Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
31-May-14 | Jul. 15, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'XZERES Corp. | ' |
Entity Central Index Key | '0001084597 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-May-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--02-28 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 43,426,913 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | 31-May-14 | Feb. 28, 2014 |
Current Assets | ' | ' |
Cash and cash equivalents | $74,330 | $43,495 |
Accounts and notes receivable, net current portion | 743,455 | 1,880,398 |
Inventories | 2,881,608 | 2,809,035 |
Inventory deposits | 750,754 | 760,769 |
Deferred financing costs current portion | 1,194 | 4,778 |
Prepaid expenses | 218,198 | 426,179 |
Total Current Assets | 4,669,539 | 5,924,654 |
Property and Equipment, net | 196,609 | 222,456 |
Other Assets | ' | ' |
Accounts and notes receivable net of current portion | 104,650 | 107,405 |
Intellectual property | 1,802,210 | 1,802,210 |
Deposits | 28,888 | 18,198 |
Total Other Assets | 1,935,748 | 1,927,813 |
TOTAL ASSETS | 6,801,896 | 8,074,924 |
Current Liabilities | ' | ' |
Accounts payable | 1,421,567 | 1,698,001 |
Accrued expenses | 937,382 | 821,708 |
Customer deposits | 106,172 | 81,569 |
Warranty reserve | 194,857 | 189,577 |
VAT & sales tax payable | 44,002 | 105,984 |
Notes payable related parties current portion, net of debt discount of $33,743 and $53,987, respectively | 882,436 | 925,192 |
Notes payable current portion, net of debt discount of $743,927 and $547,774, respectively | 10,851,474 | 9,557,390 |
Total Current Liabilities | 14,437,890 | 13,379,421 |
Long-term Liabilities | ' | ' |
Total Long-term Liabilities | ' | ' |
TOTAL LIABILITIES | 14,437,890 | 13,379,421 |
Stockholders Equity (Deficit) | ' | ' |
Preferred stock, par $0.001, 5,000,000 shares authorized, 1,428,571 Series A shares issued and outstanding | 1,429 | 1,429 |
Common stock, par $0.001, 100,000,000 shares authorized, 43,306,913 and 43,126,913 shares issued and outstanding, respectively | 43,309 | 43,129 |
Stock warrants | 6,883,337 | 6,280,172 |
Additional paid in capital | 19,824,417 | 19,706,899 |
Accumulated other comprehensive income (loss) | -2,250 | -1,393 |
Accumulated deficit | -34,386,236 | -31,334,733 |
Total Stockholders Equity (Deficit) | -7,635,994 | -5,304,497 |
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) | $6,801,896 | $8,074,924 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | 31-May-14 | Feb. 28, 2014 |
Statement of Financial Position [Abstract] | ' | ' |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Perferred stock, issued | 1,428,571 | 1,428,571 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 43,306,913 | 43,126,913 |
Notes Payable, Related Party, Debt Discount | $33,743 | $53,987 |
Notes Payable, Debt Discount | $743,927 | $547,774 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
31-May-14 | 31-May-13 | |
Income Statement [Abstract] | ' | ' |
GROSS REVENUES | $501,948 | $131,387 |
COST OF GOODS SOLD | 603,893 | 111,145 |
GROSS PROFIT | -101,945 | 20,242 |
OPERATING EXPENSES | ' | ' |
General and administrative expenses | 1,338,841 | 950,643 |
Marketing | 155,261 | 76,215 |
Sales expense | 390,241 | 210,525 |
Engineering/R&D expense | 248,995 | 290,880 |
TOTAL OPERATING EXPENSES | 2,133,338 | 1,528,263 |
LOSS FROM OPERATIONS | -2,235,283 | -1,508,021 |
OTHER INCOME (EXPENSE) | ' | ' |
Interest expense | -389,945 | -27,591 |
Amortization of debt discount | -427,256 | -85,331 |
Other income (expense) | 985 | 1,534 |
TOTAL OTHER INCOME (EXPENSE) | -816,216 | -111,388 |
LOSS BEFORE PROVISION FOR INCOME TAXES AND OTHER COMPREHENSIVE INCOME (LOSS) | -3,051,499 | -1,619,409 |
PROVISION FOR INCOME TAXES | 0 | 0 |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | -3,051,499 | -1,619,409 |
OTHER COMPREHENSIVE INCOME (LOSS) | ' | ' |
Foreign currency adjustment gain (loss) | -857 | 3,150 |
COMPREHENSIVE INCOME (LOSS) | ($3,052,356) | ($1,616,259) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED | 43,173,870 | 29,072,775 |
NET LOSS PER SHARE: BASIC AND DILUTED | ($0.07) | ($0.06) |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
31-May-14 | 31-May-13 | |
Cash Flows from Operating Activities: | ' | ' |
Net loss for the period | ($3,051,499) | ($1,619,409) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ' | ' |
Amortization of debt discount | 427,256 | 85,331 |
Depreciation and amortization expense | 27,017 | 52,032 |
Bad debt expense | -18,475 | -11,350 |
Issuance of common shares for services | ' | 67,375 |
Issuance of warrants for consulting | ' | 956,229 |
Changes in Assets and Liabilities | ' | ' |
Accounts and notes receivable | 1,158,171 | 110,047 |
Prepaid expenses | 207,981 | -844,604 |
Inventory and inventory deposits | -62,558 | -747,937 |
Accounts payable | -276,434 | -1,015,060 |
Accrued expenses | 119,258 | 292,155 |
Customer deposits | 24,603 | -11,370 |
VAT & sales tax payable | -61,982 | ' |
Warranty reserve | 5,280 | -35,152 |
Net Cash Used in Operating Activities | -1,446,684 | -2,971,110 |
Cash Flows from Investing Activities: | ' | ' |
Payments received on notes receivable | ' | 9,260 |
Acquisitions of property and equipment | -1,170 | ' |
Rent deposit | -10,690 | ' |
Net Cash Used in Investing Activities | -11,860 | 9,260 |
Cash Flows from Financing Activities: | ' | ' |
Net increase in notes and loans payable, net of debt discount | 1,490,236 | 2,965,000 |
Net Cash Provided by Financing Activities | 1,490,236 | 2,965,000 |
Foreign Currency Effect on Cash | -857 | -3,150 |
Net Increase in Cash and Cash Equivalents | 30,835 | ' |
Cash and Cash Equivalents Beginning | 43,495 | ' |
Cash and Cash Equivalents Ending | 74,330 | ' |
Supplemental Cash Flow Information: | ' | ' |
Cash paid for interest | 269,727 | 33,057 |
Cash paid for income taxes | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
31-May-14 | |
Accounting Policies [Abstract] | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
Nature of Business | |
XZERES Corp. (“XZERES” and the “Company”) is located in Wilsonville, Oregon and was originally incorporated in the state of New Mexico in January of 1984. The Company was engaged in the natural gas and asphalt businesses until 2007, at which time it liquidated its assets and operations and distributed the net proceeds to its shareholders after paying its debts. On October 2, 2008, the Company re-domiciled from New Mexico to Nevada in anticipation of pursuing the wind turbine business. The Company commenced operations in the wind turbine business in the fiscal quarter ended May 31, 2010. | |
The Company formed two subsidiaries during the year ended February 28, 2011. XZERES Energy Services Corp. was incorporated in Nevada in January, 2011 and XZERES Wind Europe Limited was formed in Ireland in October, 2010. The Company formed two additional subsidiaries during the year ended February 28, 2014. XZERES Capital Corp. was incorporated in Nevada in January, 2014 and XZERES Wind Japan Limited was formed in Japan in October, 2013. | |
The Company is in the business of designing, developing, and marketing small wind turbine systems and related equipment for electrical power generation, specifically for use in residential, small business, rural electric utility systems, other rural locations, and other infrastructure applications. The Company employs proprietary technology, including power electronics, alternator design, and blade design to increase performance, reliability, and sound suppression. The Company also works with manufacturers of inverters, lightning protection equipment and towers to integrate their equipment into the Company’s products. | |
Principles of Consolidation | |
The financial statements reflect the consolidated results of XZERES Corp. and its wholly-owned subsidiaries XZERES Energy Services Corp. (a Nevada corporation), XZERES Wind Europe Limited (formed in Ireland), XZERES Capital Corp. (a Nevada corporation), and XZERES Wind Japan Limited (formed in Japan). All material inter-company transactions have been eliminated in the consolidation. | |
Basis of Presentation | |
The accompanying interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the period ended February 28, 2014, as amended. In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results expected for the full year. | |
Accounting Basis | |
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a February 28 fiscal year end. | |
Use of Estimates | |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
Fair Value of Financial Instruments | |
The Company’s financial instruments consist of cash and cash equivalents, accounts and notes receivable, inventories, inventory deposits, prepaid expenses, notes payable, accounts payable, accrued expenses, customer deposits, taxes payable and warranty reserve. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements. | |
Recent Accounting Pronouncements | |
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operation, financial position or cash flows. | |
Revenue Recognition | |
The Company recognizes revenue when products are shipped from the factory and collection is reasonably assured. | |
XZERES sells wind turbines and power efficiency products to dealers and end users directly. Dealers are required to sign an agreement with XZERES that requires the dealer to sell one unit the first year and three units per year, thereafter. Dealers receive dealer pricing, a discount to the suggested retail price of the product. Products sold directly to end users are sold at the retail price. To date, the Company has not offered any other price concessions to its dealers, and has no post shipment obligations other than the warranty it provides. | |
Cash and Cash Equivalents | |
XZERES considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash of $74,330 and $43,495 at May 31, 2014 and February 28, 2014, respectively. | |
Advertising Costs | |
The Company’s policy regarding advertising is to expense advertising when incurred. XZERES incurred advertising expense of $7,024 and $8,778 during the quarters ended May 31, 2014 and 2013, respectively. | |
Stock-Based Compensation | |
The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation – Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. | |
The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly to compensation expense or prepaid expense and additional paid-in capital over the period during which services are rendered. | |
Dividends | |
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown. | |
On October 19, 2012 the Company sold 1,428,571 shares of the Series A Convertible Preferred stock at a price per share of $1.05 for total proceeds of $1,500,000. The sale of the Series A Convertible Preferred stock included the issuance of 2,142,857 warrants. Based upon the Black Scholes pricing model the warrants have a fair value of $0.2106 per warrant. The portion of the proceeds allocated to warrants is $345,000. The Preferred shares are convertible into three shares of common stock. A deemed dividend of $259,285 was recorded which represents the intrinsic value of the conversion feature on the issuance date. | |
Property and Equipment | |
Property and equipment are stated at cost. Depreciation is computed on the straight line method over the estimated useful lives of the assets, which range from three to seven years. | |
Research and Development | |
