANCIAL, LLC

On March 26, 2015, the Company entered into a LSA with Cherokee Financial, LLC (the “Cherokee LSA”). The purpose of the Cherokee LSA was to refinance, at a better interest rate, the Company’s Series A Debentures and Cantone Asset Management Bridge Loan (both of which matured on February 1, 2015), as well as the Company’s Mortgage Consolidation Loan with First Niagara Bank (“First Niagara”). The loan is collateralized by a first security interest in real estate and machinery and equipment. Under the Cherokee LSA, the Company was provided the sum of $1,200,000 in the form of a 5-year Note at an annual interest rate of 8%. The Company is making interest only payments quarterly on the Cherokee Note, with the first interest payment paid on May 15, 2015. The Company is also required to make an annual principal reduction payment of $75,000 on each anniversary of the date of the closing; with the first principal reduction payment being made on February 15, 2016 and the most recent principal reduction payment being made on February 16, 2017. A final balloon payment is due on March 26, 2020. In addition to the 8% interest, the Company pays Cherokee Financial, LLC (“Cherokee”) a 1% annual fee for oversight and administration of the loan. This oversight fee is paid in cash and is paid contemporaneously with the quarterly interest payments. The Company can pay off the Cherokee Note at anytime with no penalty; except that a 1% administration fee would be required to be paid to Cherokee to close out all participations.

The Company issued 1.8 million restricted shares of the Company’s common stock to Cherokee for payment of fees. In addition, because the loan was not repaid in full as of March 19, 2016, the Company issued another 600,000 restricted shares of common stock to Cherokee in March 2016.

As placement agent for the transaction, Cantone Research, Inc. (“CRI”) received a 5% cash fee on the $1.2 million, or $60,000, and 200,000 restricted shares of the Company’s common stock. In addition, because the loan was not repaid in full as of March 19, 2016, the Company issued another 196,000 restricted shares of common stock to CRI in March 2016.

The Company received net proceeds of $80,000 after $1,015,000 of debt payments, $60,000 in placement agent fees, $19,000 in legal fees, $19,000 in expenses, $3,000 in state filing fees and $4,000 in interest expense (for 8% interest on $511,000 in new participations received from February 24, 2015 through March 25, 2015). With the adoption of ASU No. 2015-03 in the First Quarter 2016, these transaction costs (with the exception of the interest expense) are now being deducted from the balance on the Cherokee LSA and are being amortized over the term of the debt.

From these net proceeds, in April 2015, the Company also paid $15,000 in interest expense related to 15% interest on $689,000 in Series A Debentures and CAM Bridge Loan for the period of February 1, 2015 through March 25, 2015.

The Company recognized $84,000 in interest expense related to the Cherokee LSA in the six months ended June 30, 2017 (of which $47,000 is debt issuance cost amortization recorded as interest expense as a result of the adoption of new accounting standards in the first quarter of 2016, and $91,000 in interest expense related to the Cherokee LSA in the six months ended June 30, 2016 (of which $43,000 is debt issuance cost amortization recorded as interest expense). The Company recognized $44,000 in interest expense related to the Cherokee LSA in the three months ended June 30, 2017 (of which $23,000 is debt issuance cost amortization recorded as interest expense), and $47,000 in interest expense related to the Cherokee LSA in the three months ended June 30, 2016 (of which $23,000 is debt issuance cost amortization recorded as interest expense). The Company had $11,000 in accrued interest expense at June 30, 2017.

As of June 30, 2017, the balance on the Cherokee LSA is $1,050,000, however the discounted balance is $800,000. As of December 31, 2016, the balance on the Cherokee LSA was $1,125,000, however the discounted balance, net of debt discount and debt issuance costs was $828,000.

LINE OF CREDIT WITH CRESTMARK BANK (“CRESTMARK”)

On June 29, 2015 (the “Closing Date”), the Company entered into a three-year Loan and Security Agreement (“LSA”) with Crestmark, a new Senior Lender, to refinance the Company’s Line of Credit with Imperium Commercial Finance, LLC (“Imperium”). The Crestmark Line of Credit is used for working capital and general corporate purposes. On May 1, 2017, the Company entered into term loan with Crestmark in the amount of $38,000 related to the purchase of manufacturing equipment. The Company executed an amendment to its LSA with Crestmark and to its Promissory Note with Crestmark. The amendments addressed the inclusion of the term loan into the Crestmark LSA and an extension of the Company’s line of credit with Crestmark. Apart from the extension of the LSA, no terms of the line of credit were changed in the amendment. The interest rate on the term loan is the WSJ Prime Rate plus 3%; or 7.25% as of the date of this report. The termination date of the Crestmark line of credit was changed from June 22, 2018 to June 22, 2020 under the amendments.

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Under the LSA, Crestmark is providing the Company with a Line of Credit of up to $1,500,000 (“Maximum Amount”) with a minimum loan balance requirement of $500,000. The Line of Credit is secured by a first security interest in the Company’s inventory, and receivables and security interest in all other assets of the Company (in accordance with permitted prior encumbrances).

The Maximum Amount is subject to an Advance Formula comprised of: 1) 90% of Eligible Accounts Receivables (excluding, receivables remaining unpaid for more than 90 days from the date of invoice and sales made to entities outside of the United States), and 2) up to 40% of eligible inventory plus up to 10% of Eligible Generic Packaging Components not to exceed the lesser of $350,000 (“Inventory Sub-Cap Limit”), or 100% of the Eligible Accounts Receivable.

So long as any obligations are due to Crestmark, the Company must comply with a minimum Tangible Net Worth (“TNW”) Covenant. Under the LSA, as amended, the Company must maintain a TNW of at least $650,000. Additionally, if a quarterly net income is reported, the TNW covenant will increase by 50% of the reported net income. If a quarterly net loss is reported, the TNW covenant will remain the same as the prior quarter’s covenant amount. TNW is defined as: Total Assets less Total Liabilities less the sum of (i) the aggregate amount of non-trade accounts receivables, including accounts receivables from affiliated or related persons, (ii) prepaid expenses, (iii) deposits, (iv) net lease hold improvements, (v) goodwill and (vi) any other asset that would be treated as an intangible asset under GAAP; plus Subordinated Debt. Subordinated Debt means any and all indebtedness presently or in the future incurred by the Company to any creditor of the Company entering into a written subordination agreement with Crestmark. The Company is in compliance with this covenant at June 30, 2017.

If the Company terminates the LSA prior to June 22, 2020, an early exit fee of 2% of the Maximum Amount (plus any additional amounts owed to Crestmark at the time of termination) would be due.

In the event of a default of the LSA, which includes but is not limited to, failure of the Company to make any payment when due and non-compliance with the TNW covenant, Crestmark is permitted to charge an Extra Rate. The Extra Rate is the Company’s then current interest rate plus 12.75% per annum.

Under the LSA, interest on the Crestmark Line of Credit is at a variable rate based on the Wall Street Journal Prime Rate plus 2% with a floor of 5.25%. The WSJ prime rate was increased another .25% effective June 15, 2017, so as of the date of this report, the interest only rate on the Crestmark Line of Credit is 6.25%. In addition to the interest rate, on the Closing Date and on each one-year anniversary date thereafter, the Company will pay Crestmark a Loan Fee of 0.50%, or $7,500, and a Monthly Maintenance Fee of 0.30% of the actual average monthly loan balance from the prior month will be paid to Crestmark. As of the date of this report, the interest rate in effect is 10.93% (with all fees; including the weighted annual fee, which is charged on the closing date anniversary and is $7,500 regardless of our balance on the line of credit).

In addition to the Loan Fee paid to Crestmark on the Closing Date, the Company had to pay a success fee (i.e. early termination fee) to Imperium in the amount of $50,000 on the Closing Date, and a Broker’s Fee of 5%, or $75,000, to Landmark Pegasus Inc. Prior to the Closing, the Company paid $12,000 in due diligence fees to Crestmark. The Company also incurred $3,000 of its own legal costs related to the Crestmark Line of Credit. With the exception of the early term fee ($50,000) paid to Imperium (which was fully expensed in the year ended December 31, 2015), these expenses are all being amortized over the initial term of the Crestmark Line of Credit, or three years. The Company recognized $16,000 of this expense in the six months ended June 30, 2017 and June 30, 2016. The Company recognized $8,000 of this expense in the three months ended June 30, 2017 and June 30, 2016.

The Company recognized $50,000 of interest expense in the six months ended June 30, 2017 (of which $16,000 is debt issuance cost amortization recorded as interest expense as a result of the adoption of new accounting standards) and $47,000 in interest expense in the six months ended June 30, 2016 (of which $16,000 is debt issuance cost amortization recorded as interest expense). The Company recognized $24,000 of interest expense in the three months ended June 30, 2017 (of which $8,000 is debt issuance cost amortization recorded as interest expense) and $23,000in interest expense in the three months ended June 30, 2016 (of which $8,000 is debt issuance cost amortization recorded as interest expense.

Given the nature of the administration of the Crestmark Line of Credit, at June 30, 2017, the Company had $0 in accrued interest expense related to the Crestmark Line of Credit, and there is $0 in additional availability under the Crestmark Line of Credit.

As of June 30, 2017, the balance on the Crestmark Line of Credit was $594,000, and as of December 31, 2016, the balance on the Crestmark Line of Credit was $639,000.

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EQUIPMENT LOAN WITH CRESTMARK

On May 1, 2017, the Company entered into term loan with Crestmark in the amount of $38,000 related to the purchase of manufacturing equipment. The equipment loan is collateralized by a first security interest in a specific piece of manufacturing equipment. The Company executed an amendment to its LSA with Crestmark and to its Promissory Note with Crestmark. The amendments addressed the inclusion of the term loan into the LSA and an extension of the Company’s line of credit with Crestmark. No terms of the line of credit were changed in the amendment. The interest rate on the term loan is the WSJ Prime Rate plus 3%; or 7.25% as of the date of this report. The termination date of the Crestmark line of credit was changed from June 22, 2018 to June 22, 2020 under the amendments. The balance on the equipment loan was $37,000 as of June 30, 2017.

NOTE F – Stock Options and Warrants

The Company currently has two non-statutory stock option plans, the Fiscal 2001 Non-statutory Stock Option Plan (the “2001 Plan”) and the 2013 Equity Compensation Plan (the “2013 Plan”). Both plans have been adopted by our Board of Directors and approved by our shareholders. Both the 2001 Plan and the 2013 Plan have options available for future issuance. Any common shares issued as a result of the exercise of stock options would be new common shares issued from our authorized issued shares.

During the three months ended June 30, 2017, the Company issued options to purchase 20,000 shares of stock to each of its two non-employee board members as an annual stock option grant (for a total of 40,000 options) under the 2001 Plan. During the three months ended June 30, 2016, the Company issued options to purchase 20,000 shares of common stock to each of its four non-employee board members as an annual stock option grant (for a total of 80,000 options) under the 2001 Plan.

