Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 09, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | QS Energy, Inc. | |
Entity Central Index Key | 1,103,795 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 183,171,577 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash | $ 559,682 | $ 2,247,557 |
Other current assets | 57,161 | 72,225 |
Total current assets | 616,843 | 2,319,782 |
Property and equipment, net of accumulated depreciation of $56,983 and $47,180 at September 30, 2015 and December 31, 2014, respectively | 25,057 | 21,946 |
Other assets | 6,480 | 5,830 |
Total assets | 648,380 | 2,347,558 |
Current liabilities | ||
Accounts payable-license agreements | 543,126 | 405,313 |
Accounts payable and accrued expenses | 170,825 | 175,228 |
Accrued expenses and accounts payable-related parties | 206,897 | 259,507 |
Convertible debentures, net of discounts of $7,119 and $105,542 at September 30, 2015 and December 31, 2014, respectively | 184,721 | 139,098 |
Total current liabilities | $ 1,105,569 | $ 979,146 |
Commitments and contingencies | ||
Stockholder's equity | ||
Common stock, $.001 par value: 300,000,000 shares authorized 183,171,577 and 181,028,244 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | $ 183,172 | $ 181,028 |
Additional paid-in capital | 99,947,915 | 98,232,582 |
Accumulated deficit | (100,588,276) | (97,045,198) |
Total stockholders' equity (deficit) | (457,189) | 1,368,412 |
Total liabilities and stockholders' equity (deficit) | $ 648,380 | $ 2,347,558 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation | $ 56,983 | $ 47,180 |
Discounts on convertible debentures | $ 7,119 | $ 105,542 |
Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 183,171,577 | 181,028,244 |
Common stock, shares outstanding | 183,171,577 | 181,025,244 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
Revenues | $ 0 | $ 180,000 | $ 0 | $ 240,000 |
Costs and Expenses | ||||
Operating expenses | 727,587 | 749,680 | 2,409,551 | 2,600,095 |
Research and development expenses | 80,082 | 146,094 | 500,517 | 741,045 |
Loss before other income (expense) | (807,669) | (715,774) | (2,910,068) | (3,101,140) |
Other income (expense) | ||||
Other income (loss) | 7,858 | 0 | 10,858 | (26,500) |
Interest and financing expense | (25,986) | 0 | (643,868) | 0 |
Net loss | $ (825,797) | $ (715,774) | $ (3,543,078) | $ (3,127,640) |
Net loss per common share, basic and diluted | $ 0 | $ 0 | $ (.02) | $ (.02) |
Weighted average common shares outstanding, basic and diluted | 183,128,577 | 180,695,547 | 181,943,768 | 180,204,377 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Stockholders' Equity - 9 months ended Sep. 30, 2015 - USD ($) | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2014 | 181,028,244 | |||
Beginning balance, value at Dec. 31, 2014 | $ 181,028 | $ 98,232,582 | $ (97,045,198) | $ 1,368,412 |
Common stock issued upon exercise of warrants and options, shares | 200,000 | |||
Common stock issued upon exercise of warrants and options, net | $ 200 | 49,800 | 50,000 | |
Common stock issued on conversion of notes, shares | 1,943,333 | |||
Common stock issued on conversion of notes, amount | $ 1,944 | 600,856 | 602,800 | |
Fair value of warrants and beneficial conversion feature associated with issued convertible notes | 470,945 | 470,945 | ||
Fair value of options and warrants issued as compensation | 593,732 | 593,732 | ||
Net loss | (3,543,078) | (3,543,078) | ||
Ending balance, shares at Sep. 30, 2015 | 181,171,577 | |||
Ending balance, value at Sep. 30, 2015 | $ 183,172 | $ 99,947,915 | $ (100,588,276) | $ (457,189) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities | ||
Net loss | $ (3,543,078) | $ (3,127,640) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock based compensation expense | 593,732 | 596,917 |
Amortization of debt discount | 643,868 | 0 |
Depreciation and amortization | 9,803 | 10,368 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 0 | (60,000) |
Prepaid expenses and other current assets | 15,064 | 7,604 |
Other assets | (650) | 0 |
Accounts payable and accrued expenses | (4,403) | (141,857) |
Accounts payable - license agreements | 137,813 | 140,644 |
Accounts payable and accrued expenses - related parties | (52,610) | (334,654) |
Net cash used in operating activities | (2,200,461) | (2,908,618) |
Cash flows from investing activities | ||
Purchase of equipment | (12,914) | 0 |
Net cash used in investing activities | (12,914) | 0 |
Cash flows from financing activities | ||
Net proceeds from issuance of convertible notes and warrants | 475,500 | 0 |
Net proceeds from exercise of warrants and options | 50,000 | 1,413,284 |
Net cash provided by financing activities | 525,500 | 1,413,284 |
Net decrease in cash | (1,687,875) | (1,495,334) |
Cash, beginning of period | 2,247,557 | 4,137,068 |
Cash, end of period | 559,682 | 2,641,734 |
Supplemental disclosures of cash flow information | ||
Cash paid during the year for: Interest | 0 | 0 |
Cash paid during the year for: Income taxes | 0 | 0 |
Non-cash investing and financing activities | ||
Common stock issued on conversion of convertible debentures | 602,800 | 0 |