We incur research and development costs (“R&D”) to develop and improve our products. Our products reach technological feasibility shortly before the products are released and therefore R&D costs are expensed as incurred. Employee related costs associated with product development are included in R&D costs. | |
Intangible Assets | |
In accordance with ASC 350, Goodwill and Other Intangible Assets, the Company tests its intangible assets for impairment on an annual basis and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount. | |
The Company applies the provisions of ASC Topic 350, requiring that intangible assets that have indefinite lives are not amortized but are subject to an annual impairment test or more frequent test if indicators of impairment exist. | |
Income Taxes | |
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of the quarter ended May 31, 2014, there have been no interest or penalties incurred on income taxes. | |
Basic Income (Loss) Per Share | |
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Weighted average common share equivalents totaled 35,879,564 at May 31, 2014. Outstanding warrants and options were not included in the computation of diluted earnings per share for the quarter ended May 31, 2014, as their effect would have been anti-dilutive. | |
Reclassifications | |
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements. |
ACCOUNTS_AND_NOTES_RECEIVABLE
ACCOUNTS AND NOTES RECEIVABLE | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Receivables [Abstract] | ' | ||||||||
ACCOUNTS AND NOTES RECEIVABLE | ' | ||||||||
Accounts receivable is generated from sales of wind turbine systems and power efficiency products. At May 31, 2014, accounts receivable were substantially comprised of balances due from end customers and dealers. | |||||||||
Notes receivable are generated from sales of wind turbine systems. At May 31, 2014, notes receivable were comprised of balances due from eight end customers. The term of the notes receivable vary from five to seven years at an annual interest rate ranging from 4.5% to 7%. Payments are received on a monthly basis. | |||||||||
An allowance for doubtful accounts is provided against accounts and notes receivable for amounts management believes may be uncollectible. The Company determines the adequacy of this allowance by regularly reviewing the composition of its receivable aging and evaluating individual customer receivables, considering the customer’s financial condition, credit history and current economic circumstance. As of May 31, 2014 and February 28, 2014 an allowance for doubtful accounts of $210,406 and $228,881, respectively, has been provided. | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
Accounts and notes receivable | $ | 1,058,511 | $ | 2,216,684 | |||||
Less: Allowance for doubtful accounts | (210,406 | ) | (228,881 | ) | |||||
Accounts and notes receivable, net | 848,105 | 1,987,803 | |||||||
Less: Current portion | 743,455 | 1,880,398 | |||||||
Long-term portion | $ | 104,650 | $ | 107,405 |
PREPAID_EXPENSES
PREPAID EXPENSES | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Notes to Financial Statements | ' | ||||||||
PREPAID EXPENSES | ' | ||||||||
Prepaid expenses consisted of the following: | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
Software licenses | $ | 11,819 | $ | 11,399 | |||||
Consulting | 206,379 | 414,780 | |||||||
Total prepaid expenses | $ | 218,198 | $ | 426,179 |
DEFERRED_FINANCING_COSTS
DEFERRED FINANCING COSTS | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Notes to Financial Statements | ' | ||||||||
DEFERRED FINANCING COSTS | ' | ||||||||
We defer certain costs associated with financing activities related to the issuance of equity securities (deferred offering costs) and debt securities (deferred financing costs). These costs consist primarily of legal, banking and other professional fees related to the transactions. Upon successful completion of the offering of equity securities, deferred offering costs are recorded as a reduction of the net proceeds in paid in capital. If the offering is not successful, such costs will be expensed. Deferred financing costs are amortized over the life of the related debt. | |||||||||
Deferred financing costs consisted of the following: | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
Deferred financing costs | $ | 99,000 | $ | 99,000 | |||||
Less: accumulated amortization | (97,806 | ) | (94,222 | ) | |||||
Deferred financing costs, net | $ | 1,194 | $ | 4,778 | |||||
INVENTORIES
INVENTORIES | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
INVENTORIES | ' | ||||||||
Inventories consist of parts and supplies used in the development, manufacture and installation of wind turbines as well as finished goods. Inventories are stated at the lower of cost, computed using the average cost, or market. Inventory deposits are payments made to vendors as advances against inventory expected to be delivered when completed. Inventory deposits totaled $750,754 and $760,769 at May 31, 2014 and February 28, 2014, respectively. | |||||||||
Inventories consisted of the following: | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
Finished goods | $ | 810,125 | $ | 776,327 | |||||
Parts and supplies | 2,071,483 | 2,032,708 | |||||||
Total Inventories | $ | 2,881,608 | $ | 2,809,035 |
PROPERTY_AND_EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||
Property and equipment are being depreciated over their estimated useful lives using the straight-line method of depreciation for book purposes. | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
Furniture | $ | 51,684 | $ | 51,684 | |||||
Computer equipment | 175,433 | 174,263 | |||||||
Shop machinery and equipment | 199,721 | 199,721 | |||||||
Testing Site & Equipment | 31,389 | 31,389 | |||||||
Molds & Tooling | 77,515 | 77,515 | |||||||
Vehicles | 10,998 | 10,998 | |||||||
Subtotal | 546,740 | 545,570 | |||||||
Less: accumulated depreciation | (350,131 | ) | (323,114 | ) | |||||
Property and equipment, net | $ | 196,609 | $ | 222,456 | |||||
Depreciation expense totaled $27,017 and $110,202 for three months ended May 31, 2014 and for the fiscal year end February 28, 2014, respectively. |
INTELLECTUAL_PROPERTY
INTELLECTUAL PROPERTY | 3 Months Ended |
31-May-14 | |
Notes to Financial Statements | ' |
INTELLECTUAL PROPERTY | ' |
Intellectual property consists of product designs with an infinite life, including the designs for the recently acquired power efficiency products. | |
The Company annually, or more frequently if events or changes indicate that the asset might be impaired, evaluates the fair value of the intellectual property to determine whether events and circumstances warrant a revision to the fair value of these assets. |
ACCRUED_EXPENSES
ACCRUED EXPENSES | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Payables and Accruals [Abstract] | ' | ||||||||
ACCRUED EXPENSES | ' | ||||||||
Accrued expenses consisted of the following: | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
Wages | $ | 83,245 | $ | 44,156 | |||||
Payroll taxes | 386,039 | 414,768 | |||||||
Benefits | 8,774 | 6,658 | |||||||
Interest | 459,324 | 356,126 | |||||||
Total accrued expenses | $ | 937,382 | $ | 821,708 |
CUSTOMER_DEPOSITS
CUSTOMER DEPOSITS | 3 Months Ended |
31-May-14 | |
Notes to Financial Statements | ' |
CUSTOMER DEPOSITS | ' |
A customer deposit of 50% of the selling price is sometimes made at the time a wind turbine is ordered. Deposits are reclassified to revenue once the unit is completed and delivered. Customer deposits were $106,172 at May 31, 2014 and $81,569 at February 28, 2014. |
WARRANTY_RESERVE
WARRANTY RESERVE | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Notes to Financial Statements | ' | ||||||||
WARRANTY RESERVE | ' | ||||||||
The Company accrues for estimated future warranty costs by establishing a reserve of 2% of fiscal year wind turbine sales and tower sales. The reserve is reduced over the five year warranty period as follows: | |||||||||
Year 1 | 0.1 | % | |||||||
Year 2 | 0.3 | % | |||||||
Year 3 | 0.4 | % | |||||||
Year 4 | 0.5 | % | |||||||
Year 5 | 0.7 | % | |||||||
Total Warranty Reserve as a % of Sales | 2 | % | |||||||
Warranty reserve balances were as follows at May 31, 2014 and February 28, 2014: | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
FY 2011 | $ | 9,464 | $ | 16,223 | |||||
FY 2012 | 41,297 | 55,063 | |||||||
FY 2013 | 64,947 | 79,343 | |||||||
FY 2014 | 72,001 | 38,948 | |||||||
FY 2015 | 7,148 | 0 | |||||||
Reserve balance | $ | 194,857 | $ | 189,577 |
CAPITAL_STOCK
CAPITAL STOCK | 3 Months Ended |
31-May-14 | |
Equity [Abstract] | ' |
CAPITAL STOCK | ' |
Common Stock | |
During the quarter year ending May 31, 2014, the following share-related transactions occurred: | |
180,000 common shares were issued in connection with the conversion of a prior outstanding note payable in the amount of $63,000. | |
During the fiscal year ending February 28, 2014, the following share-related transactions occurred: | |
385,715 common shares valued at $145,237 were issued in payment of accounts payable. | |
542,500 common shares were issued for consulting services to multiple providers. The shares were valued at various market prices ranging between $0.15 and $0.50 per share. The combined value of the shares was $112,375, all of which was expensed during the fiscal year. | |
300,000 common shares were issued valued at $150,000 in connection with prior equity issuance costs that were owed. | |
312,500 common shares were issued valued at $100,000 in connection with an adjustment in pricing from a previous investment. | |
5,000,000 common shares were sold to unrelated third parties in a private placement at $0.45 per share for net proceeds of $2,250,000. | |
565,496 common shares were issued in connection with the conversion of the prior outstanding note payable in the amount of $197,923. | |
During the fiscal year ending February 28, 2013, the following share-related transactions occurred: | |
206,718 Common Shares valued at $81,099 were issued in payment of an account payable. | |
1,508,644 common shares were issued for consulting services to multiple providers. The shares were valued at various market prices ranging between $0.35 and $0.45 per share. The combined value of the shares was $602,150, all of which was expensed during Fiscal 2013. | |
1,174,051 common shares were issued in connection with the conversion of the prior outstanding convertible note in the amount of $104,000. | |
Total common shares issued and outstanding at May 31, 2014 was 43,306,913. | |
Preferred Stock | |
On October 19, 2012 the Company sold 1,428,571 shares of the Series A Convertible Preferred stock at a price per share of $1.05 for total proceeds of $1,500,000. The sale of the Series A Convertible Preferred stock included the issuance of 2,142,857 warrants. Based upon the Black Scholes pricing model the warrants have a fair value of $0.2106 per warrant. The portion of the proceeds allocated to warrants is $345,000. Each Preferred share is convertible into three shares of common stock. A deemed dividend of $259,285 was recorded which represents the intrinsic value of the conversion feature on the date of issuance. In addition, we filed an amendment to our articles of incorporation establishing the new Preferred Shares. | |
7,627,875 common shares were issued in connection with warrants exercised for proceeds of $2,712,500. | |
STOCK_WARRANTS_AND_OPTIONS
STOCK WARRANTS AND OPTIONS | 3 Months Ended | ||||||||||||
31-May-14 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
STOCK WARRANTS AND OPTIONS | ' | ||||||||||||
Stock Options | |||||||||||||