Stock option activity for the six months ended June 30, 2017 and June 30, 2016 is summarized as follows (the figures contained within the tables below have been rounded to the nearest thousand):

	Six months ended June 30, 2017						Six months ended June 30, 2016
	Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value as of June 30, 2017		Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value as of June 30, 2016
Options outstanding at beginning of period		2,107,000	$	0.13				1,435,000		$	0.14
Granted		40,000	$	0.13				830,000		$	0.11
Exercised		0		NA				0			NA
Cancelled/expired		0		NA				(78,000	)	$	0.18
Options outstanding at end of period		2,147,000	$	0.13	$	15,000		2,187,000		$	0.13	$	16,000
Options exercisable at end of period		1,647,000	$	0.13				1,189,000		$	0.14

The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the six months ended June 30, 2017 and June 30, 2016:

	Six months ended
	2017	2016
Volatility	81%	62% - 66%
Expected term (years)	10 years	10 years
Risk-free interest rate	2.16%	1.57% - 1.94%
Dividend yield	0%	0%

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The Company recognized $23,000 in share based payment expense in the six months ended June 30, 2017 and $36,000 in share based payment expense in the six months ended June 30, 2016. The Company recognized $11,000 in share based payment expense in the three months ended June 30, 2017 and $17,000 in share based payment expense in the three months ended June 30, 2016. As of June 30, 2017, there was approximately $26,000 of total unrecognized compensation cost related to non-vested stock options, which vest over time. The cost is expected to be recognized over a period ranging from 6-11 months.

Warrants

Warrant activity for the six months ended June 30, 2017 and June 30, 2016 is summarized as follows:

	Six months ended June 30, 2017					Six months ended June 30, 2016
	Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value as of June 30, 2017	Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value as of June 30,   2016
Warrants outstanding at beginning of period		2,060,000	$	0.18			2,385,000	$	0.17
Granted		0		NA			0		NA
Exercised		0		NA			0		NA
Cancelled/expired		0		NA			0		NA
Warrants outstanding at end of period		2,060,000	$	0.18	None		2,385,000	$	0.17	$	0
Warrants exercisable at end of period		2,060,000	$	0.18			2,385,000	$	0.17

In the six months ended June 30, 2017 and June 30, 2016, the Company recognized $0 in debt issuance and deferred finance costs related to the issuance of the above warrants outstanding. In the three months ended June 30, 2017 and June 30, 2016, the Company recognized $0 in debt issuance and deferred finance costs related to the issuance of the above warrants. As of June 30, 2017, there was $0 of total unrecognized expense.

NOTE G – SUBSEQUENT EVENT

On July 10, 2017, the Company was notified that it was not awarded a contract with a state agency for which it has held a contract in excess of 10 years. The contract in question is included in the February 2016 complaint that the Company filed in the Supreme Court of the State of New York in Columbia County against Premier Biotech Inc., Premier Biotech Labs, LLC (“together “Premier Biotech”) and its principals, including its President Todd Bailey, and Peckham Vocational Industries, Inc (“Peckham”). (together the “Defendants”). The complaint seeks preliminary and permanent injunctions and a temporary restraining order against the Defendants (for their benefit or the benefit of another party or entity) related to the solicitation of Company customers (specifically related to this customer and others) as well as damages related to any profits and revenues that would result from actions taken by the Defendants related to Company customers (specifically related to this customer and others). The Company believes that the Defendants actions related to this customer and a RFP that was issued by the state agency resulted in the loss of the contract award to the Company and the award of the contract to Peckham and Premier Biotech. This contract historically accounted for 10-15% of the Company’s annual revenue. The Company will continue to hold its current contract with the agency through September 30, 2017. The Company did protest the award of the contract to Peckham and Premier Biotech, and the state agency advised the Company on July 26, 2017 that they denied the Company’s protest of the award. The Company is currently reviewing whether further actions can be taken related to this account.

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

General

The following discussion and analysis provides information, which we believe is relevant to an assessment and understanding of our financial condition and results of operations. The discussion should be read in conjunction with the Interim Condensed Financial Statements contained herein and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. Certain statements contained in this Quarterly Report on Form 10-Q, including, without limitation, statements containing the words “believes”, “anticipates”, “estimates”, “expects”, “intends”, “projects”, and words of similar import, are forward-looking as that term is defined by the Private Securities Litigation Reform Act of 1995 (“1995 Act”), and in releases issued by the United State Securities and Exchange Commission (the “Commission”). These statements are being made pursuant to the provisions of the 1995 Act and with the intention of obtaining the benefits of the “Safe Harbor” provisions of the 1995 Act. We caution that any forward-looking statements made herein are not guarantees of future performance and that actual results may differ materially from those in such forward-looking statements as a result of various factors, including, but not limited to, any risks detailed herein, in our “Risk Factors” section of our Form 10-K for the year ended December 31, 2016, in our most recent reports on Form 10-Q and Form 8-K and from time to time in our other filings with the Commission, and any amendments thereto. Any forward-looking statement speaks only as of the date on which such statement is made, and we are not undertaking any obligation to publicly update any forward-looking statements. Readers should not place undue reliance on these forward-looking statements.

Overview/Plan of Operations

Our ability to maintain and/or increase sales continues to be impacted by a very cost-competitive market currently dominated by products made outside of the United States. Evidenced by the fact that sales in the six months ended June 30, 2017 decreased again when compared to the same period last year.

During the six months ended June 30, 2017, we recorded an operating loss of $88,000. This compares to an operating loss of $59,000 in the same period last year. Decreased operating expenses were the primary cause of the increase in operating loss (relative to sales). Net loss in the six months ended June 30, 2017 was $203,000, compared to a net loss of $43,000 in the same period last year. This is primarily due to other income of $155,000 (primarily related to a tech transfer with a contract manufacturing customer) in the six months ended June 30, 2016 that did not reoccur in the six months ended June 30, 2017.

We had cash provided by operating activities of $116,000 in the six months ended June 30, 2017. This compares to cash provided by operating activities of $185,000 in the six months ended June 30, 2016.

We continuously examine all expenses in efforts to achieve profitability (when/if sales levels improve) or to minimize losses going forward (if sales continue to decline). Over the course of the last two fiscal years (Fiscal 2016 and Fiscal 2015), we refinanced substantially all of our existing debt at lower interest rates, manufactured our products in a partially consolidated operating environment, and maintained a salary and commission deferral program; all as part of our efforts to decrease expenses and improve cash flow.

The salary and commission deferral program previously referenced continued throughout the six months ended June 30, 2017. The deferral program currently consists of a 20% salary deferral for our executive officer and our non-executive VP Operations. As of June 30, 2017, we had total deferred compensation owed of $235,000. Over the course of the program, we repaid portions of the deferred compensation (with $16,000 in payments in the six months ended June 30, 2017 and $42,000 in payments in the six months ended June 30, 2016.). As cash flow from operations allows, we intend to continue to make paybacks, however the deferral program is continuing and we expect it will continue for up to another 12 months.

We continue to believe that new products and our ability to sell those products in new markets will be a future growth driver. We are still in the process of applying to the U.S. Food and Drug Administration for a marketing clearance to sell an all-inclusive, urine based, drug-testing cup to customers requiring a CLIA waived product. The process has taken longer than anticipated but we are hopeful that will we receive the clearance in the near future. Although our primary markets continue to be extremely price-competitive we remain hopeful that when/if marketing clearance is received by the FDA for our all-inclusive drug testing cup, we will be able to garner new sales in clinical markets (such as pain management and drug treatment) because although price is always a factor, quality and accuracy are equally important in these clinical markets.

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New assays and product platform developments are also in our future research and development plans. We remain focused on selling our point of collection drugs of abuse tests, and growing our business through direct sales and select distributors.

Over the course of the last 12 months, we have reorganized and restructured our sales and marketing department. In addition, we are bringing on new products and service offerings to diversify our revenue stream. These new products and services (through relationships with third parties) include products for the detection of alcohol, alternative sample options for drug testing (such as lab based oral fluid testing and hair testing) as well as toxicology management services. In addition, we are now offering customers lower-cost alternatives for onsite drug testing. And finally, we are reviewing our contract manufacturing operations in efforts to capitalize on offerings in that area. We have not derived any significant revenue from these new additions; however, the majority of the relationships were only finalized in March/April 2017.

In September 2016, our contract manufacturing sales began to decrease on an annual basis due to a manufacturing shift with one of our contract customers. More specifically, as a result of a tech transfer with the customer, they are now their own primary supplier with the Company moving into a position of back up or secondary supplier. Although contract manufacturing is not considered a material portion of our net sales, given this expected change, we are making efforts to identify and secure new contract work and possible diversification alternatives. In connection with the tech transfer, we received a $300,000 tech transfer fee from this customer. We recognized $150,000 related to this tech transfer fee as other income in the six months ended June 30, 2016.

Our continued existence is dependent upon several factors, including our ability to: 1) raise revenue levels even though we have suffered the loss of a material contract that will impact sales starting October 1, 2017, 2) control costs to generate positive cash flows, 3) maintain our current credit facilities or refinance our current credit facilities if necessary, and 4) if needed, our ability to obtain working capital by selling additional shares of our common stock.

Results of operations for the six months ended June 30, 2017

compared to the six months ended June 30, 2016

NET SALES: Net sales for the six months ended June 30, 2017 decreased 11.9% when compared to net sales in the six months ended June 30, 2016. The decrease in sales is primarily a result of the anticipated decrease in contract manufacturing sales in the six months ended June 30, 2017 when compared to the six months ended June 30, 2016. More specifically, contract manufacturing sales declined by approximately $116,000. The remaining $238,000 in decreased sales resulted primarily from a decrease in government sales (most of which is due to the loss of an account in the fourth quarter of the year ended December 31, 2016). These declines were partially offset by an increase in national accounts and international sales to Latin and South America.

GROSS PROFIT: Gross profit in the six months ended June 30, 2017 decreased to 43.1% of net sales compared to 45.0% of net sales in the six months ended June 30, 2016. While we are still maintaining manufacturing efficiencies, there were certain periods within the six months ended June 30, 2017 that we produced less testing strips due to the product sales mix.

OPERATING EXPENSES: Operating expenses decreased 12.7% in the six months ended June 30, 2017 compared to the six months ended June 30, 2016. Expenses in research and development and selling and marketing decreased while general and administrative expense increased. More specifically:

Research and development (“R&D”)

R&D expense decreased 37.6% when comparing the six months ended June 30, 2017 with the same period last year. Decreased FDA compliance costs associated with the timing of actions taken related to our FDA marketing clearance application) were partially offset by an increase in supplies and materials. Our R&D department will continue to focus their efforts on the enhancement of current products, the development of new testing assays, new product platforms and the evaluation of contract manufacturing opportunities.