Fair value of warrants and beneficial conversion feature associated with issued convertible notes | $ 470,945 | $ 0 |
1. Description of Business
1. Description of Business | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | QS Energy, Inc. (QS Energy, Company) (formerly known as Save the World Air, Inc.) was incorporated on February 18, 1998, as a Nevada Corporation under the name Mandalay Capital Corporation. The Company changed its name to Save the World Air, Inc. on February 11, 1999. Effective August 11, 2015, the Company changed its name to QS Energy, Inc. The name change was effected through a short-form merger pursuant to Section 92A.180 of the Nevada Revised Statutes. Additionally, QS Energy Pool, Inc., a California corporation, was formed as a wholly-owned subsidiary of the Company on July 6, 2015 to serve as a vehicle for the Company to explore, review and consider acquisition opportunities. The Companys common stock is quoted under the symbol QSEP on the Over-the-Counter Bulletin Board. More information including the Companys fact sheet, logos and media articles are available at our corporate website, www.qsenergy.com QS Energy, Inc. develops and commercializes energy efficiency technologies that assist in meeting increasing global energy demands, improving the economics of oil extraction and transport, and reducing greenhouse gas emissions. The Company's intellectual property portfolio includes 47 domestic and international patents and patents pending, a substantial portion of which have been developed in conjunction with and exclusively licensed from Temple University of Philadelphia, PA (Temple). QS Energy's primary technology is called Applied Oil Technology (AOT), a commercial-grade crude oil pipeline transportation flow-assurance product. AOT has been proven in U.S. Department of Energy tests to increase the energy efficiency of oil pipeline pump stations. The AOT product has transitioned from the research and development stage to initial commercial production for the midstream pipeline marketplace. In 2014, the Company began commercial development of a suite of products based around the Joule Heat technology. The Company began fabrication of prototype equipment to be operated under a joint development agreement with a commercial entity in the fourth quarter of 2014. This prototype equipment was installed in June, 2015, with testing beginning shortly thereafter which is anticipated to be completed first quarter of 2016. In addition, the Company filed two additional provisional patents related to the technologys method and apparatus. The first of the two provisional patents was finalized and submitted to non-provisional status on April 29, 2014. The second of the two provisional patents was finalized and submitted to non-provisional status at the end of the third quarter of 2014. Basis of Presentation The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2014 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company's financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of significant accounting policies | Consolidation Policy The accompanying consolidated financial statements of QS Energy Inc. include the accounts of QS Energy Inc. (the Parent) and its wholly owned subsidiaries, QS Energy Pool, Inc. and STWA Asia Pte. Limited. Intercompany transactions and balances have been eliminated in consolidation. Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the nine months ended September 30, 2015, the Company incurred a net loss of $3,543,078 and used cash in operations of $2,200,461. These factors raise substantial doubt about the Companys ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Companys ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company's independent registered public accounting firm, in its report on the Company's December 31, 2014 financial statements, has raised substantial doubt about the Company's ability to continue as a going concern. At September 30, 2015, the Company had cash on hand in the amount of $559,682. Management estimates that the current funds on hand will be sufficient to continue operations through January 2016. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities for cash to operate our business, including without limitation the expenses it will incur in connection with the license and research and development agreements with Temple; costs associated with product development and commercialization of the AOT and Joule Heat technologies; costs to manufacture and ship the products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, as discussed below, the Company has substantial contractual commitments, including without limitation salaries to our executive officers pursuant to employment agreements, certain payments to a former officer and consulting fees, during the remainder of 2015 and beyond. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case of equity financing. Revenue Recognition The Company recognizes lease revenue upon commencement of the lease. Revenue on future product sales will be recognized upon meeting the following criteria: persuasive evidence of an arrangement exists; delivery has occurred or services rendered; the seller's price to the buyer is fixed or determinable; and collectability is reasonably assured. Basic and Diluted Income (loss) per share Our computation of earnings per share (EPS) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Potential common shares that have an antidilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted (loss) per common share is the same for periods in which the Company reported an operating loss because all warrants and stock options outstanding are anti-dilutive. At September 30, 2015 and 2014, we excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock as their effect would have been anti-dilutive. September 30, 2015 September 30, 2014 Options 21,706,512 20,757,030 Warrants 3,677,704 5,421,050 Common stock issuable upon conversion of notes payable 399,667 Total 25,783,883 26,178,080 Stock-Based Compensation The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board (FASB) whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date. The fair value of the Company's stock option and warrant grants is estimated using the Black-Scholes Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes Option Pricing model could materially affect compensation expense recorded in future periods. Business and Credit Concentrations The Companys cash balances in financial institutions at times may exceed federally insured limits. As of September 30, 2015 and December 31, 2014, before adjustments for outstanding checks and deposits in transit, the Company had $559,682 and $2,247,557, respectively, on deposit with two banks. The deposits are federally insured up to $250,000 at each bank. The Company believes that no significant concentration of credit risk exists with respect to these cash balances because of its assessment of the creditworthiness and financial viability of these financial institutions. 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. Significant estimates include those related to assumptions used in valuing equity instruments issued for financing and services. Actual results could differ from those estimates. Fair Value of Financial Instruments Effective January 1, 2008, fair value measurements are determined by the Company's adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities as permitted. The adoption of the authoritative guidance did not have a material impact on the Company's fair value measurements. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows: Level 1Quoted prices in active markets for identical assets or liabilities. Level 2Inputs, other than the quoted prices in active markets, are observable either directly or indirectly. Level 3Unobservable inputs based on the Company's assumptions. The Company is required to use observable market data if such data is available without undue cost and effort. At September 30, 2015, the recorded amounts for accounts payable, accrued expenses and convertible debentures approximate their fair value due to their short-term nature. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company's financial statements and disclosures. In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation Stock Compensation (Topic 718). The pronouncement was issued to clarify the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2014-12 is not expected to have a significant impact on the Companys consolidated financial position or results of operations. On August 27, 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern In April 2015, the FASB issued Accounting Standards Update No. 2015-03, InterestImputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statement presentation or disclosures. |
3. Certain relationships and re
3. Certain relationships and related transactions | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
Certain relationships and related transactions | As of September 30, 2015 and December 31, 2014, the Company had accrued expenses and accounts payable to related parties in the amount of $206,897 and $259,507, respectively. Included in these amounts at September 30, 2015 and December 31, 2014 were unpaid salaries due the former President and a current member of the Companys Board of Directors of $90,429 and $135,429, respectively. The Company agreed to pay the former President $5,000 per month until the unpaid salary is fully settled. Also included in these amounts at September 30, 2015 and December 31, 2014 are accrued directors fees of $76,089 and $80,586, respectively. |
4. Convertible Notes