The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation – Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. | |||||||||||||
The Company has adopted a stock option and award plan to attract, retain and motivate its directors, officers, and employees. Options provide the opportunity to acquire a proprietary interest in the Company and to benefit from its growth. Vesting terms and conditions are determined by the Board of Directors at the time of the grant. The current Plan provides for the issuance of up to 2,823,199 common shares for directors, officers, and employees. The Company amended the original plan to increase the available issuance of common shares up to 4,000,000. The amendment will require shareholder ratification at the next annual meeting. | |||||||||||||
The Company did not grant any new options during the quarter ending May 31, 2014. The Company granted 2,375,000 new qualified options during the fiscal year ending February 28, 2014. During the same period, 1,085,000 qualified options were canceled due to terminations and the Company also issued a non-qualified option for 700,000 to its former Chairman under a settlement arrangement. The Company did not grant any stock options to employees in fiscal 2013. The Company estimated the fair value of employee options issued in fiscal 2014 as of the grant dates at $590,588 using the Black-Scholes option pricing model. Compensation expense is being recognized over the vesting periods of the options which range from immediate vesting to vesting over two years. Previously recognized compensation expense is reversed if an employee terminates service prior to exercise and expiration of the option. | |||||||||||||
Key assumptions used by the Company are summarized as follows: | |||||||||||||
Employee Stock Options | |||||||||||||
Stock Price | $0.17-$2.20 | ||||||||||||
Exercise Price | $.35-$1.25 | ||||||||||||
Expected volatility | 73.4% - 98% | ||||||||||||
Expected dividend yield | 0 | % | |||||||||||
Risk-free rate | 2.0-3.37% | ||||||||||||
Vesting period | 0-4 years | ||||||||||||
Expected term | 7 years | ||||||||||||
Options issued to employees are classified as compensation expense. Stock option expense recognized in net earnings amounted to $54,698 and ($249,398) during the quarter ending May 31, 2014 and 2013, respectively. The May 31, 2013 quarter reflected a negative expense value due to the reversal of prior options expensed related to a terminated employee. Unrecognized expense of $461,585 remains to be recognized through 2017. | |||||||||||||
A summary of changes in stock options during the quarter ended May 31, 2014 and years ended February 28, 2014 and February 28, 2013 is as follows: | |||||||||||||
Stock Options | Weighted Average | Expiry Date | |||||||||||
Exercise Price | |||||||||||||
Outstanding, February 28, 2012 | 2,475,000 | $ | 1.13 | FY 2019 | |||||||||
Issued | 0 | 0 | |||||||||||
Exercised | 0 | 0 | |||||||||||
Expired/Cancelled | (380,000 | ) | 1.13 | ||||||||||
Outstanding, February 29, 2013 | 2,095,000 | 1.13 | |||||||||||
Issued | 2,375,000 | 0.368 | FY 2020 | ||||||||||
Exercised | 0 | 0 | |||||||||||
Expired/Cancelled | (1,085,000 | ) | 1.14 | ||||||||||
Outstanding, February 28, 2014 | 3,385,000 | $ | 0.618 | ||||||||||
Issued | 0 | 0 | |||||||||||
Exercised | 0 | 0 | |||||||||||
Expired/Cancelled | 0 | 0 | |||||||||||
Outstanding, May 31, 2014 | 3,385,000 | $ | 0.618 | ||||||||||
Because the Company’s stock-based compensation options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the estimate, amounts estimated using the Black-Scholes option pricing model may differ materially from the actual fair value of the Company’s stock-based compensation options. | |||||||||||||
Stock Warrants | |||||||||||||
The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly to compensation expense or prepaid expense and additional paid-in capital, and amortized over the period during which services are rendered. All warrants issued were valued using the Black-Scholes pricing model. | |||||||||||||
During the May 31, 2014 quarter, the Company granted 2,645,000 warrants in connection with an amendment to its existing credit facility, which provided for an increase in the total borrowing limit to $11,033,000. Those warrants were valued at $603,165 and were recorded as a debt discount. The debt discount is being amortized over the term of the financing. The unamortized portion of the debt discount was $452,374 at May 31, 2014. | |||||||||||||
During fiscal year 2014, the Company granted 8,935,000 warrants in connection with its new credit facility and amendments made to certain existing credit facilities previously outstanding. Those warrants were valued at $757,491 and were recorded as a debt discount. During the August 31, 2013 quarter, the Company granted an additional 2,070,000 warrants in connection with an increase provided in its new credit facility. Those warrants were valued at $519,727 and were also recorded as a debt discount. During the November 30, 2013 quarter, the Company granted an additional 493,393 warrants in connection with a further increase provided in the credit facility. Those warrants were valued at $111,026 and were also recorded as a debt discount. The debt discount is being amortized over the term of the financing. The unamortized portion of the debt discounts was $325,296 at May 31, 2014. Additionally, 12,128,572 warrants valued at $956,229 were issued to certain consultants. These warrants are amortized over an 18 month period beginning April 1, 2013. | |||||||||||||
During fiscal year 2013, the Company granted 2,142,857 warrants in connection with its series A Preferred Stock. A fair value of $345,000 was allocated to the warrants based upon the Black-Scholes pricing model. A total of 695,000 warrants valued at $85,204 were issued in connection with purchase order financing and were recorded as a debt discount. The debt discount is being amortized over the term of the financing and has been fully amortized as of May 31, 2014. | |||||||||||||
During fiscal year 2012, the Company granted 5,207,649 stock warrants valued at $1,841,318 in connection with its common stock private placements. These warrants were accounted for as an equity transaction. Additionally, 1,250,000 warrants valued at $189,875 were issued to an advisor. These warrants were amortized over a 12 month period beginning February 1, 2012. The issuance of new warrants at a reduced exercise price triggered a reset provision on 1,777,225 previously issued warrants resulting in a modification of value of $194,784. | |||||||||||||
A range of stock prices from $0.16 to $1.05 was used in valuing the warrants. The stock price was based on open market trading prices or the per share issuance prices from unrelated third party private placements in the event no active market price was available as occurred in some of the Company’s earlier transactions. Volatility was computed based on the average volatility of similar companies in the wind turbine business. The risk-free interest rate is the Treasury Constant Maturity Rate on the date of grant for a period equivalent to the expected term of the instrument. The expected term is the same as the contractual term for the above valuations. | |||||||||||||
Key assumptions used by the Company are summarized as follows: | |||||||||||||
Warrants | |||||||||||||
Stock Price | $0.16-$1.05 | ||||||||||||
Exercise Price | $0.35-$1.50 | ||||||||||||
Expected volatility | 73.4% - 98% | ||||||||||||
Expected dividend yield | 0 | % | |||||||||||
Risk-free rate | 0.16% - 2.62% | ||||||||||||
Vesting period | — | ||||||||||||
Expected term | 2-5 years | ||||||||||||
A summary of changes in share purchase warrants during the quarter ended May 31, 2014 and years ended February 28, 2014 and February 28, 2013 is as follows: | |||||||||||||
Number of Warrants | Weighted Average | Expiry Date | |||||||||||
Exercise Price | |||||||||||||
Outstanding, February 29, 2012 | 9,041,967 | 1.14 | Various through 3/18/2016 | ||||||||||
Issued | 2,837,857 | 0.39 | Various through 10/22/2017 | ||||||||||
Exercised | 0 | ||||||||||||
Cancelled/Expired | 0 | ||||||||||||
Outstanding, February 28, 2013 | 11,879,824 | 0.96 | |||||||||||
Issued | 26,126,965 | 0.353 | Various through 4/4/2017 | ||||||||||
Exercised | (7,627,875 | ) | 0.36 | ||||||||||
Cancelled/Expired | (529,350 | ) | |||||||||||
Outstanding, February 28, 2014 | 29,849,564 | $ | 0.59 | ||||||||||
Issued | 2,645,000 | $ | 0.35 | 4/16/18 | |||||||||
Exercised | 0 | ||||||||||||
Cancelled/Expired | 0 | ||||||||||||
Outstanding, May 31, 2014 | 32,494,564 | $ | 0.57 |
INCOME_TAXES
INCOME TAXES | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
INCOME TAXES | ' | ||||||||
For the period ended May 31, 2014, Xzeres has incurred net losses from continuing operations and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $34,377,000 at May 31, 2014, and will expire beginning in the year 2029. The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows: | |||||||||
The provision for Federal income tax consists of the following: | |||||||||
31-May-14 | 31-May-13 | ||||||||
Federal income tax benefit attributable to: | |||||||||
Current operations | $ | 1,035,000 | $ | 550,000 | |||||
Less: valuation allowance | (1,035,000 | ) | (550,000 | ) | |||||
Net provision for Federal income taxes | $ | 0 | $ | 0 | |||||
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows: | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
Deferred tax asset attributable to: | |||||||||
Net operating loss carryover | $ | 11,685,772 | $ | 10,650,772 | |||||
Less: valuation allowance | (11,685,772 | ) | (10,650,772 | ) | |||||
Net deferred tax asset | $ | 0 | $ | 0 | |||||
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $34,377,000 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years. |
COMMITMENTS
COMMITMENTS | 3 Months Ended | ||||||
31-May-14 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
COMMITMENTS | ' | ||||||
Operating Leases | |||||||
The Company leases its office and manufacturing facilities under a lease which expires in July 31, 2017. The lease provides for the payment of taxes and operating costs, such as insurance and maintenance in addition to the base rental payments. The lease is renewable for an additional three year term. | |||||||
Aggregate minimum annual rental payments under the non-cancelable operating lease are as follows: | |||||||
Year ended February 28, 2015 | $ | 153,977 | |||||
Year ended February 28, 2016 | 169,708 | ||||||
Year ended February 28, 2017 | 174,804 | ||||||
Year ended February 28, 2018 | 73,550 | ||||||
Sub-Total | $ | 572,039 | |||||
Rent expense totaled $75,582 and $40,104 for the three months ending May 31, 2014 and 2013, respectively. |
NOTES_PAYABLERELATED_PARTIES
NOTES PAYABLE-RELATED PARTIES | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
NOTES PAYABLE RELATED PARTIES | ' | ||||||||
Notes payable – related parties consists of three separate notes: | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