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Selling and marketing

Selling and marketing expense in the six months ended June 30, 2017 decreased 32.5% when compared to the same period last year. One of the primary reasons for the decline in expenses is related to decreased commission expense. In the latter part of December 2016, we terminated our relationship with a sales consultant due to competitive issues that arose during our relationship; we subsequently filed a complaint against this consultant in the early part of 2017 (See Note D – Litigation/Legal Matters). In addition to the decline in commissions, sales salaries and benefits, customer relations expense, postage and marketing consulting expenses decreased. These declines were minimally offset by an increase in costs associated with trade show attendance. Our direct sales force will continue to focus their efforts in our target markets, which include, but are not limited to, Workplace, Government, and Clinical (i.e. pain management and drug treatment) and in the forensic and international markets for our oral fluid product. Our sales force has also started to promote new products and service offerings to diversify our revenue stream. These new products and services (through relationships with third parties) include products for the detection of alcohol, alternative sample options for drug testing (such as lab based oral fluid testing and hair testing) as well as toxicology management services, and lower-cost alternatives for onsite drug testing.

General and administrative (“G&A”)

G&A expense increased 5.3% in the six months ended June 30, 2017 when compared to the same period last year. Increases in legal fees (due to the initiation of litigation in the early part of 2017; see Note D – Litigation/Legal Matters), and accounting fees were partially offset by reduced expenses related to investor relations (due to decreased travel), shipping supplies, telephone and non-cash compensation (I.e. share based payment expense; due to less options outstanding subject to amortization) Share based payment expense was $22,000 in the six months ended June 30, 2017 compared to $36,000 in the six months ended June 30, 2016.

Results of operations for the three months ended June 30, 2017

compared to the three months ended June 30, 2016

NET SALES: Net sales for the three months ended June 30, 2017 declined 13.2% when compared to the three months ended June 30, 2016. The decrease in sales results from a decrease in government sales (most of which is due to the loss of an account in the fourth quarter of 2016), and the anticipated decline in contract manufacturing sales. Sales in Latin America and South America increased, however sales to other parts of the world decreased (resulting in decreased international sales overall). These declines were offset by an increase in national account sales.

GROSS PROFIT: Gross profit decreased to 43.3% of net sales in the three months ended June 30, 2017 compared to gross profit of 47.1% of net sales in the three months ended June 30, 2016. While we are still maintaining manufacturing efficiencies, there were certain periods within the three months ended June 30, 2017 that we produced less testing strips due to the product sales mix.

OPERATING EXPENSES: Operating expenses decreased 14.8% in the three months ended June 30, 2017, compared to the three months ended June 30, 2016. Expenses in research and development and selling and marketing decreased while general and administrative expense increased. More specifically:

Research and development (“R&D”)

R&D expense decreased 60.0% when comparing the three months ended June 30, 2017 with the three months ended June 30, 2016. Decreased FDA compliance costs associated with the timing of actions taken related to our FDA marketing clearance application) were partially offset by an increase in supplies and materials. Our R&D department will continue to focus their efforts on the enhancement of current products, the development of new testing assays, new product platforms and the evaluation of contract manufacturing opportunities.

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Selling and marketing

Selling and marketing expense in the three months ended June 30, 2017 decreased 37.6% when compared to the three months ended June 30, 2016. One of the primary reasons for the decline in expenses is related to decreased commission expense. In the latter part of December 2016, we terminated our relationship with a sales consultant due to competitive issues that arose during our relationship; we subsequently filed a complaint against this consultant in the early part of 2017 (See Note D – Litigation/Legal Matters). In addition to the decline in commissions, sales salaries and benefits, customer relations expense, and marketing consulting expenses decreased. These declines were minimally offset by an increase in costs associated with trade show attendance. Our direct sales force will continue to focus their efforts in our target markets, which include, but are not limited to, Workplace, Government, and Clinical (i.e. pain management and drug treatment) and in the forensic and international markets for our oral fluid product. Our sales force has also started to promote new products and service offerings to diversify our revenue stream. These new products and services (through relationships with third parties) include products for the detection of alcohol, alternative sample options for drug testing (such as lab based oral fluid testing and hair testing) as well as toxicology management services, and lower-cost alternatives for onsite drug testing.

General and administrative (“G&A”)

G&A expense increased 10.5% in the three months ended June 30, 2017 when compared to G&A expense in the three months ended June 30, 2016. Increases in legal fees (due to the initiation of litigation in the early part of 2017; see Note D – Litigation/Legal Matters), accounting fees and outside service fees (due to the timing of our ISO audit in 2017 versus 2016) were partially offset by reduced expenses related to telephone and non-cash compensation (i.e. share based payment expense; due to less options outstanding subject to amortization) Share based payment expense was $11,000 in the three months ended June 30, 2017 compared to $17,000 in the three months ended June 30, 2016.

Liquidity and Capital Resources as of June 30, 2017

Our cash requirements depend on numerous factors, including but not limited to manufacturing costs (such as raw materials, equipment, etc.), selling and marketing initiatives, product development activities, regulatory costs and effective management of inventory levels and production levels in response to sales forecasts. We expect to devote capital resources to continue selling and marketing initiatives and product development/research and development activities. We are examining other growth opportunities including strategic alliances. Given our current and historical cash position, we expect such activities would need to be funded from the issuance of additional equity or additional credit borrowings, subject to market and other conditions. Our financial statements for the year ended December 31, 2016 were prepared assuming we will continue as a going concern.

Our current cash balances, together with cash generated from future operations and amounts available under our credit facilities may not be sufficient to fund operations through August 2018. Our current line of credit expires on June 22, 2020 and has a maximum availability of $1,500,000. However, the amount available under our line of credit is based upon the balance of our accounts receivable and inventory. As of June 30, 2017, based on our availability calculation, there were no additional amounts available under our line of credit because we draw any balance available on a daily basis. If sales levels decline further, we will have reduced availability on our line of credit due to decreased accounts receivable balances. In addition, we would expect our inventory levels to decrease if sales levels decline further, which would result in further reduced availability on our line of credit. If availability under our line of credit is not sufficient to satisfy our working capital and capital expenditure requirements, we will be required to obtain additional credit facilities or sell additional equity securities, or delay capital expenditures. There is no assurance that such financing will be available or that we will be able to complete financing on satisfactory terms, if at all.

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As of June 30, 2017, we had the following debt/credit facilities:

Facility	Debtor	Balance as of June 30, 2017
Loan and Security Agreement	Cherokee Financial, LLC	$	1,050,000
Revolving Line of Credit	Crestmark Bank	$	594,000
Capital Equipment Loan	Crestmark Bank	$	37,000

Working Capital

Our working capital was $668,000 at June 30, 2017; this is a decrease of $125,000 when compared to working capital of $793,000 at December 31, 2016. This decrease in working capital is primarily the result of decreased sales. We have historically satisfied working capital requirements through cash from operations and debt.

Dividends

We have never paid any dividends on our common shares and anticipate that all future earnings, if any, will be retained for use in our business, and therefore, we do not anticipate paying any cash dividends.

Cash Flow, Outlook/Risk

We do not expect significant increases in expenses during the year ending December 31, 2017 and as evidenced by our operating expenses for the year ended December 31, 2016 (“Fiscal 2016”), we have taken steps (and will continue to take steps) to ensure that operating expenses and manufacturing costs remain in line with sales levels. In 2017, we will continue to focus our efforts on improving sales. Such steps include, but are not limited to, obtaining a marketing clearance from FDA for one of our all-inclusive drug testing cups (allowing us to further penetrate Clinical markets such as pain management and drug treatment), and entering into strategic relationships with third parties to offer additional products and services to our customers. This includes products for the detection of alcohol, alternative sample options for drug testing (such as lab based oral fluid testing and hair testing) as well as toxicology management services, and lower-cost alternatives for onsite drug testing. We are hopeful that these additional product and service offerings could have a positive impact on sales in the future. In the six months ended June 30, 2017, we continued to utilize cash resources to complete our FDA marketing application process and to take other steps that would result in increased sales. We do not believe expenditures related to our marketing clearance will continue throughout the year ending December 31, 2017.

None of these efforts related to sales, or any other efforts being taken related to other operational activities, resulted in a substantial increase in cash requirements in the six months ended June 30, 2017. In the second quarter of the year ended December 31, 2016, we received our final payment of $150,000 related to a tech transfer with one of our contract-manufacturing customers. The upcoming loss of a state agency contract starting October 1, 2017 is expected to have a material impact on our sales. If we are unable to recoup this loss (which has historically been 10-15% of our annual sales), it is possible that our current line of credit (and advance rates) would not be adequate for our cash requirements in the year ending December 31, 2017, especially if expense levels do not decline in line with the sales decline. In addition, extraordinary events could occur that would result in unexpected, increased expenditures.

If events and circumstances occur such that 1) we do not meet our current operating plans to increase sales, 2) we are unable to raise sufficient additional equity or debt financing, or 3) our credit facilities are insufficient or not available, we may be required to further reduce expenses or take other steps which could have a material adverse effect on our future performance.

Our ability to repay our current debt will depend primarily upon our future operating performance, which may be affected by the loss of a material contract in October 2017, general economic, financial, competitive, regulatory, business and other factors beyond our control, including those discussed herein. In addition, we cannot assure you that future borrowings or equity financing will be available for the payment of any indebtedness we may have.

Our failure to comply with the covenant under our revolving credit facility could result in an event of default, which, if not cured or waived, could result in the Company being required to pay higher costs associated with the indebtedness. If we are forced to refinance our debt on less favorable terms, our results of operations and financial condition could be adversely affected by increased costs and rates. We may also be forced to pursue one or more alternative strategies, such as restructuring, selling assets, reducing or delaying capital expenditures or seeking additional equity capital. There can be no assurances that any of these strategies could be implemented on satisfactory terms, if at all.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this item.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer (Principal Executive Officer)/Chief Financial Officer (Principal Financial Officer), together with other members of management, has reviewed and evaluated the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on this review and evaluation, our Principal Executive Officer/Principal Financial Officer concluded that our disclosure controls and procedures are effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner.

(b) Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the last quarterly period covered by this report 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

See Part I, Item 1, Note D in the Notes to the interim condensed Financial Statements included in this report for a description of pending legal proceedings in which we may be a party.

Item 1A.  Risk Factors

Two of our customers accounted for more than 10% of our total net sales in the year ended December 31, 2016.

Two of our customers each accounted for more than 10% of our total net sales in the year ended December 31, 2016. Although we have entered into written purchase agreements with these customers, neither customer has minimum purchase obligations and they could stop buying products from us with adequate notice outlined in their contracts. A reduction, delay or cancellation of orders from these customers or the loss of one or both of these customers would reduce our revenues. Early in 2017, one of these customers (a state agency) issued a Request for Proposal (RFP) to which many entities responded. In July 2017, we were informed that we were not awarded the RFP; rather it was issued to an entity that we are currently suing for their actions taken related to this RFP. This state agency is expected to cease buying from us starting October 1, 2017. This customer was historically 10-15% of our annual sales. Due to the timing of the contract loss in the year ending December 31, 2017, the full impact of this contract loss will not be evident until the year ending December 31, 2018. We currently have a contract in place with the other customer that does not expire in the near future. However, there can be no assurance that this customer, or any of our current customers will continue to place orders, that orders by existing customers will continue at current or historical levels or that we will be able to obtain orders from new customers.

We rely on intellectual property rights and contractual non-disclosure obligations to protect our proprietary information. These rights and obligations may not adequately protect our proprietary information, and an inability to protect our proprietary information can harm our business.