Purchase order (PO) financing note payable due within five days of receipt by Company, in whole or in part, portion of funds collected on collateral sales order, or, Company may submit a new collateral sales order with value equal to or in excess of principal outstanding. Interest rate is 1% per month. The note maturity date was originally May 15, 2013. On April 1, 2013, under a new simple note agreement, the maturity date was extended until October 14, 2013 at 10% interest per annum. Under the new terms, interest is reduced to 10% per annum, and monthly payments of $4,937 are due May 1, 2013 until October 1, 2014, when all remaining principal and interest are due. Under the new terms, outstanding accrued interest was added to principal as of the amendment date. On May 10, 2013, the board approved a conversion feature for the note allowing for principal and accrued interest to be converted at any time into common shares at $0.35 per share. On the commitment date, the conversion feature was valued at $0. In addition, the board approved the issuance of a warrant giving the holder the right to purchase 517,500 shares of common stock at a price of $0.35 per share for a period of 3 years. As required by ASC 470-20, the Company valued the warrant and recorded a debt discount to market available at the time of issuance. The discount is amortized over the life of the loan. As of May 31, 2014, $35,224 has been amortized and the balance is shown net of a $13,548 remaining debt discount. | $ | 548,276 | $ | 540,148 | |||||
On August 25, 2011, the Company entered into a purchase and sale factoring agreement with a related party whereby the Company sells certain accounts receivable to the factor. Under the terms of this agreement, the factor made advances to the Company based on certain international accounts receivable. Interest was computed at 8% of the factored amount for the period the factored accounts receivable remain outstanding. The agreement was initially due to expire on December 15, 2012, and was extended on April 1, 2013 under a new simple note agreement at 10%. Monthly payments of $2,159 are due under the note until October 1, 2014, when all remaining principal and interest are due. Under the note, outstanding accrued interest was added to principal as of the amendment date. On May 10, 2013, the board approved a conversion feature for the note allowing for principal and accrued interest to be converted at any time into common shares at $0.35 per share. On the commitment date, the conversion feature was valued at $0. In addition, the board approved the issuance of a warrant giving the holder the right to purchase 250,000 shares of common stock at a price of $0.35 per share for a period of 3 years. As required by ASC 470-20, the Company valued the warrant and recorded a debt discount to market available at the time of issuance. The discount is amortized over the life of the loan. As of May 31, 2014, $16,907 has been amortized and the balance is shown net of a $6,503 remaining debt discount. | 175,308 | 234,407 | |||||||
Promissory note bearing a 10% annual interest rate. Unsecured. The note maturity date was originally May 1, 2013. On April 1, 2013, under a new simple note agreement, the maturity date was extended until October 14, 2013 at 10% interest. Under the new terms, outstanding accrued interest was added to principal as of the amendment date. On May 10, 2013, the board approved a conversion feature for the note allowing for principal and accrued interest to be converted at any time into common shares at $0.35 per share. On the commitment date, the conversion feature was valued at $0. In addition, the board approved the issuance of a warrant giving the holder the right to purchase 667,500 shares of common stock at a price of $0.35 per share for a period of 3 years. As required by ASC 470-20, the Company valued the warrant and recorded a debt discount to market available at the time of issuance. The discount is amortized over the life of the loan. As of May 31, 2014, $35,599 has been amortized and the balance is shown net of a $13,692 remaining debt discount. | 158,852 | 150,637 | |||||||
Totals | 882,436 | 925,192 | |||||||
Less: current maturities | 882,436 | 925,192 | |||||||
Long-term portion | $ | 0 | $ | 0 |
NOTES_PAYABLE
NOTES PAYABLE | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Notes to Financial Statements | ' | ||||||||
NOTES PAYABLE | ' | ||||||||
Notes Payable consists of three separate notes: | |||||||||
31-May-14 | 28-Feb-14 | ||||||||
Note payable dated August 6, 2012. The Company entered into a purchase order (PO) financing agreement which provided $1,500,000 in debt financing. This agreement also enabled us to receive a portion of the funds owed by customers in advance of when the customer is required to pay the balance (usually prior to shipment or delivery). We will be required to submit customer orders as collateral for the funds received under the agreement. Once the products are shipped and the end customer pays the remaining balance, those funds are then used to pay back the amount of the particular PO financed. The amount repaid is then available for us to borrow against other of our accounts receivable. The agreement calls for a 16% annual interest rate on any funds outstanding. As additional consideration for the financing agreement, we issued the financing party warrants to purchase up to 600,000 shares of our common stock, exercisable at any time during the 24 months from the date of issue, at an exercise price of $0.35 per share. As required by ASC 470-20, the Company valued the warrant and recorded a debt discount to market available at the time of issuance. The discount is amortized over the life of the loan. The note was amended in March 2013 to include the outstanding accrued interest to date. Under the new terms, interest remains at 16%, and monthly payments are due as follows: month 1 - $275,000; month 4 and 5 - $30,000; months 6–11 - $60,000; and month 12 - $105,000. | $ | 1,105,000 | $ | 1,105,000 | |||||
382,153 | 382,153 | ||||||||
Notes payable due within five days of receipt by Company, in whole or in part, portion of funds collected on collateral sales order, or, Company may submit a new collateral sales order with value equal to or in excess of principal outstanding. Borrowings were originally due December 31, 2012, but notes were combined on April 1, 2013 under a simple promissory note due October 1, 2014. Under the new terms, the interest rate is 10% per annum, and monthly payments are due as follows: April 15, 2013 - month 1 - $160,000; months 2-5 - $20,000; months 6–10 - $80,000; month 11 - $20,000; and month 12 – all accrued interest. Under the new terms, outstanding accrued interest was added to principal as of the amendment date. | |||||||||
On April 3, 2013, the Company entered into a new credit facility, which provided up to $6,500,000 in debt financing. The agreement calls for a 10% annual interest rate on any funds outstanding. As of May 31, 2014, the available credit was increased three times to a total of $11,033,000. As additional consideration for the original financing agreement and the increases in available credit, the financing parties were issued warrants to purchase up to 12,715,000 shares of our common stock, exercisable at any time during four years from the date of issuance, at an exercise price of $0.35 per share. As required by ASC 470-20, the Company valued the warrants and recorded a debt discount to market available at the time of issuance. The discounts are amortized over the life of the loan. As of May 31, 2014, $1,126,008 has been amortized and the balance is shown net of a $743,927 remaining debt discount. | 9,364,321 | 8,070,237 | |||||||
Totals | 10,851,474 | 9,557,390 | |||||||
Less: current maturities | (10,851,474 | ) | (9,557,390 | ) | |||||
Long-term portion | $ | 0 | $ | 0 | |||||
A promissory note was originated on June 14, 2012 in the amount of $100,000 with an 8% interest rate. The unpaid principal and accrued interest was due on the maturity date of March 18, 2013. After 180 days, the unpaid note principal and accrued interest could be converted to common stock at the option of the lender at 58% of the average of the lowest three trading prices for the common stock during the ten trading day period ending on the latest complete trading day prior to the conversion date. The convertible note payable along with $4,000 in accrued interest was converted into 1,177,051 shares of common stock on January 24, 2013. | |||||||||
Future maturities of note and loan debt are as follows at May 31, 2014: | |||||||||
FY 2015 | $ | 12,511,580 | |||||||
Thereafter | 0 | ||||||||
Total | $ | 12,511,580 | |||||||
The Company incurred total interest expense of $389,945 and $27,591 for period ended May 31, 2014 and 2013, respectively. Interest expense includes finance charges related to vendors in addition to actual note interest. The Company’s senior lender has continued to support its activities, including increasing the available borrowing capacity on 3 separate occasions. While the lender has not waived any default provisions under credit facility and the Company is currently in default, we believe the senior lender remains generally supportive of our near-term growth efforts. |
GOING_CONCERN
GOING CONCERN | 3 Months Ended |
31-May-14 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
GOING CONCERN | ' |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has sustained substantial losses since inception, has negative working capital, and is in need of additional capital to grow its operations so that it can become profitable. | |
In view of this matter, the ability of the Company to continue as a going concern is dependent upon growth of revenues and the ability of the Company to raise additional capital. Management believes that its successful ability to raise capital and increases in revenues will provide the opportunity for the Company to continue as a going concern. |
SUPPLEMENTAL_CASH_FLOWS
SUPPLEMENTAL CASH FLOWS | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Supplemental Cash Flow Elements [Abstract] | ' | ||||||||
SUPPLEMENTAL CASH FLOWS | ' | ||||||||
Supplemental Non-Cash Investing and Financing Activities: | 31-May-14 | 28-Feb-14 | |||||||
Shares issued in payment of trade debt | $ | 0 | $ | 145,237 | |||||
Debt discount from fair value of embedded conversion feature | $ | 603,165 | $ | 1,388,244 | |||||
Issuance of common shares for convertible debt and accrued interest | $ | 63,000 | $ | 197,923 | |||||
Shares issued for prepaid consulting services | $ | 0 | $ | 112,375 | |||||
Warrants and options issued for prepaid consulting | $ | 0 | $ | 956,229 |
CONCENTRATIONS
CONCENTRATIONS | 3 Months Ended |
31-May-14 | |
Risks and Uncertainties [Abstract] | ' |
CONCENTRATIONS | ' |
Credit risk- Financial instruments that potentially subject the Company to concentrations of credit risk consist of demand deposits with a financial institution. At May 31, 2014, there are no balances exceeding FDIC insurance of $250,000. The Company believes there is minimal credit risk relative to its cash and investment accounts. | |
The Company is also potentially subject to concentrations of credit risk in its accounts receivable. Credit risk with respect to receivables is limited due to the number of companies comprising the Company’s customer base. Although the Company is directly affected by the financial condition of its customers, management does not believe significant credit risks exist at May 31, 2014. Generally, the Company does not require collateral or other securities beyond the equipment sold to support its accounts receivable. | |
Major customer- The Company has one major customer that accounted for approximately 16% and $81,658 of sales for the three months ended May 31, 2014. The Company expects to maintain this relationship with the customer. | |
Major vendor- The Company has one major vendor that accounted for approximately 40% and $197,000 of materials purchased for the three months ended May 31, 2014. The Company expects to maintain this relationship with the vendor. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
31-May-14 | |
Subsequent Events [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
On June 24th, the Company announced it had entered into a license agreement to manufacture, market, and sell Argosy Wind Power’s 50kW rated wind turbine. As part of the license agreement, the Company has a nine-month exclusive option to acquire Argosy and its assets. | |
In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to May 31, 2014 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than those mentioned above. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
31-May-14 | |
Accounting Policies [Abstract] | ' |
Nature of Business | ' |
XZERES Corp. (“XZERES” and the “Company”) is located in Wilsonville, Oregon and was originally incorporated in the state of New Mexico in January of 1984. The Company was engaged in the natural gas and asphalt businesses until 2007, at which time it liquidated its assets and operations and distributed the net proceeds to its shareholders after paying its debts. On October 2, 2008, the Company re-domiciled from New Mexico to Nevada in anticipation of pursuing the wind turbine business. The Company commenced operations in the wind turbine business in the fiscal quarter ended May 31, 2010. | |
The Company formed two subsidiaries during the year ended February 28, 2011. XZERES Energy Services Corp. was incorporated in Nevada in January, 2011 and XZERES Wind Europe Limited was formed in Ireland in October, 2010. The Company formed two additional subsidiaries during the year ended February 28, 2014. XZERES Capital Corp. was incorporated in Nevada in January, 2014 and XZERES Wind Japan Limited was formed in Japan in October, 2013. | |
The Company is in the business of designing, developing, and marketing small wind turbine systems and related equipment for electrical power generation, specifically for use in residential, small business, rural electric utility systems, other rural locations, and other infrastructure applications. The Company employs proprietary technology, including power electronics, alternator design, and blade design to increase performance, reliability, and sound suppression. The Company also works with manufacturers of inverters, lightning protection equipment and towers to integrate their equipment into the Company’s products. | |
Principles of Consolidation | ' |
The financial statements reflect the consolidated results of XZERES Corp. and its wholly-owned subsidiaries XZERES Energy Services Corp. (a Nevada corporation), XZERES Wind Europe Limited (formed in Ireland), XZERES Capital Corp. (a Nevada corporation), and XZERES Wind Japan Limited (formed in Japan). All material inter-company transactions have been eliminated in the consolidation. | |
Basis of Presentation | ' |
The accompanying interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the period ended February 28, 2014, as amended. In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results expected for the full year. | |
Accounting Basis | ' |
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a February 28 fiscal year end. | |
Use of Estimates | ' |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
Fair Value of Financial Instruments | ' |
The Company’s financial instruments consist of cash and cash equivalents, accounts and notes receivable, inventories, inventory deposits, prepaid expenses, notes payable, accounts payable, accrued expenses, customer deposits, taxes payable and warranty reserve. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements. | |
Recent Accounting Pronouncements | ' |
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operation, financial position or cash flows. | |
Revenue Recognition | ' |
The Company recognizes revenue when products are shipped from the factory and collection is reasonably assured. | |
XZERES sells wind turbines and power efficiency products to dealers and end users directly. Dealers are required to sign an agreement with XZERES that requires the dealer to sell one unit the first year and three units per year, thereafter. Dealers receive dealer pricing, a discount to the suggested retail price of the product. Products sold directly to end users are sold at the retail price. To date, the Company has not offered any other price concessions to its dealers, and has no post shipment obligations other than the warranty it provides. | |
Cash and Cash Equivalents | ' |
XZERES considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash of $74,330 and $43,495 at May 31, 2014 and February 28, 2014, respectively. | |
Advertising Costs | ' |
The Company’s policy regarding advertising is to expense advertising when incurred. XZERES incurred advertising expense of $7,024 and $8,778 during the quarters ended May 31, 2014 and 2013, respectively. | |
Stock-Based Compensation | ' |
The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation – Stock Compensation which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. | |
The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly to compensation expense or prepaid expense and additional paid-in capital over the period during which services are rendered. | |
Dividends | ' |
The Company has not adopted any policy regarding payment of dividends. No dividends have been paid during any of the periods shown. | |
On October 19, 2012 the Company sold 1,428,571 shares of the Series A Convertible Preferred stock at a price per share of $1.05 for total proceeds of $1,500,000. The sale of the Series A Convertible Preferred stock included the issuance of 2,142,857 warrants. Based upon the Black Scholes pricing model the warrants have a fair value of $0.2106 per warrant. The portion of the proceeds allocated to warrants is $345,000. The Preferred shares are convertible into three shares of common stock. A deemed dividend of $259,285 was recorded which represents the intrinsic value of the conversion feature on the issuance date. | |
Property and Equipment | ' |
Property and equipment are stated at cost. Depreciation is computed on the straight line method over the estimated useful lives of the assets, which range from three to seven years. | |
Research and Development | ' |
We incur research and development costs (“R&D”) to develop and improve our products. Our products reach technological feasibility shortly before the products are released and therefore R&D costs are expensed as incurred. Employee related costs associated with product development are included in R&D costs. | |
Intangible Assets | ' |
In accordance with ASC 350, Goodwill and Other Intangible Assets, the Company tests its intangible assets for impairment on an annual basis and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount. | |
The Company applies the provisions of ASC Topic 350, requiring that intangible assets that have indefinite lives are not amortized but are subject to an annual impairment test or more frequent test if indicators of impairment exist. | |
Income Taxes | ' |
Income taxes are accounted for under the assets and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. It is the Company’s policy to classify interest and penalties on income taxes as interest expense or penalties expense. As of the quarter ended May 31, 2014, there have been no interest or penalties incurred on income taxes. | |
Basic Income (Loss) Per Share | ' |
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Weighted average common share equivalents totaled 35,879,564 at May 31, 2014. Outstanding warrants and options were not included in the computation of diluted earnings per share for the quarter ended May 31, 2014, as their effect would have been anti-dilutive. | |
Reclassifications | ' |
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements. |
ACCOUNTS_AND_NOTES_RECEIVABLE_
ACCOUNTS AND NOTES RECEIVABLE (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Receivables [Abstract] | ' | ||||||||
Schedule of Accounts Receivable | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
Accounts and notes receivable | $ | 1,058,511 | $ | 2,216,684 | |||||
Less: Allowance for doubtful accounts | (210,406 | ) | (228,881 | ) | |||||
Accounts and notes receivable, net | 848,105 | 1,987,803 | |||||||
Less: Current portion | 743,455 | 1,880,398 | |||||||
Long-term portion | $ | 104,650 | $ | 107,405 |
PREPAID_EXPENSES_Tables
PREPAID EXPENSES (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Notes to Financial Statements | ' | ||||||||
Schedule of Prepaid Expense | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
Software licenses | $ | 11,819 | $ | 11,399 | |||||
Consulting | 206,379 | 414,780 | |||||||
Total prepaid expenses | $ | 218,198 | $ | 426,179 |
DEFERRED_FINANCING_COSTS_Table
DEFERRED FINANCING COSTS (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Notes to Financial Statements | ' | ||||||||
Schedule of Deferred Financing Cost | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
Deferred financing costs | $ | 99,000 | $ | 99,000 | |||||
Less: accumulated amortization | (97,806 | ) | (94,222 | ) | |||||
Deferred financing costs, net | $ | 1,194 | $ | 4,778 |
INVENTORIES_Tables
INVENTORIES (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Inventory Disclosure [Abstract] | ' | ||||||||
Schedule of Inventory | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
Finished goods | $ | 810,125 | $ | 776,327 | |||||
Parts and supplies | 2,071,483 | 2,032,708 | |||||||
Total Inventories | $ | 2,881,608 | $ | 2,809,035 |
PROPERTY_AND_EQUIPMENT_Tables
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Schedule of Property and Equipment | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
Furniture | $ | 51,684 | $ | 51,684 | |||||
Computer equipment | 175,433 | 174,263 | |||||||
Shop machinery and equipment | 199,721 | 199,721 | |||||||
Testing Site & Equipment | 31,389 | 31,389 | |||||||
Molds & Tooling | 77,515 | 77,515 | |||||||
Vehicles | 10,998 | 10,998 | |||||||
Subtotal | 546,740 | 545,570 | |||||||
Less: accumulated depreciation | (350,131 | ) | (323,114 | ) | |||||
Property and equipment, net | $ | 196,609 | $ | 222,456 |
ACCRUED_EXPENSES_Tables
ACCRUED EXPENSES (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Payables and Accruals [Abstract] | ' | ||||||||
Schedule of Accrued Expenses | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
Wages | $ | 83,245 | $ | 44,156 | |||||
Payroll taxes | 386,039 | 414,768 | |||||||
Benefits | 8,774 | 6,658 | |||||||
Interest | 459,324 | 356,126 | |||||||
Total accrued expenses | $ | 937,382 | $ | 821,708 |
WARRANTY_RESERVE_Tables
WARRANTY RESERVE (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Notes to Financial Statements | ' | ||||||||
Schedule of Estimated Future Warranty Costs | ' | ||||||||
Year 1 | 0.1 | % | |||||||
Year 2 | 0.3 | % | |||||||
Year 3 | 0.4 | % | |||||||
Year 4 | 0.5 | % | |||||||
Year 5 | 0.7 | % | |||||||
Total Warranty Reserve as a % of Sales | 2 | % | |||||||
Schedule of Warranty Reserve Activity | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
FY 2011 | $ | 9,464 | $ | 16,223 | |||||
FY 2012 | 41,297 | 55,063 | |||||||
FY 2013 | 64,947 | 79,343 | |||||||
FY 2014 | 72,001 | 38,948 | |||||||
FY 2015 | 7,148 | 0 | |||||||
Reserve balance | $ | 194,857 | $ | 189,577 |
STOCK_WARRANTS_AND_OPTIONS_Tab
STOCK WARRANTS AND OPTIONS (Tables) | 3 Months Ended | ||||||||||||
31-May-13 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
Schedule of Key Assumptions of Employee Stock Options | ' | ||||||||||||