20

We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality procedures and contractual provisions to protect our proprietary information. From an intellectual property perspective, we currently have a total of 30 patents related to our drug test products. We have additional patent applications pending in the United States, and other countries, related to our drug test products. Certain trademarks have been registered in the United States and in other countries. There can be no assurance that the additional patents and/or trademarks will be granted or that, if granted, they will withstand challenge. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain information that we regard as proprietary.

Other confidential, proprietary information (such as pricing structures, customer information, vendor information, internal financial information, production processes, new product developments, product enhancements and other material, non-public information) is protected under non-disclosure agreements with our personnel and consultants. If these individuals do not comply with their obligations under these agreements, we may be required to incur significant costs to protect our confidential information and the use of this information by the breaching individual may cause harm to our business. In February 2017, we filed a complaint against Todd Bailey (a former employee and consultant of the Company) along with his companies Premier Biotech, Inc. (“Premier Biotech”) and Premier Biotech Labs as well as a Peckham Vocational Industries (“Peckham”), (among others), related to the use of our confidential and proprietary information to circumvent and interfere with our ability to respond to a Request for Proposal (RFP) from a long-standing ABMC customer. This interference resulted in the customer awarding the contract to Peckham and Premier Biotech thereby causing harm to our business.

We may also be required to incur significant costs to protect our intellectual property right under laws of the United States Patent and Trademark Office. In addition, the laws of some foreign countries do not ensure that our means of protecting our proprietary rights in the United States or abroad will be adequate. Policing and enforcement against the unauthorized use of our intellectual property and other confidential proprietary information could entail significant expenses and could prove difficult or impossible. Such significant expenditures could have a material adverse effect on our results of operations.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

31.1/31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer/Chief Financial Officer

32.1/32.2 Certification of the Chief Executive Officer/Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101 The following materials from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Balance Sheet, (ii) Condensed Statements of Income (iii) Condensed Statements of Cash Flows, and (iv) Notes to Condensed Financial Statements.

21

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERICAN BIO MEDICA CORPORATION
(Registrant)
By:	/s/ Melissa A. Waterhouse
Melissa A. Waterhouse
Chief Executive Officer (Principal Executive Officer)
Principal Financial Officer
Principal Accounting Officer

Dated: August 14, 2017

22

EX-31

Exhibit 31.1/Exhibit 31.2

CERTIFICATION

I, Melissa A. Waterhouse, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Bio Medica Corporation;

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. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

5. 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.

/s/ Melissa A. Waterhouse

Melissa A. Waterhouse
Chief Executive Officer (Principal Executive Officer)

Principal Financial Officer

Principal Accounting Officer

Date: August 14, 2017

EX-32

Exhibit 32.1/Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of American Bio Medica Corporation (the “Company”) on Form 10-Q for the period ending June 30, 2017 as filed with the Securities and Exchange Commission on August 14, 2017 (the “Report”), I, Melissa A. Waterhouse, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The 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 Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Melissa A. Waterhouse

Melissa A. Waterhouse

Chief Executive Officer (Principal Executive Officer)

Principal Financial Officer

Principal Accounting Officer

August 14, 2017

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 14, 2017
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Entity Registrant Name	AMERICAN BIO MEDICA CORP
Entity Central Index Key	0000896747
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	ABMC
Entity Common Stock, Shares Outstanding		29,297,333

XML

Condensed Balance Sheets - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 138,000	$ 156,000
Accounts receivable, net of allowance for doubtful accounts of $49,000 at June 30, 2017 and December 31, 2016	482,000	556,000
Inventory, net of allowance of $468,000 at June 30, 2017 and $449,000 at December 31, 2016	1,450,000	1,582,000
Prepaid expenses and other current assets	88,000	92,000
Total current assets	2,158,000	2,386,000
Property, plant and equipment, net	823,000	824,000
Patents, net	102,000	93,000
Other assets	21,000	21,000
Deferred finance costs - line of credit, net	31,000	47,000
Total assets	3,135,000	3,371,000
Current liabilities
Accounts payable	278,000	304,000
Accrued expenses and other current liabilities	263,000	276,000
Wages payable	268,000	299,000
Line of credit	594,000	639,000
Current portion of long-term debt	87,000	75,000
Total current liabilities	1,490,000	1,593,000
Long-term debt, net of current portion and deferred finance costs	725,000	753,000
Other long-term liabilities	25,000	0
Total liabilities	2,240,000	2,346,000
COMMITMENTS AND CONTINGENCIES
Stockholders' equity:
Preferred stock; par value $.01 per share; 5,000,000 shares authorized, none issued and outstanding at June 30, 2017 and December 31, 2016	0	0
Common stock; par value $.01 per share; 50,000,000 shares authorized; 29,297,333 issued and outstanding at June 30, 2017 and 28,842,788 issued and outstanding at December 31, 2016	293,000	288,000
Additional paid-in capital	21,105,000	21,037,000
Accumulated deficit	(20,503,000)	(20,300,000)
Total stockholders’ equity	895,000	1,025,000
Total liabilities and stockholders’ equity	$ 3,135,000	$ 3,371,000

XML

Condensed Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Allowance For Doubtful Accounts Receivable, Current (in dollars)	$ 49,000	$ 49,000
Inventory Valuation Reserves	$ 468,000	$ 449,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	29,297,333	28,842,788
Common stock, shares outstanding	29,297,333	28,842,788

XML

Condensed Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Net sales	$ 1,306,000	$ 1,505,000	$ 2,621,000	$ 2,975,000
Cost of goods sold	741,000	796,000	1,491,000	1,636,000
Gross profit	565,000	709,000	1,130,000	1,339,000
Operating expenses:
Research and development	22,000	55,000	68,000	109,000
Selling and marketing	176,000	282,000	372,000	551,000
General and administrative	388,000	351,000	778,000	738,000
Operating Expenses, Total	586,000	688,000	1,218,000	1,398,000
Operating loss	(21,000)	21,000	(88,000)	(59,000)
Other income / (expense):
Interest expense	(69,000)	(71,000)	(134,000)	(138,000)
Other income, net	20,000	6,000	20,000	155,000
Other income / (expense), Total	(49,000)	(65,000)	(114,000)	17,000
Net loss before tax	(70,000)	(44,000)	(202,000)	(42,000)
Income tax expense	(1,000)	0	(1,000)	(1,000)
Net loss	$ (71,000)	$ (44,000)	$ (203,000)	$ (43,000)
Basic and diluted loss per common share (in dollars per share)	$ (0.00)	$ (0.00)	$ (0.01)	$ (0.00)
Weighted average number of shares outstanding - basic & diluted (in shares)	29,242,388	27,271,408	29,043,692	26,940,917

XML

Condensed Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net loss	$ (203,000)	$ (43,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	43,000	46,000
Amortization of debt issuance costs	63,000	59,000
Provision for slow moving and obsolete inventory	19,000	42,000
Share-based payment expense	23,000	36,000
Changes in:
Accounts receivable	74,000	(48,000)
Inventory	113,000	93,000
Prepaid expenses and other current assets	54,000	19,000
Accounts payable	(26,000)	3,000
Accrued expenses and other current liabilities	(13,000)	(6,000)
Wages payable	(31,000)	(16,000)
Net cash provided by operating activities	116,000	185,000
Cash flows from investing activities:
Patent application costs	(13,000)	(6,000)
Purchase of property, plant & equipment	(38,000)	0
Net cash used in investing activities	(51,000)	(6,000)
Cash flows from financing activities:
Proceeds (payments) on debt financing	(38,000)	(75,000)
Proceeds from lines of credit	2,835,000	3,095,000
Payments on lines of credit	(2,880,000)	(3,179,000)
Net cash (used in) financing activities	(83,000)	(159,000)
Net (decrease in) / increase in cash and cash equivalents	(18,000)	20,000
Cash and cash equivalents - beginning of period	156,000	158,000
Cash and cash equivalents - end of period	138,000	178,000
Supplemental disclosures of cash flow information
Cash paid during period for interest	71,000	79,000
Cash paid during period for taxes	1,000	1,000
Consulting expense prepaid with restricted stock	50,000	49,000
Debt issuance cost paid with restricted stock	$ 0	$ 96,000

XML

Basis of Reporting

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Accounting [Text Block]

Note A - Basis of Reporting

The accompanying unaudited interim condensed financial statements of American Bio Medica Corporation (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, these unaudited interim condensed financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statement presentation. These unaudited interim condensed financial statements should be read in conjunction with audited financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. In the opinion of management, the interim condensed financial statements include all normal, recurring adjustments which are considered necessary for a fair presentation of the financial position of the Company at June 30, 2017, the results of operations for the three and six month periods ended June 30, 2017 and June 30, 2016 and, cash flows for the six month periods ended June 30, 2017 and June 30, 2016.

Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of results that may be expected for the year ending December 31, 2017. Amounts at December 31, 2016 are derived from audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

During the six months ended June 30, 2017, there were no significant changes to the Company’s critical accounting policies, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

The preparation of these interim condensed financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates estimates, including those related to product returns, bad debts, inventories, income taxes, warranty obligations, contingencies and litigation. The Company bases estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

These unaudited interim condensed financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. The independent registered public accounting firm’s report on the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, contained an explanatory paragraph regarding the Company’s ability to continue as a going concern. As of the date of this report, our current cash balances, together with cash generated from future operations and amounts available under our credit facilities may not be sufficient to fund operations through August 2018. On May 1, 2017, we extended our line of credit. The new expiration date of our line of credit is June 29, 2020. The maximum availability on our line of credit remains to be $1,500,000. However, the amount available under our line of credit is based upon our accounts receivable and inventory. As of June 30, 2017, based on our availability calculation, there were no additional amounts available under our line of credit because we draw any balance available on a daily basis. If sales levels decline further, we will have reduced availability on our line of credit due to decreased accounts receivable balances. In addition, we would expect our inventory levels to decrease if sales levels decline further, and this also will result in reduced availability on our line of credit. If availability under our line of credit is not sufficient to satisfy our working capital and capital expenditure requirements, we will be required to obtain additional credit facilities or sell additional equity securities, or delay capital expenditures. There is no assurance that such financing will be available or that we will be able to complete financing on satisfactory terms, if at all.

Recently Adopted Accounting Standards

ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 was issued in July 2015. ASU 2015-11 applies to inventory measured using the first-in, first-out (“FIFO”) or average cost methods. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company adopted ASU 2015-11 in the quarter ended March 31, 2017, and it did not have a material impact on our financial position or results of operations.

ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. ASU 2016-09 was issued in March 2016 and it simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods. Early adoption is permitted. An entity that elects early adoption of the amendment under ASU 2016-09 must adopt all aspects of the amendment in the same period. The Company adopted ASU 2016-09 in the quarter ended March 31, 2017 and it did not have a material effect on our financial position or results of operations.

ASU 2015-17, “Income Taxes”. ASU 2015-17 was issued in December 2015 and addresses simplification of the presentation of deferred income taxes. The amendments in ASU 2015-17 require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement is that deferred tax liabilities and assets, net of a tax-paying component of an entity be offset and presented as two amounts; one current and one long-term. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption was permitted. The Company adopted ASU 2015-17 in the quarter ended March 31, 2017 and it did not have a material impact on our financial position or results of operations.

Accounting Standards Issued; Not Yet Adopted

ASU 2017-09, “Compensation – Stock Compensation (Topic 718)”. ASU 2017-09 was issued in May 2017. The amendment in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. More specifically, that an entity should account for the effects of modification unless all the following are met: 1) the fair value, calculated or intrinsic value of the modified award is the same fair value, calculated or intrinsic value of the original award immediately before the original award is modified, 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original grant is modified. The current disclosure requirements in Topic 718 apply regardless of whether accounting modification is applied. ASU 2017-09 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company is in the process of evaluating the impact of ASU 2017-09.

ASU 2017-07, “Compensation - Retirement Benefits”. ASU 2017-07 was issued in March 2017. The amendments in ASU 2017-07 require an employer to report the service cost component of pension and postretirement benefits in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations. In addition, only the service cost component will be eligible for capitalization as applicable following labor. ASU 2017-07 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance. The Company is in the process of evaluating the impact of ASU 2017-07.

ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350)”. ASU 2017-04 was issued in January 2017. The amendments in ASU 2017-04 indicate that an entity will no longer perform a hypothetical purchase price allocation to measure impairment, eliminating step 2 of the goodwill impairment test. Instead, impairment will be measured using the difference of the carrying amount to the fair value of the reporting unit. The ASU is effective prospectively for annual and interim periods in fiscal years beginning after December 15, 2019, but early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Company is in the process of evaluating the impact of ASU 2017-04.

ASU 2017-01, “Business Combinations (Topic 805)”. ASU 2017-01 was issued in January 2017. The amendments in ASU 2017-01 clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of ASU 2017-01.

ASU 2016-02, “Leases”. ASU 2016-02 was issued in February 2016 and it requires a lessee to recognize a lease liability and a right-of-use asset on its balance sheet for all leases, including operating leases, with a term greater than 12 months. Lease classification will determine whether a lease is reported as a financing transaction in the income statement and statement of cash flows. ASU 2016-02 does not substantially change lessor accounting, but it does make certain changes related to leases for which collectability of the lease payments is uncertain or there are significant variable payments. Additionally, ASU 2016-02 makes several other targeted amendments including a) revising the definition of lease payments to include fixed payments by the lessee to cover lessor costs related to ownership of the underlying asset such as for property taxes or insurance; b) narrowing the definition of initial direct costs which an entity is permitted to capitalize to include only those incremental costs of a lease that would not have been incurred if the lease had not been obtained; c) requiring seller-lessees in a sale-leaseback transaction to recognize the entire gain from the sale of the underlying asset at the time of sale rather than over the leaseback term; and d) expanding disclosures to provide quantitative and qualitative information about lease transactions. ASU 2016-02 is effective for all annual and interim periods beginning January 1, 2019, and is required to be applied retrospectively to the earliest period presented at the date of initial application, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2016-02.

ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 was issued in May 2014 and it provides guidance for revenue recognition. The core principle of ASU 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. Examples of the use of judgments and estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The update also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 provides for two transition methods to the new guidance: a retrospective approach and a modified retrospective approach. In August 2015, ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date” was issued as a revision to ASU 2014-09. ASU 2015-14 revised the effective date to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted but not prior to periods beginning after December 15, 2016 (i.e. the original adoption date per ASU No. 2014-09). The Company is currently evaluating the transition methods and the impact of adopting this ASU.

There are no other accounting pronouncements issues during the six months ended June 30, 2017 that are expected to have or that could have a significant impact on our financial position or results of operations.

Reclassifications

Certain items have been reclassified from the prior year to conform to the current year presentation.

XML

Inventory

6 Months Ended

Jun. 30, 2017

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note B – Inventory

Inventory is comprised of the following:

	June 30, 2017		December 31, 2016
Raw Materials	$	1,043,000	$	1,028,000
Work In Process		393,000		385,000
Finished Goods		482,000		618,000
Allowance for slow moving and obsolete inventory		(468,000)		(449,000)
	$	1,450,000	$	1,582,000

XML

Net Loss Per Common Share

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note C – Net Loss Per Common Share

Basic net loss per common share is calculated by dividing the net loss by the weighted average number of outstanding common shares during the period. Diluted net loss per common share includes the weighted average dilutive effect of stock options and warrants. Potential common shares outstanding as of June 30, 2017 and 2016:

	June 30, 2017		June 30, 2016
Warrants		2,060,000		2,385,000
Options		2,147,000		2,187,000
		4,207,000		4,572,000

The number of securities not included in the diluted net loss per share for the three and six months ended June 30, 2017 was 4,207,000, as their effect would have been anti-dilutive due to the net loss in each period.

The number of securities not included in the diluted net loss per share for the three and six months ended June 30, 2016 was 4,572,000, as their effect would have been anti-dilutive due to the net loss in each period.

XML

Litigation/Legal Matters

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Legal Matters and Contingencies [Text Block]

Note D – Litigation/Legal Matters

In February 2017, the Company filed a complaint in the Supreme Court of the State of New York in Columbia County against Premier Biotech Inc., Premier Biotech Labs, LLC and its principals, including its President Todd Bailey, and Peckham Vocational Industries, Inc. (together the “Defendants”). Mr. Bailey formerly served as the Company’s Vice President of Sales and Marketing, and as a sales consultant until December 23, 2016. The complaint seeks preliminary and permanent injunctions and a temporary restraining order against Todd Bailey (for his benefit or the benefit of another party or entity) related to the solicitation of Company customers as well as damages related to any profits and revenues that would result from actions taken by the Defendants related to Company customers. In March 2017, the complaint was moved to the federal court in the Northern District of New York. In April 2017, the Defendants filed a motion to dismiss, to which the Company responded on April 21, 2017. As of the date of this report, the Company is awaiting the courts rulings on the parties’ motions.

In addition, from time to time, the Company may be named in legal proceedings in connection with matters that arise during the normal course of business. While the ultimate outcome of any such litigation cannot be predicted, if we are unsuccessful in defending any such litigation, the resulting financial losses could have an adverse effect on the financial position, results of operations and cash flows of the Company. We are aware of no significant litigation loss contingencies for which management believes it is both probable that a liability has been incurred and that the amount of the loss can be reasonably estimated.

XML

Line of Credit and Debt

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note E – Line of Credit and Debt

	June 30, 2017		December 31, 2016
Loan and Security Agreement with Cherokee Financial, LLC: 5 year note at an annual interest rate of 8% plus a 1% annual oversight fee, interest only and oversight fee paid quarterly with first payment being made on May 15, 2015, annual principal reduction payment of $75,000 due each year beginning on February 15, 2016, with a final balloon payment being due on February 15, 2020. Loan is collateralized by a first security interest in building, land and property.	$	1,050,000	$	1,125,000
Crestmark Line of Credit: Line of credit (with a current termination date of June 22, 2020) with interest payable at a variable rate based on WSJ Prime plus 2% with a floor or 5.25%; loan fee of 0.5% annually & monthly maintenance fee of 0.3% on actual loan balance from prior month. Early termination fee of 2% if terminated in year 2 or after (and prior to natural expiration). Loan is collateralized by first security interest in receivables and inventory.		594,000		639,000
Crestmark Equipment Term Loan: 38 month equipment loan related to the purchase of manufacturing equipment, at an interest rate of WSJ Prime Rate plus 3%; or 7.25% as of the date of this report.		37,000		0
		1,681,000		1,764,000
Less debt discount & issuance costs (Cherokee Financial, LLC Loan)		(250,000)		(297,000)
Total debt, net		1,431,000		1,467,000
Current portion		681,000		714,000
Long-term portion, net of current portion	$	750,000	$	753,000

LOAN AND SECURITY AGREEMENT WITH CHEROKEE FINANCIAL, LLC

On March 26, 2015, the Company entered into a LSA with Cherokee Financial, LLC (the “Cherokee LSA”). The purpose of the Cherokee LSA was to refinance, at a better interest rate, the Company’s Series A Debentures and Cantone Asset Management Bridge Loan (both of which matured on February 1, 2015), as well as the Company’s Mortgage Consolidation Loan with First Niagara Bank (“First Niagara”). The loan is collateralized by a first security interest in real estate and machinery and equipment. Under the Cherokee LSA, the Company was provided the sum of $1,200,000 in the form of a 5-year Note at an annual interest rate of 8%. The Company is making interest only payments quarterly on the Cherokee Note, with the first interest payment paid on May 15, 2015. The Company is also required to make an annual principal reduction payment of $75,000 on each anniversary of the date of the closing; with the first principal reduction payment being made on February 15, 2016 and the most recent principal reduction payment being made on February 16, 2017. A final balloon payment is due on March 26, 2020. In addition to the 8% interest, the Company pays Cherokee Financial, LLC (“Cherokee”) a 1% annual fee for oversight and administration of the loan. This oversight fee is paid in cash and is paid contemporaneously with the quarterly interest payments. The Company can pay off the Cherokee Note at anytime with no penalty; except that a 1% administration fee would be required to be paid to Cherokee to close out all participations.

The Company issued 1.8 million restricted shares of the Company’s common stock to Cherokee for payment of fees. In addition, because the loan was not repaid in full as of March 19, 2016, the Company issued another 600,000 restricted shares of common stock to Cherokee in March 2016.

As placement agent for the transaction, Cantone Research, Inc. (“CRI”) received a 5% cash fee on the $1.2 million, or $60,000, and 200,000 restricted shares of the Company’s common stock. In addition, because the loan was not repaid in full as of March 19, 2016, the Company issued another 196,000 restricted shares of common stock to CRI in March 2016.

The Company received net proceeds of $80,000 after $1,015,000 of debt payments, $60,000 in placement agent fees, $19,000 in legal fees, $19,000 in expenses, $3,000 in state filing fees and $4,000 in interest expense (for 8% interest on $511,000 in new participations received from February 24, 2015 through March 25, 2015). With the adoption of ASU No. 2015-03 in the First Quarter 2016, these transaction costs (with the exception of the interest expense) are now being deducted from the balance on the Cherokee LSA and are being amortized over the term of the debt.

From these net proceeds, in April 2015, the Company also paid $15,000 in interest expense related to 15% interest on $689,000 in Series A Debentures and CAM Bridge Loan for the period of February 1, 2015 through March 25, 2015.

The Company recognized $84,000 in interest expense related to the Cherokee LSA in the six months ended June 30, 2017 (of which $47,000 is debt issuance cost amortization recorded as interest expense as a result of the adoption of new accounting standards in the first quarter of 2016, and $91,000 in interest expense related to the Cherokee LSA in the six months ended June 30, 2016 (of which $43,000 is debt issuance cost amortization recorded as interest expense). The Company recognized $44,000 in interest expense related to the Cherokee LSA in the three months ended June 30, 2017 (of which $23,000 is debt issuance cost amortization recorded as interest expense), and $47,000 in interest expense related to the Cherokee LSA in the three months ended June 30, 2016 (of which $23,000 is debt issuance cost amortization recorded as interest expense). The Company had $11,000 in accrued interest expense at June 30, 2017.