Employee Stock Options | |||||||||||||
Stock Price | $0.17-$2.20 | ||||||||||||
Exercise Price | $.35-$1.25 | ||||||||||||
Expected volatility | 73.4% - 98% | ||||||||||||
Expected dividend yield | 0 | % | |||||||||||
Risk-free rate | 2.0-3.37% | ||||||||||||
Vesting period | 0-4 years | ||||||||||||
Expected term | 7 years | ||||||||||||
Schedule of Stock Options | ' | ||||||||||||
Stock Options | Weighted Average | Expiry Date | |||||||||||
Exercise Price | |||||||||||||
Outstanding, February 28, 2012 | 2,475,000 | $ | 1.13 | FY 2019 | |||||||||
Issued | 0 | 0 | |||||||||||
Exercised | 0 | 0 | |||||||||||
Expired/Cancelled | (380,000 | ) | 1.13 | ||||||||||
Outstanding, February 29, 2013 | 2,095,000 | 1.13 | |||||||||||
Issued | 2,375,000 | 0.368 | FY 2020 | ||||||||||
Exercised | 0 | 0 | |||||||||||
Expired/Cancelled | (1,085,000 | ) | 1.14 | ||||||||||
Outstanding, February 28, 2014 | 3,385,000 | $ | 0.618 | ||||||||||
Issued | 0 | 0 | |||||||||||
Exercised | 0 | 0 | |||||||||||
Expired/Cancelled | 0 | 0 | |||||||||||
Outstanding, May 31, 2014 | 3,385,000 | $ | 0.618 | ||||||||||
Schedule of Key Assumptions of Warrants | ' | ||||||||||||
Warrants | |||||||||||||
Stock Price | $0.16-$1.05 | ||||||||||||
Exercise Price | $0.35-$1.50 | ||||||||||||
Expected volatility | 73.4% - 98% | ||||||||||||
Expected dividend yield | 0 | % | |||||||||||
Risk-free rate | 0.16% - 2.62% | ||||||||||||
Vesting period | — | ||||||||||||
Expected term | 2-5 years | ||||||||||||
Schedule of Warrants | ' | ||||||||||||
Number of Warrants | Weighted Average | Expiry Date | |||||||||||
Exercise Price | |||||||||||||
Outstanding, February 29, 2012 | 9,041,967 | 1.14 | Various through 3/18/2016 | ||||||||||
Issued | 2,837,857 | 0.39 | Various through 10/22/2017 | ||||||||||
Exercised | 0 | ||||||||||||
Cancelled/Expired | 0 | ||||||||||||
Outstanding, February 28, 2013 | 11,879,824 | 0.96 | |||||||||||
Issued | 26,126,965 | 0.353 | Various through 4/4/2017 | ||||||||||
Exercised | (7,627,875 | ) | 0.36 | ||||||||||
Cancelled/Expired | (529,350 | ) | |||||||||||
Outstanding, February 28, 2014 | 29,849,564 | $ | 0.59 | ||||||||||
Issued | 2,645,000 | $ | 0.35 | 4/16/18 | |||||||||
Exercised | 0 | ||||||||||||
Cancelled/Expired | 0 | ||||||||||||
Outstanding, May 31, 2014 | 32,494,564 | $ | 0.57 |
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Schedule of Federal Income Tax | ' | ||||||||
31-May-14 | 31-May-13 | ||||||||
Federal income tax benefit attributable to: | |||||||||
Current operations | $ | 1,035,000 | $ | 550,000 | |||||
Less: valuation allowance | (1,035,000 | ) | (550,000 | ) | |||||
Net provision for Federal income taxes | $ | 0 | $ | 0 | |||||
Schedule of Net Deferred Tax Amount | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
Deferred tax asset attributable to: | |||||||||
Net operating loss carryover | $ | 11,685,772 | $ | 10,650,772 | |||||
Less: valuation allowance | (11,685,772 | ) | (10,650,772 | ) | |||||
Net deferred tax asset | $ | 0 | $ | 0 |
COMMITMENTS_Tables
COMMITMENTS (Tables) | 3 Months Ended | ||||||
31-May-14 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
Schedule of Non-Cancelable Operating Lease Aggregate Minimum Rental Payments | ' | ||||||
Year ended February 28, 2015 | $ | 153,977 | |||||
Year ended February 28, 2016 | 169,708 | ||||||
Year ended February 28, 2017 | 174,804 | ||||||
Year ended February 28, 2018 | 73,550 | ||||||
Sub-Total | $ | 572,039 |
NOTES_PAYABLERELATED_PARTIES_T
NOTES PAYABLE-RELATED PARTIES (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Schedule of Notes Payable Related Parties | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
Purchase order (PO) financing note payable due within five days of receipt by Company, in whole or in part, portion of funds collected on collateral sales order, or, Company may submit a new collateral sales order with value equal to or in excess of principal outstanding. Interest rate is 1% per month. The note maturity date was originally May 15, 2013. On April 1, 2013, under a new simple note agreement, the maturity date was extended until October 14, 2013 at 10% interest per annum. Under the new terms, interest is reduced to 10% per annum, and monthly payments of $4,937 are due May 1, 2013 until October 1, 2014, when all remaining principal and interest are due. Under the new terms, outstanding accrued interest was added to principal as of the amendment date. On May 10, 2013, the board approved a conversion feature for the note allowing for principal and accrued interest to be converted at any time into common shares at $0.35 per share. On the commitment date, the conversion feature was valued at $0. In addition, the board approved the issuance of a warrant giving the holder the right to purchase 517,500 shares of common stock at a price of $0.35 per share for a period of 3 years. As required by ASC 470-20, the Company valued the warrant and recorded a debt discount to market available at the time of issuance. The discount is amortized over the life of the loan. As of May 31, 2014, $35,224 has been amortized and the balance is shown net of a $13,548 remaining debt discount. | $ | 548,276 | $ | 540,148 | |||||
On August 25, 2011, the Company entered into a purchase and sale factoring agreement with a related party whereby the Company sells certain accounts receivable to the factor. Under the terms of this agreement, the factor made advances to the Company based on certain international accounts receivable. Interest was computed at 8% of the factored amount for the period the factored accounts receivable remain outstanding. The agreement was initially due to expire on December 15, 2012, and was extended on April 1, 2013 under a new simple note agreement at 10%. Monthly payments of $2,159 are due under the note until October 1, 2014, when all remaining principal and interest are due. Under the note, outstanding accrued interest was added to principal as of the amendment date. On May 10, 2013, the board approved a conversion feature for the note allowing for principal and accrued interest to be converted at any time into common shares at $0.35 per share. On the commitment date, the conversion feature was valued at $0. In addition, the board approved the issuance of a warrant giving the holder the right to purchase 250,000 shares of common stock at a price of $0.35 per share for a period of 3 years. As required by ASC 470-20, the Company valued the warrant and recorded a debt discount to market available at the time of issuance. The discount is amortized over the life of the loan. As of May 31, 2014, $16,907 has been amortized and the balance is shown net of a $6,503 remaining debt discount. | 175,308 | 234,407 | |||||||
Promissory note bearing a 10% annual interest rate. Unsecured. The note maturity date was originally May 1, 2013. On April 1, 2013, under a new simple note agreement, the maturity date was extended until October 14, 2013 at 10% interest. Under the new terms, outstanding accrued interest was added to principal as of the amendment date. On May 10, 2013, the board approved a conversion feature for the note allowing for principal and accrued interest to be converted at any time into common shares at $0.35 per share. On the commitment date, the conversion feature was valued at $0. In addition, the board approved the issuance of a warrant giving the holder the right to purchase 667,500 shares of common stock at a price of $0.35 per share for a period of 3 years. As required by ASC 470-20, the Company valued the warrant and recorded a debt discount to market available at the time of issuance. The discount is amortized over the life of the loan. As of May 31, 2014, $35,599 has been amortized and the balance is shown net of a $13,692 remaining debt discount. | 158,852 | 150,637 | |||||||
Totals | 882,436 | 925,192 | |||||||
Less: current maturities | 882,436 | 925,192 | |||||||
Long-term portion | $ | 0 |
NOTES_PAYABLE_Tables
NOTES PAYABLE (Tables) | 3 Months Ended | ||||||||
31-May-14 | |||||||||
Notes to Financial Statements | ' | ||||||||
Schedule of Notes Payable Table | ' | ||||||||
31-May-14 | 28-Feb-14 | ||||||||
Note payable dated August 6, 2012. The Company entered into a purchase order (PO) financing agreement which provided $1,500,000 in debt financing. This agreement also enabled us to receive a portion of the funds owed by customers in advance of when the customer is required to pay the balance (usually prior to shipment or delivery). We will be required to submit customer orders as collateral for the funds received under the agreement. Once the products are shipped and the end customer pays the remaining balance, those funds are then used to pay back the amount of the particular PO financed. The amount repaid is then available for us to borrow against other of our accounts receivable. The agreement calls for a 16% annual interest rate on any funds outstanding. As additional consideration for the financing agreement, we issued the financing party warrants to purchase up to 600,000 shares of our common stock, exercisable at any time during the 24 months from the date of issue, at an exercise price of $0.35 per share. As required by ASC 470-20, the Company valued the warrant and recorded a debt discount to market available at the time of issuance. The discount is amortized over the life of the loan. The note was amended in March 2013 to include the outstanding accrued interest to date. Under the new terms, interest remains at 16%, and monthly payments are due as follows: month 1 - $275,000; month 4 and 5 - $30,000; months 6–11 - $60,000; and month 12 - $105,000. | $ | 1,105,000 | $ | 1,105,000 | |||||
382,153 | 382,153 | ||||||||
Notes payable due within five days of receipt by Company, in whole or in part, portion of funds collected on collateral sales order, or, Company may submit a new collateral sales order with value equal to or in excess of principal outstanding. Borrowings were originally due December 31, 2012, but notes were combined on April 1, 2013 under a simple promissory note due October 1, 2014. Under the new terms, the interest rate is 10% per annum, and monthly payments are due as follows: April 15, 2013 - month 1 - $160,000; months 2-5 - $20,000; months 6–10 - $80,000; month 11 - $20,000; and month 12 – all accrued interest. Under the new terms, outstanding accrued interest was added to principal as of the amendment date. | |||||||||
On April 3, 2013, the Company entered into a new credit facility, which provided up to $6,500,000 in debt financing. The agreement calls for a 10% annual interest rate on any funds outstanding. As of May 31, 2014, the available credit was increased three times to a total of $11,033,000. As additional consideration for the original financing agreement and the increases in available credit, the financing parties were issued warrants to purchase up to 12,715,000 shares of our common stock, exercisable at any time during four years from the date of issuance, at an exercise price of $0.35 per share. As required by ASC 470-20, the Company valued the warrants and recorded a debt discount to market available at the time of issuance. The discounts are amortized over the life of the loan. As of May 31, 2014, $1,126,008 has been amortized and the balance is shown net of a $743,927 remaining debt discount. | 9,364,321 | 8,070,237 | |||||||
Totals | 10,851,474 | 9,557,390 | |||||||
Less: current maturities | (10,851,474 | ) | (9,557,390 | ) | |||||
Long-term portion | $ | 0 | $ | 0 | |||||
Schedule of Future maturities of Note and Loan Debt | ' | ||||||||