As of June 30, 2017, the balance on the Cherokee LSA is $1,050,000, however the discounted balance is $800,000. As of December 31, 2016, the balance on the Cherokee LSA was $1,125,000, however the discounted balance, net of debt discount and debt issuance costs was $828,000.

LINE OF CREDIT WITH CRESTMARK BANK (“CRESTMARK”)

On June 29, 2015 (the “Closing Date”), the Company entered into a three-year Loan and Security Agreement (“LSA”) with Crestmark, a new Senior Lender, to refinance the Company’s Line of Credit with Imperium Commercial Finance, LLC (“Imperium”). The Crestmark Line of Credit is used for working capital and general corporate purposes. On May 1, 2017, the Company entered into term loan with Crestmark in the amount of $38,000 related to the purchase of manufacturing equipment. The Company executed an amendment to its LSA with Crestmark and to its Promissory Note with Crestmark. The amendments addressed the inclusion of the term loan into the Crestmark LSA and an extension of the Company’s line of credit with Crestmark. Apart from the extension of the LSA, no terms of the line of credit were changed in the amendment. The interest rate on the term loan is the WSJ Prime Rate plus 3%; or 7.25% as of the date of this report. The termination date of the Crestmark line of credit was changed from June 22, 2018 to June 22, 2020 under the amendments.

Under the LSA, Crestmark is providing the Company with a Line of Credit of up to $1,500,000 (“Maximum Amount”) with a minimum loan balance requirement of $500,000. The Line of Credit is secured by a first security interest in the Company’s inventory, and receivables and security interest in all other assets of the Company (in accordance with permitted prior encumbrances).

The Maximum Amount is subject to an Advance Formula comprised of: 1) 90% of Eligible Accounts Receivables (excluding, receivables remaining unpaid for more than 90 days from the date of invoice and sales made to entities outside of the United States), and 2) up to 40% of eligible inventory plus up to 10% of Eligible Generic Packaging Components not to exceed the lesser of $350,000 (“Inventory Sub-Cap Limit”), or 100% of the Eligible Accounts Receivable.

So long as any obligations are due to Crestmark, the Company must comply with a minimum Tangible Net Worth (“TNW”) Covenant. Under the LSA, as amended, the Company must maintain a TNW of at least $650,000. Additionally, if a quarterly net income is reported, the TNW covenant will increase by 50% of the reported net income. If a quarterly net loss is reported, the TNW covenant will remain the same as the prior quarter’s covenant amount. TNW is defined as: Total Assets less Total Liabilities less the sum of (i) the aggregate amount of non-trade accounts receivables, including accounts receivables from affiliated or related persons, (ii) prepaid expenses, (iii) deposits, (iv) net lease hold improvements, (v) goodwill and (vi) any other asset that would be treated as an intangible asset under GAAP; plus Subordinated Debt. Subordinated Debt means any and all indebtedness presently or in the future incurred by the Company to any creditor of the Company entering into a written subordination agreement with Crestmark. The Company is in compliance with this covenant at June 30, 2017.

If the Company terminates the LSA prior to June 22, 2020, an early exit fee of 2% of the Maximum Amount (plus any additional amounts owed to Crestmark at the time of termination) would be due.

In the event of a default of the LSA, which includes but is not limited to, failure of the Company to make any payment when due and non-compliance with the TNW covenant, Crestmark is permitted to charge an Extra Rate. The Extra Rate is the Company’s then current interest rate plus 12.75% per annum.

Under the LSA, interest on the Crestmark Line of Credit is at a variable rate based on the Wall Street Journal Prime Rate plus 2% with a floor of 5.25%. The WSJ prime rate was increased another .25% effective June 15, 2017, so as of the date of this report, the interest only rate on the Crestmark Line of Credit is 6.25%. In addition to the interest rate, on the Closing Date and on each one-year anniversary date thereafter, the Company will pay Crestmark a Loan Fee of 0.50%, or $7,500, and a Monthly Maintenance Fee of 0.30% of the actual average monthly loan balance from the prior month will be paid to Crestmark. As of the date of this report, the interest rate in effect is 10.93% (with all fees; including the weighted annual fee, which is charged on the closing date anniversary and is $7,500 regardless of our balance on the line of credit).

In addition to the Loan Fee paid to Crestmark on the Closing Date, the Company had to pay a success fee (i.e. early termination fee) to Imperium in the amount of $50,000 on the Closing Date, and a Broker’s Fee of 5%, or $75,000, to Landmark Pegasus Inc. Prior to the Closing, the Company paid $12,000 in due diligence fees to Crestmark. The Company also incurred $3,000 of its own legal costs related to the Crestmark Line of Credit. With the exception of the early term fee ($50,000) paid to Imperium (which was fully expensed in the year ended December 31, 2015), these expenses are all being amortized over the initial term of the Crestmark Line of Credit, or three years. The Company recognized $16,000 of this expense in the six months ended June 30, 2017 and June 30, 2016. The Company recognized $8,000 of this expense in the three months ended June 30, 2017 and June 30, 2016.

The Company recognized $50,000 of interest expense in the six months ended June 30, 2017 (of which $16,000 is debt issuance cost amortization recorded as interest expense as a result of the adoption of new accounting standards) and $47,000 in interest expense in the six months ended June 30, 2016 (of which $16,000 is debt issuance cost amortization recorded as interest expense). The Company recognized $24,000 of interest expense in the three months ended June 30, 2017 (of which $8,000 is debt issuance cost amortization recorded as interest expense) and $23,000in interest expense in the three months ended June 30, 2016 (of which $8,000 is debt issuance cost amortization recorded as interest expense.

Given the nature of the administration of the Crestmark Line of Credit, at June 30, 2017, the Company had $0 in accrued interest expense related to the Crestmark Line of Credit, and there is $0 in additional availability under the Crestmark Line of Credit.

As of June 30, 2017, the balance on the Crestmark Line of Credit was $594,000, and as of December 31, 2016, the balance on the Crestmark Line of Credit was $639,000.

EQUIPMENT LOAN WITH CRESTMARK

On May 1, 2017, the Company entered into term loan with Crestmark in the amount of $38,000 related to the purchase of manufacturing equipment. The equipment loan is collateralized by a first security interest in a specific piece of manufacturing equipment. The Company executed an amendment to its LSA with Crestmark and to its Promissory Note with Crestmark. The amendments addressed the inclusion of the term loan into the LSA and an extension of the Company’s line of credit with Crestmark. No terms of the line of credit were changed in the amendment. The interest rate on the term loan is the WSJ Prime Rate plus 3%; or 7.25% as of the date of this report. The termination date of the Crestmark line of credit was changed from June 22, 2018 to June 22, 2020 under the amendments. The balance on the equipment loan was $37,000 as of June 30, 2017.

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Stock Options and Warrants

6 Months Ended

Jun. 30, 2017

Stockholders Equity Note [Abstract]

Stockholders Equity Note Disclosure [Text Block]

NOTE F – Stock Options and Warrants

The Company currently has two non-statutory stock option plans, the Fiscal 2001 Non-statutory Stock Option Plan (the “2001 Plan”) and the 2013 Equity Compensation Plan (the “2013 Plan”). Both plans have been adopted by our Board of Directors and approved by our shareholders. Both the 2001 Plan and the 2013 Plan have options available for future issuance. Any common shares issued as a result of the exercise of stock options would be new common shares issued from our authorized issued shares.

During the three months ended June 30, 2017, the Company issued options to purchase 20,000 shares of stock to each of its two non-employee board members as an annual stock option grant (for a total of 40,000 options) under the 2001 Plan. During the three months ended June 30, 2016, the Company issued options to purchase 20,000 shares of common stock to each of its four non-employee board members as an annual stock option grant (for a total of 80,000 options) under the 2001 Plan.

Stock option activity for the six months ended June 30, 2017 and June 30, 2016 is summarized as follows (the figures contained within the tables below have been rounded to the nearest thousand):

	Six months ended June 30, 2017						Six months ended June 30, 2016
					Aggregate						Aggregate Intrinsic Value as of
					Intrinsic Value as of June 30,				Weighted Average Exercise		June 30,
	Shares		Weighted Average Exercise Price		2017		Shares		Price		2016
Options outstanding at beginning of period		2,107,000	$	0.13				1,435,000	$	0.14
Granted		40,000	$	0.13				830,000	$	0.11
Exercised		0		NA				0		NA
Cancelled/expired		0		NA				(78,000)	$	0.18
Options outstanding at end of period		2,147,000	$	0.13	$	15,000		2,187,000	$	0.13	$	16,000
Options exercisable at end of period		1,647,000	$	0.13				1,189,000	$	0.14

The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the six months ended June 30, 2017 and June 30, 2016:

	Six months ended
	2017	2016
Volatility	81%	62% - 66%
Expected term (years)	10 years	10 years
Risk-free interest rate	2.16%	1.57% - 1.94%
Dividend yield	0%	0%

The Company recognized $23,000 in share based payment expense in the six months ended June 30, 2017 and $36,000 in share based payment expense in the six months ended June 30, 2016. The Company recognized $11,000 in share based payment expense in the three months ended June 30, 2017 and $17,000 in share based payment expense in the three months ended June 30, 2016. As of June 30, 2017, there was approximately $26,000 of total unrecognized compensation cost related to non-vested stock options, which vest over time. The cost is expected to be recognized over a period ranging from 6-11 months.

Warrants

Warrant activity for the six months ended June 30, 2017 and June 30, 2016 is summarized as follows:

	Six months ended June 30, 2017					Six months ended June 30, 2016
					Aggregate
					Intrinsic Value as of June 30,					Aggregate Intrinsic Value as of
	Shares		Weighted Average Exercise Price		2017	Shares		Weighted Average Exercise Price		June 30, 2016
Warrants outstanding at beginning of period		2,060,000	$	0.18			2,385,000	$	0.17
Granted		0		NA			0		NA
Exercised		0		NA			0		NA
Cancelled/expired		0		NA			0		NA
Warrants outstanding at end of period		2,060,000	$	0.18	None		2,385,000	$	0.17	$	0
Warrants exercisable at end of period		2,060,000	$	0.18			2,385,000	$	0.17

In the six months ended June 30, 2017 and June 30, 2016, the Company recognized $0 in debt issuance and deferred finance costs related to the issuance of the above warrants outstanding. In the three months ended June 30, 2017 and June 30, 2016, the Company recognized $0 in debt issuance and deferred finance costs related to the issuance of the above warrants. As of June 30, 2017, there was $0 of total unrecognized expense.