FY 2015 | $ | 12,511,580 | |||||||
Thereafter | 0 | ||||||||
Total | $ | 12,511,580 |
SUPPLEMENTAL_CASH_FLOWS_Tables
SUPPLEMENTAL CASH FLOWS (Tables) | 3 Months Ended | |||||||
31-May-14 | ||||||||
Supplemental Cash Flow Elements [Abstract] | ' | |||||||
Schedule of Non-Cash Investing Financing Activities | ' | |||||||
Supplemental Non-Cash Investing and Financing Activities: | 2014 | 2013 | ||||||
Modification of warrants | $ | 0 | $ | 51,895 | ||||
Shares issued in payment of trade debt | $ | 145,237 | $ | 81,099 | ||||
Debt discount from fair value of embedded derivative | $ | 1,388,244 | $ | 85,204 | ||||
Issuance of common shares for convertible debt and accrued interest | $ | 197,923 | $ | 104,000 | ||||
Shares issued to acquire assets | $ | 0 | $ | 0 | ||||
Warrants and options issued for prepaid consulting | $ | 956,229 | $ | 0 | ||||
Warrants issued in connection with private placements | $ | 1,173,000 | $ | 0 | ||||
Warrants issued for equity issuance costs | $ | 0 | $ | 0 | ||||
Deemed dividend | $ | 0 | $ | 259,285 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 0 Months Ended | 3 Months Ended | 12 Months Ended | ||
Oct. 19, 2012 | 31-May-14 | 31-May-13 | Feb. 29, 2012 | Feb. 28, 2014 | |
Accounting Policies [Abstract] | ' | ' | ' | ' | ' |
Current Fiscal Year End Date | ' | '--02-28 | ' | ' | ' |
Cash and cash equivalents | ' | $74,330 | ' | ' | $43,495 |
Advertising expense | ' | 7,024 | 8,778 | ' | ' |
Estimated useful lives, minimum | ' | 'P3Y | ' | ' | ' |
Estimated useful lives, maximum | ' | 'P7Y | ' | ' | ' |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED | ' | 43,173,870 | 29,072,775 | ' | ' |
Series A Convertible Preferred stock sold | 1,428,571 | 1,428,571 | ' | ' | 1,428,571 |
Series A Convertible Preferred stock price per share | $1.05 | $0.00 | ' | ' | $0.00 |
Proceeds from issuance of preferred shares | 1,500,000 | ' | ' | 1,500,000 | ' |
Series A Convertible Preferred stock, warrants issued | ' | ' | ' | 2,142,857 | ' |
Fair value per warrant | $0.21 | ' | ' | ' | ' |
Proceeds allocated to warrants | 345,000 | ' | ' | 345,000 | ' |
Deemed Dividend | ($259,285) | ' | ' | $259,285 | ' |
ACCOUNTS_AND_NOTES_RECEIVABLE_1
ACCOUNTS AND NOTES RECEIVABLE - Schedule of Accounts Receivable (Details) (USD $) | 31-May-14 | Feb. 28, 2014 |
Receivables [Abstract] | ' | ' |
Accounts and notes receivable | $1,058,511 | $2,216,684 |
Less: Allowance for doubtful accounts | -210,406 | -228,881 |
Accounts and notes receivable, net | 848,105 | 1,987,803 |
Less: Current Portion | 743,455 | 1,880,398 |
Long term portion | $104,650 | $107,405 |
ACCOUNTS_AND_NOTES_RECEIVABLE_2
ACCOUNTS AND NOTES RECEIVABLE (Details Narrative) (USD $) | 3 Months Ended | |
31-May-14 | Feb. 28, 2014 | |
Receivables [Abstract] | ' | ' |
Less: Allowance for doubtful accounts | ($210,406) | ($228,881) |
Percentage of notes receivable annual interest rate, min | 4.50% | ' |
Annual interest rate, term min | 'P5Y | ' |
Percentage of notes receivable annual interest rate, max | 7.00% | ' |
Annual interest rate, term max | 'P7Y | ' |
Schedule_of_Prepaid_Expenses_D
Schedule of Prepaid Expenses (Details) (USD $) | 31-May-14 | Feb. 28, 2014 |
Schedule Of Prepaid Expenses Details | ' | ' |
Software licenses | $11,819 | $11,399 |
Consulting | 206,379 | 414,780 |
Total Prepaid expenses | $218,198 | $426,179 |
DEFERRED_FINANCING_COSTS_Sched
DEFERRED FINANCING COSTS - Schedule of Deferred Financing Cost (Details) (USD $) | 31-May-14 | Feb. 28, 2014 |
Notes to Financial Statements | ' | ' |
Deferred financing costs | $99,000 | $99,000 |
Less: accumulated amortization | -97,806 | -94,222 |
Deferred financing costs, net | $1,194 | $4,778 |
INVENTORIES_Schedule_of_Invent
INVENTORIES - Schedule of Inventory (Details) (USD $) | 31-May-14 | Feb. 28, 2014 |
Inventory Disclosure [Abstract] | ' | ' |
Finished goods | $810,125 | $776,327 |
Parts and supplies | 2,071,483 | 2,032,708 |
Total Inventories | $2,881,608 | $2,809,035 |
INVENTORIES_Details_Narrative
INVENTORIES (Details Narrative) (USD $) | 31-May-14 | Feb. 28, 2014 |
Inventory Disclosure [Abstract] | ' | ' |
Inventory deposits | $750,754 | $760,769 |
PROPERTY_AND_EQUIPMENT_Schedul
PROPERTY AND EQUIPMENT - Schedule of Property and Equipment (Details) (USD $) | 31-May-14 | Feb. 28, 2014 |
Property, Plant and Equipment [Abstract] | ' | ' |
Furniture | $51,684 | $51,684 |
Computer equipment | 175,433 | 174,263 |
Shop machinery and equipment | 199,721 | 199,721 |
Testing Site & Equipment | 31,389 | 31,389 |
Molds & Tooling | 77,515 | 77,515 |
Vehicles | 10,998 | 10,998 |
Subtotal | 546,740 | 545,570 |
Less: accumulated depreciation | -350,131 | -323,114 |
Property and equipment, net | $196,609 | $222,456 |
PROPERTY_AND_EQUIPMENT_Details
PROPERTY AND EQUIPMENT (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended |
31-May-14 | Feb. 28, 2014 | |
Property, Plant and Equipment [Abstract] | ' | ' |
Depreciation expense | $27,017 | $110,202 |
ACCRUED_EXPENSES_Schedule_of_A
ACCRUED EXPENSES - Schedule of Accrued Expenses (Details) (USD $) | 31-May-14 | Feb. 28, 2014 |
Payables and Accruals [Abstract] | ' | ' |
Wages | $83,245 | $44,156 |
Payroll Taxes | 386,039 | 414,768 |
Benefits | 8,774 | 6,658 |
Interest | 459,324 | 356,126 |
Total Accrued Expenses | $937,382 | $821,708 |
CUSTOMER_DEPOSITS_Details_Narr
CUSTOMER DEPOSITS (Details Narrative) (USD $) | 3 Months Ended | |
31-May-14 | Feb. 28, 2014 | |
Notes to Financial Statements | ' | ' |
Percentage of selling price on customer deposit | 50.00% | ' |
Customer deposits | $106,172 | $81,569 |
Schedule_of_Estimated_Future_W
Schedule of Estimated Future Warranty Costs (Details) | 3 Months Ended | 12 Months Ended | ||||
31-May-14 | Feb. 23, 2014 | Feb. 28, 2014 | Feb. 28, 2014 | Feb. 28, 2014 | Feb. 28, 2014 | |
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
Total Warranty Reserve as a % of Sales | 2.00% | 0.10% | 0.30% | 0.40% | 0.50% | 0.70% |
WARRANTY_RESERVE_Schedule_of_W
WARRANTY RESERVE - Schedule of Warranty Reserve Activity (Details) (USD $) | 3 Months Ended | 12 Months Ended |
31-May-14 | Feb. 28, 2013 | |
Notes to Financial Statements | ' | ' |
Reserve Balance, FY 2011 | $9,464 | $16,223 |
Reserve Balance, FY 2012 | 41,297 | 55,063 |
Reserve Balance, FY 2013 | 64,947 | 79,343 |
Reserve Balance, FY 2014 | 72,001 | 38,948 |
Reserve Balance, FY 2015 | 7,148 | 0 |
Reserve balance, ending | $194,857 | $189,577 |
WARRANTY_RESERVE_Details_Narra
WARRANTY RESERVE (Details Narrative) | 3 Months Ended |
31-May-14 | |
Notes to Financial Statements | ' |
Total Warranty Reserve as a % of Sales | 2.00% |
Warranty Reserve, Warranty Period | 'P5Y |
CAPITAL_STOCK_Details_Narrativ
CAPITAL STOCK (Details Narrative) (USD $) | 0 Months Ended | 3 Months Ended | 12 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||||
Oct. 19, 2012 | 31-May-14 | 31-May-13 | Feb. 29, 2012 | Feb. 28, 2014 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2014 | Feb. 28, 2014 | Feb. 28, 2013 | 31-May-14 | Feb. 28, 2014 | Feb. 28, 2014 | Feb. 28, 2014 | Feb. 28, 2014 | Feb. 28, 2014 | |
Accounts Payable | Convertible Note | Accounts Payable | Multiple Providers | Multiple Providers | Convertible Note | Convertible Note | Private Placement 1 | Prior Equity Issuance | Prior Investment | Warrants Exercise | ||||||
Common stock, shares authorized | ' | 100,000,000 | ' | ' | 100,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock, value per share | ' | $0.00 | ' | ' | $0.00 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock, shares issued | ' | 43,306,913 | ' | ' | 43,126,913 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common shares issued for payment, shares | ' | ' | ' | ' | ' | 206,718 | ' | 385,715 | ' | ' | ' | ' | ' | ' | ' | ' |
Common shares issued for payment | ' | ' | ' | ' | ' | $81,099 | ' | $145,237 | ' | ' | ' | ' | ' | ' | ' | ' |
Common shares issued for services, shares | ' | ' | ' | ' | ' | ' | ' | ' | 542,500 | 1,508,644 | ' | ' | ' | 300,000 | 312,500 | ' |
Common shares issued for prior outstanding convertible note | ' | ' | ' | ' | ' | ' | 1,174,051 | ' | ' | ' | 180,000 | 565,496 | ' | ' | ' | ' |
Common shares issued-outstanding convertible note | ' | ' | ' | ' | ' | ' | 104,000 | ' | ' | ' | 63,000 | 197,923 | ' | ' | ' | ' |
Common shares issued for services | ' | ' | 67,375 | ' | ' | ' | ' | ' | 112,375 | 602,150 | ' | ' | ' | 150,000 | 100,000 | ' |
Common shares issued to unrelated party in private placement | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,000,000 | ' | ' | ' |
Common shares valued per share, minimum | ' | ' | ' | ' | ' | ' | ' | ' | $0.15 | $0.35 | ' | ' | ' | ' | ' | ' |
Common shares value per share, maximum | ' | ' | ' | ' | ' | ' | ' | ' | $0.50 | $0.45 | ' | ' | ' | ' | ' | ' |
Common shares average price per share | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.45 | ' | ' | ' |
Net proceeds from private placement | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,250,000 | ' | ' | ' |
Total value expensed | ' | ' | ' | ' | ' | ' | ' | ' | 112,375 | 602,150 | ' | ' | ' | ' | ' | ' |
Series A, Convertible Preferred stock, par value | $1.05 | $0.00 | ' | ' | $0.00 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Series A Convertible Preferred stock sold | 1,428,571 | 1,428,571 | ' | ' | 1,428,571 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Proceeds from issuance of preferred shares | 1,500,000 | ' | ' | 1,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of warrants issued | 2,142,857 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair value per warrant | $0.21 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Proceeds from warrants exercised | 345,000 | ' | ' | 345,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,712,500 |
Deemed dividend | $259,285 | ' | ' | ($259,285) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock issued during period | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7,627,875 |
STOCK_WARRANTS_AND_OPTIONS_Sch
STOCK WARRANTS AND OPTIONS - Schedule of Key Assumptions of Warrants and Options (Details) (USD $) | 3 Months Ended |
31-May-14 | |
Minimum [Member] | ' |
Employee Stock Options, Stock Price | $0.17 |
Employee Stock Options, Exercise Price | $0.35 |
Employee Stock Options, Expected Volatility | 73.40% |
Employee Stock Options, Dividend Yield | 0.00% |
Employee Stock Options, Risk-free rate | 2.00% |
Employee Stock Options, Vesting period | '4 years |
Private Placement Warrants, Stock Price | $0.16 |
Private Placement Warrants, Exercise Price | $0.35 |
Private Placement Warrants, Expected volatility | 73.40% |
Private Placement Warrants, Dividend Yield | 0.00% |
Private Placement Warrants, Risk-free rate | 0.16% |
Private Placement Warrants, Expected term | '2 years |
Maximum [Member] | ' |
Employee Stock Options, Stock Price | $2.20 |
Employee Stock Options, Exercise Price | $1.25 |
Employee Stock Options, Expected Volatility | 98.00% |
Employee Stock Options, Dividend Yield | 0.00% |
Employee Stock Options, Risk-free rate | 3.37% |
Employee Stock Options, Vesting period | '7 years |
Private Placement Warrants, Stock Price | $1.05 |
Private Placement Warrants, Exercise Price | $1.50 |
Private Placement Warrants, Expected volatility | 98.00% |
Private Placement Warrants, Dividend Yield | 0.00% |
Private Placement Warrants, Risk-free rate | 2.62% |
Private Placement Warrants, Expected term | '5 years |
STOCK_WARRANTS_AND_OPTIONS_Sch1
STOCK WARRANTS AND OPTIONS - Schedule of Stock Options (Details) (USD $) | 12 Months Ended | ||
Feb. 28, 2014 | Feb. 28, 2013 | 31-May-14 | |
Stock Warrants And Options - Schedule Of Stock Options Details | ' | ' | ' |
Beginning Balance, Issued Options | 2,095,000 | 2,475,000 | 3,385,000 |
Beginning Balance, Average Exercise Price | $1.13 | $1.13 | $0.62 |
Expiry Date | '2019 | '2019 | ' |
Issued, Options | 2,375,000 | 0 | ' |
Issued, Average Exercise Price | $0.37 | $0 | ' |
Issued, Expiry Date | '2020 | ' | ' |
Exercised, Options | 0 | 0 | ' |
Exercised, Average Exercise Price | $0 | $0 | ' |
Expired/Cancelled Options | -1,085,000 | -380,000 | ' |
Expired/Cancelled Average Exercise Price | $1.14 | $1.13 | ' |
Ending Balance, Issued Options | 3,385,000 | 2,095,000 | 3,385,000 |
Ending Balance, Average Exercise Price | $0.62 | $1.13 | $0.62 |
STOCK_WARRANTS_AND_OPTIONS_Sch2
STOCK WARRANTS AND OPTIONS - Schedule of Stock Warrants (Details) (USD $) | 3 Months Ended | 12 Months Ended | |
31-May-14 | Feb. 28, 2014 | Feb. 28, 2013 | |
Stock Warrants And Options - Schedule Of Stock Options Details | ' | ' | ' |
Beginning Balance, Issued Warrants | 29,849,564 | 11,879,824 | 9,041,967 |
Beginning Balance, Average Exercise Price | $0.59 | $0.96 | $1.14 |
Expiry Date | ' | ' | '2016-03-18 |
Issued, Warrants | 2,645,000 | 26,126,965 | 2,837,857 |
Issued, Average Exercise Price | $0.35 | $0.35 | $0.39 |
Issued, Expiry Date | 16-Apr-18 | 4-Apr-17 | 22-Oct-17 |
Exercised, Warrants | ' | -7,627,875 | 0 |
Exercised, Average Exercise Price | ' | $0.36 | ' |
Expired/Cancelled Warrants | ' | -529,350 | 0 |
Ending Balance, Issued Warrants | 32,494,564 | 29,849,564 | 11,879,824 |
Ending Balance, Average Exercise Price | $0.57 | $0.59 | $0.96 |
STOCK_WARRANTS_AND_OPTIONS_Det
STOCK WARRANTS AND OPTIONS (Details Narrative) (USD $) | 0 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 15 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||||
Oct. 19, 2012 | Feb. 28, 2014 | Feb. 28, 2013 | 31-May-14 | 31-May-14 | 31-May-14 | 31-May-14 | Feb. 28, 2014 | Feb. 28, 2013 | 31-May-14 | Nov. 30, 2013 | Feb. 28, 2014 | 31-May-14 | Aug. 31, 2013 | 31-May-14 | Feb. 28, 2014 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 29, 2012 | Feb. 29, 2012 | |
Minimum [Member] | Maximum [Member] | Employee Stock Option Plan | Employee Stock Option Plan | Employee Stock Option Plan | Employee Stock Option Plan | Credit Facility | Credit Facility | Credit Facility | Credit Facility | Credit Facility Amended | Consultant | Series A - Warrants Issued | PO Financing - Warrants Issued | Private Placement - Warrants Issued | Advisor - Warrants Issued | |||||
Stock option plan, common stock authorized | ' | ' | ' | ' | ' | ' | 4,000,000 | ' | 2,823,199 | 4,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock options granted during period | ' | ' | ' | ' | ' | ' | ' | 2,375,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock options canceled | ' | -1,085,000 | -380,000 | ' | ' | ' | ' | -1,085,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
NonQualified Stock options issued | ' | ' | ' | ' | ' | ' | ' | 700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Estimated fair value of stock options | ' | ' | ' | ' | ' | ' | ' | $590,588 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrecognized compensation expense | ' | ' | ' | ' | ' | ' | 461,585 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Share based compensation recognized in net earnings | ' | ' | ' | ' | ' | ' | 54,689 | ' | -463,357 | -249,398 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants granted during period, shares | 2,142,857 | ' | ' | ' | ' | ' | ' | ' | ' | ' | 493,393 | 8,935,000 | 2,645,000 | 2,070,000 | ' | 12,128,572 | 2,142,857 | 695,000 | 5,207,649 | 1,250,000 |
Fair value of warrants using Black-Scholes option pricing model | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 111,026 | 757,491 | 603,165 | 519,727 | ' | 956,229 | 345,000 | 85,204 | 1,841,318 | 189,875 |
Reset provision, previously issued warrants | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,777,225 |
Reset provision, value modification | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 194,784 |
Warrants, Stock Price | ' | ' | ' | ' | $0.16 | $1.05 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Discount, unamortized | ' | $547,774 | ' | $743,927 | ' | ' | ' | ' | ' | ' | ' | ' | $325,296 | ' | $452,374 | ' | ' | $31,650 | ' | ' |
INCOME_TAXES_Schedule_of_Feder
INCOME TAXES - Schedule of Federal Income Tax (Details) (USD $) | 3 Months Ended | |
31-May-14 | 31-May-13 | |
Income Tax Disclosure [Abstract] | ' | ' |
Current operations | $1,035,000 | $550,000 |
Less: valuation allowance | -1,035,000 | -550,000 |
Net provision for Federal income taxes | $0 | $0 |
INCOME_TAXES_Schedule_of_Net_D
INCOME TAXES - Schedule of Net Deferred Tax Amount (Details) (USD $) | 31-May-14 | Feb. 28, 2014 |
Income Tax Disclosure [Abstract] | ' | ' |
Net operating loss carryover | $11,685,772 | $10,650,772 |
Less: valuation allowance | -11,685,772 | -10,650,772 |
Net deferred tax asset | $0 | $0 |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) (USD $) | 3 Months Ended |
31-May-14 | |
Income Tax Disclosure [Abstract] | ' |
Net of operating loss carry-forwards | $34,377,000 |
Operating loss carry-forwards expiration date | 1-Jan-29 |
Changes in expected tax rate of deferred tax amount | 34.00% |
COMMITMENTS_Schedule_of_NonCan
COMMITMENTS - Schedule of Non-Cancelable Operating Lease Aggregate Minimum Rental Payments (Details) (USD $) | 31-May-14 |
Commitments and Contingencies Disclosure [Abstract] | ' |
Year ended February 28, 2015 | $153,977 |
Year ended February 28, 2016 | 169,708 |
Year ended February 28, 2017 | 174,804 |
Year ended February 28, 2018 | 73,550 |
Total | $572,039 |
COMMITMENTS_Details_Narrative
COMMITMENTS (Details Narrative) (USD $) | 3 Months Ended | |
31-May-14 | 31-May-13 | |
Commitments and Contingencies Disclosure [Abstract] | ' | ' |
Operating lease rent expense | $75,582 | $40,104 |
NOTES_PAYABLE_RELATED_PARTIES_
NOTES PAYABLE - RELATED PARTIES Schedule of Notes Payable - Related Parties (Details) (USD $) | 3 Months Ended | 12 Months Ended |
31-May-14 | Feb. 28, 2013 | |
Notes payable - related parties, net | $882,436 | $925,192 |
Less: current maturities | 882,436 | 925,192 |
Long-term Portion | 0 | 0 |
Related Party Note 1 | ' | ' |
Principal balance | 548,276 | 540,148 |
Related Party Note 2 | ' | ' |
Principal balance | 175,308 | 234,407 |
Related Party Note 3 | ' | ' |
Principal balance | $150,637 | $158,852 |
NOTES_PAYABLERELATED_PARTIES_D
NOTES PAYABLE-RELATED PARTIES (Details Narrative) (USD $) | 0 Months Ended | 3 Months Ended | 17 Months Ended | 3 Months Ended | |||
Oct. 19, 2012 | 31-May-14 | 31-May-13 | 31-May-14 | Oct. 01, 2014 | 31-May-14 | 31-May-14 | |
Related Party Note 1 | Related Party Note 1 | Related Party Note 2 | Related Party Note 3 | ||||
Maturity date | ' | ' | ' | 15-May-13 | ' | 15-Dec-12 | 1-May-13 |
Monthly interest rate | ' | ' | ' | 1.00% | ' | ' | ' |
Annual interest rate | ' | ' | ' | ' | ' | 8.00% | 10.00% |
Amended maturity date | ' | ' | ' | 14-Oct-13 | ' | 1-Apr-13 | 14-Oct-13 |
Amended Monthly interest rate | ' | ' | ' | 10.00% | ' | 10.00% | 10.00% |
Monthly payments due | ' | ' | ' | ' | $4,937 | $2,159 | ' |
Amortization of debt discount | ' | -427,256 | -85,331 | 35,224 | ' | 16,907 | 35,599 |
Debt discount | ' | ' | ' | 13,548 | ' | 6,503 | 13,692 |
Conversion Feature, Price per Share | ' | ' | ' | $0.35 | ' | $0.35 | $0.35 |
Conversion Feature, Value | ' | ' | ' | ' | ' | $0 | ' |
Warrants granted during period, shares | 2,142,857 | ' | ' | 517,500 | ' | 250,000 | 667,500 |
Warrants exercise price per share | ' | ' | ' | $0.35 | ' | $0.35 | $0.35 |
Warrants granted, exercise period | ' | ' | ' | 'P3Y | ' | 'P3Y | 'P3Y |
NOTES_PAYABLE_Schedule_of_Note
NOTES PAYABLE - Schedule of Notes Payable (Details) (USD $) | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended |
31-May-14 | Feb. 28, 2014 | 31-May-14 | Feb. 28, 2014 | 31-May-14 | Feb. 28, 2013 | 31-May-14 | Feb. 28, 2014 | |
Amended PO Financing | Amended PO Financing | Promissory Note 1 | Promissory Note 1 | Credit Facility | Credit Facility | |||
Principal balance | ' | ' | $1,105,000 | $1,105,000 | $382,153 | $382,153 | $8,070,237 | $9,364,321 |
Notes payable, net | 10,851,474 | 9,557,390 | ' | ' | ' | ' | ' | ' |
Less: current maturities | -10,851,474 | -9,557,390 | ' | ' | ' | ' | ' | ' |
Long-term Portion | $0 | $0 | ' | ' | ' | ' | ' | ' |
NOTES_PAYABLE_Schedule_of_Futu
NOTES PAYABLE - Schedule of Future maturities of Note and Loan Debt (Details) (USD $) | 31-May-14 |
Debt Instrument, Future Maturities | $12,511,580 |
Year 1 | ' |
Debt Instrument, Future Maturities | 12,511,580 |
Thereafter | ' |
Debt Instrument, Future Maturities | $0 |
NOTES_PAYABLE_Details_Narrativ
NOTES PAYABLE (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | 3 Months Ended | ||||||
31-May-14 | 31-May-13 | 31-May-14 | 31-May-14 | 31-May-14 | 31-May-14 | Feb. 28, 2013 | Feb. 28, 2014 | 31-May-14 | |
PO Financing | Amended PO Financing | Promissory Note 1 | Credit Facility | Credit Facility | Credit Facility | Promissory Note 3 | |||
Date entered into Agreement | ' | ' | '2012-08-06 | ' | '2013-04-01 | ' | ' | '2013-04-03 | '2012-06-14 |
Debt financing | ' | ' | $1,500,000 | ' | ' | $11,033,000 | $6,500,000 | ' | $100,000 |
Interest rate on funds outstanding | ' | ' | 16.00% | 16.00% | 16.00% | 10.00% | 10.00% | ' | 8.00% |
Issuance of warrants to purchase common stock | ' | ' | 600,000 | ' | ' | ' | ' | 12,715,000 | ' |
Warrants exercisable period | ' | ' | '24 months | ' | ' | ' | ' | '4 years | ' |
Warrants exercise price per share | ' | ' | $0.35 | ' | ' | ' | ' | $0.35 | ' |
Monthly payment due, payment one | ' | ' | ' | 275,000 | 160,000 | ' | ' | ' | ' |
Monthly payment due, payment two | ' | ' | ' | 30,000 | 20,000 | ' | ' | ' | ' |
Monthly payment due, payment three | ' | ' | ' | 60,000 | 80,000 | ' | ' | ' | ' |
Monthly payment due, payment four | ' | ' | ' | 105,000 | 20,000 | ' | ' | ' | ' |
Date promissory notes were amended | ' | ' | ' | 31-Mar-13 | 1-Apr-13 | ' | ' | ' | ' |
Annual interest rate | ' | ' | ' | ' | 10.00% | ' | ' | ' | ' |
Due date | ' | ' | ' | ' | 1-Oct-14 | ' | ' | ' | 18-Mar-13 |
Amortization of debt discount | -427,256 | -85,331 | ' | ' | ' | ' | ' | 1,126,008 | ' |
Debt discount | ' | ' | ' | ' | ' | 743,927 | ' | ' | ' |
Accured Interest | ' | ' | ' | ' | ' | ' | ' | ' | 4,000 |
Common shares issued for prior outstanding convertible note | ' | ' | ' | ' | ' | ' | ' | ' | 1,177,051 |
Interest Expense | $389,945 | $27,591 | ' | ' | ' | ' | ' | ' | ' |
SUPPLEMENTAL_CASH_FLOWS_Schedu
SUPPLEMENTAL CASH FLOWS - Schedule of Non-Cash Investing Financing Activities (Details) (USD $) | 3 Months Ended | 12 Months Ended |
31-May-14 | Feb. 28, 2014 | |
Supplemental Cash Flow Elements [Abstract] | ' | ' |
Modification of warrants | ' | $0 |
Shares issued in payment of trade debt | 0 | 145,237 |
Debt discount from fair value of embedded derivative | 603,165 | 1,388,244 |
Issuance of common stock for convertible debt and accrued interest | 63,000 | 197,923 |
Shares issued for prepaid consulting services | 0 | 112,375 |
Warrants and options issued for prepaid consulting | 0 | 956,229 |
Deemed dividend | $0 | $0 |
CONCENTRATIONS_Details_Narrati
CONCENTRATIONS (Details Narrative) (USD $) | 31-May-14 | Feb. 28, 2014 | Feb. 28, 2014 |
Customer 1 | Vendor1 | ||
Demand deposits | $0 | ' | ' |
FDIC insurance policy amount | 250,000 | ' | ' |
Sales by customer/vendor | ' | $81,658 | $197,000 |
Ownership of annual sales by customer/vendor | ' | 16.00% | 40.00% |