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SUBSEQUENT EVENT

6 Months Ended

Jun. 30, 2017

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE G – SUBSEQUENT EVENT

On July 10, 2017, the Company was notified that it was not awarded a contract with a state agency for which it has held a contract in excess of 10 years. The contract in question is included in the February 2016 complaint that the Company filed in the Supreme Court of the State of New York in Columbia County against Premier Biotech Inc., Premier Biotech Labs, LLC (“together “Premier Biotech”) and its principals, including its President Todd Bailey, and Peckham Vocational Industries, Inc (“Peckham”). (together the “Defendants”). The complaint seeks preliminary and permanent injunctions and a temporary restraining order against the Defendants (for their benefit or the benefit of another party or entity) related to the solicitation of Company customers (specifically related to this customer and others) as well as damages related to any profits and revenues that would result from actions taken by the Defendants related to Company customers (specifically related to this customer and others). The Company believes that the Defendants actions related to this customer and a RFP that was issued by the state agency resulted in the loss of the contract award to the Company and the award of the contract to Peckham and Premier Biotech. This contract historically accounted for 10-15% of the Company’s annual revenue. The Company will continue to hold its current contract with the agency through September 30, 2017. The Company did protest the award of the contract to Peckham and Premier Biotech, and the state agency advised the Company on July 26, 2017 that they denied the Company’s protest of the award. The Company is currently reviewing whether further actions can be taken related to this account.

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Basis of Reporting (Policies)

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Standards

ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 was issued in July 2015. ASU 2015-11 applies to inventory measured using the first-in, first-out (“FIFO”) or average cost methods. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company adopted ASU 2015-11 in the quarter ended March 31, 2017, and it did not have a material impact on our financial position or results of operations.

ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. ASU 2016-09 was issued in March 2016 and it simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods. Early adoption is permitted. An entity that elects early adoption of the amendment under ASU 2016-09 must adopt all aspects of the amendment in the same period. The Company adopted ASU 2016-09 in the quarter ended March 31, 2017 and it did not have a material effect on our financial position or results of operations.

ASU 2015-17, “Income Taxes”. ASU 2015-17 was issued in December 2015 and addresses simplification of the presentation of deferred income taxes. The amendments in ASU 2015-17 require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement is that deferred tax liabilities and assets, net of a tax-paying component of an entity be offset and presented as two amounts; one current and one long-term. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption was permitted. The Company adopted ASU 2015-17 in the quarter ended March 31, 2017 and it did not have a material impact on our financial position or results of operations.

Accounting Standards Issued; Not Yet Adopted

ASU 2017-09, “Compensation – Stock Compensation (Topic 718)”. ASU 2017-09 was issued in May 2017. The amendment in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. More specifically, that an entity should account for the effects of modification unless all the following are met: 1) the fair value, calculated or intrinsic value of the modified award is the same fair value, calculated or intrinsic value of the original award immediately before the original award is modified, 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original grant is modified. The current disclosure requirements in Topic 718 apply regardless of whether accounting modification is applied. ASU 2017-09 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company is in the process of evaluating the impact of ASU 2017-09.

ASU 2017-07, “Compensation - Retirement Benefits”. ASU 2017-07 was issued in March 2017. The amendments in ASU 2017-07 require an employer to report the service cost component of pension and postretirement benefits in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations. In addition, only the service cost component will be eligible for capitalization as applicable following labor. ASU 2017-07 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance. The Company is in the process of evaluating the impact of ASU 2017-07.

ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350)”. ASU 2017-04 was issued in January 2017. The amendments in ASU 2017-04 indicate that an entity will no longer perform a hypothetical purchase price allocation to measure impairment, eliminating step 2 of the goodwill impairment test. Instead, impairment will be measured using the difference of the carrying amount to the fair value of the reporting unit. The ASU is effective prospectively for annual and interim periods in fiscal years beginning after December 15, 2019, but early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Company is in the process of evaluating the impact of ASU 2017-04.

ASU 2017-01, “Business Combinations (Topic 805)”. ASU 2017-01 was issued in January 2017. The amendments in ASU 2017-01 clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of ASU 2017-01.

ASU 2016-02, “Leases”. ASU 2016-02 was issued in February 2016 and it requires a lessee to recognize a lease liability and a right-of-use asset on its balance sheet for all leases, including operating leases, with a term greater than 12 months. Lease classification will determine whether a lease is reported as a financing transaction in the income statement and statement of cash flows. ASU 2016-02 does not substantially change lessor accounting, but it does make certain changes related to leases for which collectability of the lease payments is uncertain or there are significant variable payments. Additionally, ASU 2016-02 makes several other targeted amendments including a) revising the definition of lease payments to include fixed payments by the lessee to cover lessor costs related to ownership of the underlying asset such as for property taxes or insurance; b) narrowing the definition of initial direct costs which an entity is permitted to capitalize to include only those incremental costs of a lease that would not have been incurred if the lease had not been obtained; c) requiring seller-lessees in a sale-leaseback transaction to recognize the entire gain from the sale of the underlying asset at the time of sale rather than over the leaseback term; and d) expanding disclosures to provide quantitative and qualitative information about lease transactions. ASU 2016-02 is effective for all annual and interim periods beginning January 1, 2019, and is required to be applied retrospectively to the earliest period presented at the date of initial application, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2016-02.

ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 was issued in May 2014 and it provides guidance for revenue recognition. The core principle of ASU 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. Examples of the use of judgments and estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The update also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 provides for two transition methods to the new guidance: a retrospective approach and a modified retrospective approach. In August 2015, ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date” was issued as a revision to ASU 2014-09. ASU 2015-14 revised the effective date to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted but not prior to periods beginning after December 15, 2016 (i.e. the original adoption date per ASU No. 2014-09). The Company is currently evaluating the transition methods and the impact of adopting this ASU.

There are no other accounting pronouncements issues during the six months ended June 30, 2017 that are expected to have or that could have a significant impact on our financial position or results of operations.

Reclassification, Policy [Policy Text Block]

Reclassifications

Certain items have been reclassified from the prior year to conform to the current year presentation.

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Inventory (Tables)

6 Months Ended

Jun. 30, 2017

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventory is comprised of the following:

	June 30, 2017		December 31, 2016
Raw Materials	$	1,043,000	$	1,028,000
Work In Process		393,000		385,000
Finished Goods		482,000		618,000
Allowance for slow moving and obsolete inventory		(468,000)		(449,000)
	$	1,450,000	$	1,582,000

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Net Loss Per Common Share (Tables)

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

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

Basic net loss per common share is calculated by dividing the net loss by the weighted average number of outstanding common shares during the period. Diluted net loss per common share includes the weighted average dilutive effect of stock options and warrants. Potential common shares outstanding as of June 30, 2017 and 2016:

	June 30, 2017		June 30, 2016
Warrants		2,060,000		2,385,000
Options		2,147,000		2,187,000
		4,207,000		4,572,000

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Line of Credit and Debt (Tables)

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

	June 30, 2017		December 31, 2016
Loan and Security Agreement with Cherokee Financial, LLC: 5 year note at an annual interest rate of 8% plus a 1% annual oversight fee, interest only and oversight fee paid quarterly with first payment being made on May 15, 2015, annual principal reduction payment of $75,000 due each year beginning on February 15, 2016, with a final balloon payment being due on February 15, 2020. Loan is collateralized by a first security interest in building, land and property.	$	1,050,000	$	1,125,000
Crestmark Line of Credit: Line of credit (with a current termination date of June 22, 2020) with interest payable at a variable rate based on WSJ Prime plus 2% with a floor or 5.25%; loan fee of 0.5% annually & monthly maintenance fee of 0.3% on actual loan balance from prior month. Early termination fee of 2% if terminated in year 2 or after (and prior to natural expiration). Loan is collateralized by first security interest in receivables and inventory.		594,000		639,000
Crestmark Equipment Term Loan: 38 month equipment loan related to the purchase of manufacturing equipment, at an interest rate of WSJ Prime Rate plus 3%; or 7.25% as of the date of this report.		37,000		0
		1,681,000		1,764,000
Less debt discount & issuance costs (Cherokee Financial, LLC Loan)		(250,000)		(297,000)
Total debt, net		1,431,000		1,467,000
Current portion		681,000		714,000
Long-term portion, net of current portion	$	750,000	$	753,000

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Stock Options and Warrants (Tables)

6 Months Ended

Jun. 30, 2017

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the six months ended June 30, 2017 and June 30, 2016:

	Six months ended
	2017	2016
Volatility	81%	62% - 66%
Expected term (years)	10 years	10 years
Risk-free interest rate	2.16%	1.57% - 1.94%
Dividend yield	0%	0%

Warrant [Member]

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

Warrant activity for the six months ended June 30, 2017 and June 30, 2016 is summarized as follows:

	Six months ended June 30, 2017					Six months ended June 30, 2016
					Aggregate
					Intrinsic Value as of June 30,					Aggregate Intrinsic Value as of
	Shares		Weighted Average Exercise Price		2017	Shares		Weighted Average Exercise Price		June 30, 2016
Warrants outstanding at beginning of period		2,060,000	$	0.18			2,385,000	$	0.17
Granted		0		NA			0		NA
Exercised		0		NA			0		NA
Cancelled/expired		0		NA			0		NA
Warrants outstanding at end of period		2,060,000	$	0.18	None		2,385,000	$	0.17	$	0
Warrants exercisable at end of period		2,060,000	$	0.18			2,385,000	$	0.17

Employee Stock Option [Member]

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

Stock option activity for the six months ended June 30, 2017 and June 30, 2016 is summarized as follows (the figures contained within the tables below have been rounded to the nearest thousand):

	Six months ended June 30, 2017						Six months ended June 30, 2016
					Aggregate						Aggregate Intrinsic Value as of
					Intrinsic Value as of June 30,				Weighted Average Exercise		June 30,
	Shares		Weighted Average Exercise Price		2017		Shares		Price		2016
Options outstanding at beginning of period		2,107,000	$	0.13				1,435,000	$	0.14
Granted		40,000	$	0.13				830,000	$	0.11
Exercised		0		NA				0		NA
Cancelled/expired		0		NA				(78,000)	$	0.18
Options outstanding at end of period		2,147,000	$	0.13	$	15,000		2,187,000	$	0.13	$	16,000
Options exercisable at end of period		1,647,000	$	0.13				1,189,000	$	0.14

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Basis of Reporting (Details Textual) - Crestmark Bank [Member] - USD ($)	May 01, 2017	Jun. 30, 2017
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,500,000	$ 1,500,000
Line of Credit Facility, Expiration Date	Jun. 29, 2020

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Inventory (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Inventory [Line Items]
Raw Materials	$ 1,043,000	$ 1,028,000
Work In Process	393,000	385,000
Finished Goods	482,000	618,000
Allowance for slow moving and obsolete inventory	(468,000)	(449,000)
Inventory, Net, Total	$ 1,450,000	$ 1,582,000

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Net Loss Per Common Share (Details) - shares	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Weighted Average Number Diluted Shares Outstanding Adjustment	4,207,000	4,572,000
Warrant [Member]
Weighted Average Number Diluted Shares Outstanding Adjustment	2,060,000	2,385,000
Employee Stock Option [Member]
Weighted Average Number Diluted Shares Outstanding Adjustment	2,147,000	2,187,000

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Net Loss Per Common Share (Details Textual) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,207,000	4,572,000	4,207,000	4,572,000

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Line of Credit and Debt (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 1,681,000	$ 1,764,000
Less debt discount & issuance costs (Cherokee Financial, LLC Loan)	(250,000)	(297,000)
Total debt, net	1,431,000	1,467,000
Current portion	681,000	714,000
Long-term portion, net of current portion	725,000	753,000
Cherokee Financial LLC [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	1,050,000	1,125,000
Crestmark Line of Credit [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	594,000	639,000
Crestmark Equipment Term Loan [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 37,000	$ 0

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Line of Credit and Debt (Details Textual)	6 Months Ended
	Jun. 30, 2017 USD ($)
Line of Credit Facility [Line Items]
Line of Credit Facility, Description	annual interest rate of 8% plus a 1% annual oversight fee,
Cherokee Financial LLC [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Maturity Date	May 15, 2015
Debt Instrument, Term	5 years
Line of Credit Facility, Interest Rate Description	annual interest rate of 8% plus a 1% annual oversight fee,
Line of Credit Facility, Periodic Payment, Principal	$ 75,000
Crestmark Line of Credit [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Term	3 years
Line of Credit Facility, Interest Rate Description	WSJ Prime plus 2% with a floor or 5.25%; loan fee of 0.5% annually & monthly maintenance fee of 0.3% on actual loan balance from prior month. Early termination fee of 2% if terminated in year 2 or after (and prior to natural expiration).

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Line of Credit and Debt - Loan and Security Agreement With Cherokee Financial, LLC (Details Textual) - USD ($)	1 Months Ended	3 Months Ended			6 Months Ended
	Apr. 30, 2015	Jun. 30, 2017	Jun. 30, 2016	Mar. 31, 2016	Jun. 30, 2017	Jun. 30, 2016	May 01, 2017	Dec. 31, 2016	Mar. 25, 2015
Line of Credit Facility [Line Items]
Debt Related Commitment Fees and Debt Issuance Costs		$ 0	$ 0		$ 0	$ 0
Debt Instrument, Face Amount							$ 38,000
Interest Expense, Debt					0
Debt Instrument, Unamortized Discount		$ 800,000			$ 800,000			$ 828,000
Crestmark Equipment Term Loan [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Description of Variable Rate Basis					Prime Rate plus 3%; or 7.25%
Cherokee Financial LLC [Member]
Line of Credit Facility [Line Items]
Debt Related Commitment Fees and Debt Issuance Costs					$ 47,000	23,000
Debt Instrument, Interest Rate, Stated Percentage		8.00%			8.00%
Debt Instrument, Face Amount		$ 1,200,000			$ 1,200,000
Interest Expense, Debt					11,000	47,000
Notes and Loans, Noncurrent		1,050,000			$ 1,050,000			$ 1,125,000
Annual Fee Percentage					1.00%
Debt Instrument, Annual Principal Payment		75,000			$ 75,000
Debt Instrument, Term					5 years
Administrative Fees Percentage					1.00%
Cherokee Financial LLC [Member] | Final Balloon [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Maturity Date					Mar. 26, 2020
Cherokee Loan and Security Agreement [Member]
Line of Credit Facility [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross					200,000
Placement Agent Fees					$ 60,000
Proceeds from Debt, Net of Issuance Costs					80,000
Repayments of Debt					1,015,000
Legal Fees					19,000
Debt Related Commitment Fees and Debt Issuance Costs					19,000
State Filing Fees					3,000
Interest Expense, Debt		44,000		$ 91,000	84,000	$ 43,000
Notes and Loans, Noncurrent		$ 1,200,000			1,200,000
Cherokee Loan and Security Agreement [Member] | New Participations [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Periodic Payment, Interest					$ 4,000
Debt Instrument, Interest Rate, Stated Percentage									8.00%
Debt Instrument, Face Amount									$ 511,000
Cherokee Loan and Security Agreement [Member] | Series A Debentures and CAM Bridge Loan [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Periodic Payment, Interest	$ 15,000
Debt Instrument, Interest Rate, Stated Percentage	15.00%
Debt Instrument, Face Amount	$ 689,000
Cherokee Loan and Security Agreement [Member] | Cherokee Financial LLC [Member]
Line of Credit Facility [Line Items]
Contingent Consideration Additional Restricted Shares Issuable					600,000
Stock Issued During Period, Shares, Restricted Stock Award, Gross					1,800,000
Cherokee Loan and Security Agreement [Member] | Cantone Research Inc [Member] | New Participations [Member]
Line of Credit Facility [Line Items]
Contingent Consideration Additional Restricted Shares Issuable					196,000

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Line of Credit and Debt - Line of Credit with Crestmark Bank ("Crestmark") (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	May 01, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016	Jun. 29, 2015
Line of Credit Facility [Line Items]
Line of Credit Facility, Interest Rate During Period				6.25%
Debt Related Commitment Fees and Debt Issuance Costs		$ 0	$ 0	$ 0	$ 0
Interest Expense, Debt				0
Debt Instrument, Face Amount	$ 38,000
Amortization of debt issuance costs				63,000	59,000
Long-term Debt, Gross		1,681,000		1,681,000		$ 1,764,000
Interest Expense [Member]
Line of Credit Facility [Line Items]
Amortization of debt issuance costs				8,000
Interest Expense One [Member]
Line of Credit Facility [Line Items]
Amortization of debt issuance costs				8,000
Imperium Line Of Credit [Member]
Line of Credit Facility [Line Items]
Interest Expense, Debt				0
Line Of Credit Facility Termination Fee							$ 50,000
Minimum [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	3.00%
Maximum [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	7.25%
Crestmark Bank [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,500,000	1,500,000		1,500,000
Minimum Loan Balance		500,000		$ 500,000
Debt Instrument, Fee				75,000
Debt Instrument, Fee Amount		594,000		$ 594,000		$ 639,000
Interest Expense, Debt		24,000	$ 23,000	50,000
Amortization of debt issuance costs				16,000	$ 16,000
Line of Credit Facility, Expiration Date	Jun. 29, 2020
Long-term Debt, Gross		37,000		$ 37,000
Crestmark Bank [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Expiration Date				Jun. 22, 2018
Crestmark Bank [Member] | Maximum [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Expiration Date				Jun. 22, 2020
Imperium [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Fee Amount		50,000		$ 50,000
Crestmark Loan And Security Agreeement [Member]
Line of Credit Facility [Line Items]
Minimum Net Worth Required for Compliance		$ 650,000		650,000
Debt Related Commitment Fees and Debt Issuance Costs				$ 16,000
Crestmark Loan And Security Agreeement [Member] | Crestmark Bank [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Borrowing Capacity, Description				The Maximum Amount is subject to an Advance Formula comprised of: 1) 90% of Eligible Accounts Receivables (excluding, receivables remaining unpaid for more than 90 days from the date of invoice and sales made to entities outside of the United States), and 2) up to 40% of eligible inventory plus up to 10% of Eligible Generic Packaging Components not to exceed the lesser of $350,000 (“Inventory Sub-Cap Limit”), or 100% of the Eligible Accounts Receivable.
Debt Instrument, Fee				the Company will pay Crestmark a Loan Fee of 0.50%, or $7,500, and a Monthly Maintenance Fee of 0.30% of the actual average monthly loan balance from the prior month will be paid to Crestmark.
Debt Instrument, Debt Default, Description of Violation or Event of Default				The Extra Rate is the Company’s then current interest rate plus 12.75% per annum.
Line of Credit Facility, Interest Rate Description				variable rate based on the Wall Street Journal Prime Rate plus 2% with a floor of 5.25%.
Payments of Debt Issuance Costs				$ 12,000
Legal Fees				$ 3,000
Percentage of Net Income, Increase		50.00%		50.00%
Weighted Average Annual Fee				$ 7,500
Crestmark Loan And Security Agreeement [Member] | Crestmark Bank [Member] | Prime Rate [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Increase (Decrease)				0.25%

XML

Stock Options and Warrants (Details) - Employee Stock Option [Member] - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Shares, Beginning Balance			2,107,000	1,435,000
Shares, Granted	40,000	80,000	40,000	830,000
Shares, Exercised			0	0
Shares, Cancelled/expired			0	(78,000)
Shares, Ending Balance	2,147,000	2,187,000	2,147,000	2,187,000
Exercisable at end of period	1,647,000	1,189,000	1,647,000	1,189,000
Weighted Average Exercise Price, at beginning of period			$ 0.13	$ 0.14
Weighted Average Exercise Price, Granted			0.13	0.11
Weighted Average Exercise Price, Cancelled/expired			0	0.18
Weighted Average Exercise Price, at end of period	$ 0.13	$ 0.13	0.13	0.13
Weighted Average Exercise Price, Exercisable, at end of period	$ 0.13	$ 0.14	$ 0.13	$ 0.14
Aggregate Intrinsic Value, Outstanding at end of period	$ 15,000	$ 16,000	$ 15,000	$ 16,000

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Stock Options and Warrants (Details 1)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Volatility	81.00%
Expected term (years)	10 years	10 years
Risk-free interest rate	2.16%
Dividend yield	0.00%	0.00%
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Volatility		62.00%
Risk-free interest rate		1.57%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Volatility		66.00%
Risk-free interest rate		1.94%

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Stock Options and Warrants (Details 2) - Warrant [Member]	6 Months Ended
	Jun. 30, 2017 $ / shares shares	Jun. 30, 2016 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares, Beginning Balance	2,060,000	2,385,000
Shares, Granted	0	0
Shares, Exercised	0	0
Shares, Cancelled/expired	0	0
Shares, Ending Balance	2,060,000	2,385,000
Exercisable at end of period	2,060,000	2,385,000
Weighted Average Exercise Price, at beginning of period | $ / shares	$ 0.18	$ 0.17
Weighted Average Exercise Price, Cancelled/expired | $ / shares	0	0
Weighted Average Exercise Price, at end of period | $ / shares	0.18	0.17
Weighted Average Exercise Price, Exercisable, at end of period | $ / shares	$ 0.18	$ 0.17
Aggregate Intrinsic Value outstanding at period | $		$ 0

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Stock Options and Warrants (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 0		$ 0
Debt Related Commitment Fees and Debt Issuance Costs	0	$ 0	0	$ 0
Allocated Share-based Compensation Expense	$ 11,000	$ 17,000	$ 23,000	$ 36,000
Non-Employee Board One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		20,000
Non-Employee Board Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		20,000
Non-Employee Board Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		20,000
Non-Employee Board Four [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		20,000
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	40,000	80,000	40,000	830,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 26,000		$ 26,000
Employee Stock Option [Member] | Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	20,000
Employee Stock Option [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			6 months
Employee Stock Option [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			11 months

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SUBSEQUENT EVENT (Details Texual) - Subsequent Event [Member]	Jul. 10, 2017
Subsequent Event [Line Items]
Term Of Contract	10 years
Maximum [Member]
Subsequent Event [Line Items]
Contract Revenue Percentage In Total Revenue	15.00%
Minimum [Member]
Subsequent Event [Line Items]
Contract Revenue Percentage In Total Revenue	10.00%