4. Convertible Notes | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Convertible Notes | September 30, 2015 (unaudited) December 31, 2014 Balance due on convertible notes $ 191,840 $ 244,640 Unamortized note discounts (7,119 ) (105,542 ) Balance on convertible notes, net of note discounts $ 184,721 $ 139,098 Spring 2015 Convertible Notes: In the second quarter of 2015, the Company issued convertible notes in the aggregate of $550,000 for cash consideration of $475,500, net of original issue discount of $50,000 and commission paid of $24,500. The notes do not bear any interest; however, the Company used an implied interest rate of 10%. The notes are unsecured, mature one year after issuance, and are convertible into 1,833,333 shares of common stock at a conversion price of $0.30 per share. The Company determined that the notes contained a beneficial conversion feature of $352,139 since the market price of the Companys common stock was higher than the effective conversion price of the notes when issued. Investors in the convertible notes received, for no additional consideration, warrants to purchase a total of 916,667 shares of common stock. Each warrant is exercisable on a cash basis only at an exercise price of $0.30 per share, are exercisable immediately upon issuance, and expires one year from the date of issuance. The relative fair value of the warrants issued with the convertible notes was determined to be $118,806 computed using the Black-Scholes Option Pricing model. The fair value of the warrants, the beneficial conversion feature, the original issue discount and commission paid, aggregated $545,445 and is considered a debt discount. In June 2015, the full balance of these notes in the amount of $550,000 was converted to 1,833,333 shares of common stock and the full aggregated debt discount amortized as interest expense. During the three and nine month periods ending September 30, 2015, the total note discount amortized as interest expense was $0 and $545,455, respectively. As of September 30, 2015 there was no remaining balance due on these notes. Fall 2014 Convertible Notes: In the fourth quarter of 2014, the Company issued convertible notes in the aggregate of $280,390 for cash consideration of $254,900, resulting in an original issue discount of $25,490. The notes do not bear any interest; however, the Company used an implied interest rate of 10%. The notes are unsecured, mature one year after issuance, and were convertible into 584,147 shares of common stock at a conversion price of $0.48 per share. The Company determined that the notes contained a beneficial conversion feature of $94,845 since the market price of the Companys common stock was higher than the conversion price of the notes when issued. Investors in the convertible notes received, for no additional consideration, warrants to purchase a total of 146,037 shares of common stock. Each warrant is exercisable on a cash basis only at an exercise price of $0.48 per share, are exercisable immediately upon issuance, and expires one year from the date of issuance. The fair value of the warrants issued with the convertible notes was determined to be $24,826 computed using the Black-Scholes Option Pricing model. The fair value of the warrants, the beneficial conversion feature, and the original issue discount, aggregated $145,161 and was considered a debt discount. The debt discount is being amortized to interest expense over the term of the notes, or in full upon the conversion of a note. As of December 31, 2014 the balance due on these notes was $244,640 and unamortized note discount was $105,542. During the nine month period ended September 30, 2015, the Company converted $52,800 of these notes into 110,000 shares of common stock. As of September 30, 2015 the balance due on these notes was $191,840. During the three and nine month periods ended September 30, 2015, amortization of the note discount totaled $25,986 and $98,231, respectively. As of September 30, 2015, the unamortized note discount was $7,119. In October 2015, two notes payable with a total balance of $26,840 matured. As of the date of this report, the notes payable are still outstanding and past due. Under terms of the notes, the principal balance of each note increased by 10% at maturity and interest thereon accrues at 10% per annum. |
5. Research and development
5. Research and development | 9 Months Ended |
Sep. 30, 2015 | |
Research and Development [Abstract] | |
Research and development | The Company constructs, develops and tests the AOT and Joule Heat technologies with internal resources and through the assistance of various third party entities. Research and development costs are expensed as incurred and include fees such as fees due to Temple University, patent fees, purchase of test equipment, pipeline pumping equipment, crude oil tank batteries, viscometers, SCADA systems, computer equipment, payroll and other related equipment and various logistical expenses for the purposes of evaluating and testing the Companys AOT and Joule Heat prototypes. Total expenses incurred during the three and nine month periods ending September 30, 2015 on Research and Development were $80,082 and $500,517, respectively. Total expenses incurred during the three and nine month periods ending September 30, 2014 on Research and Development were $146,094 and $741,045, respectively. AOT and Joule Heat Product Development and Testing Total expenses incurred during the three and nine month periods ended September 30, 2015 on AOT and Joule Heat product development and testing amounted to $0, and $25,575, respectively, and have been reflected as part of Research and Development expenses on the accompanying consolidated statement of operations. Total expenses incurred during the three and nine month periods ended September 30, 2014 on AOT and Joule Heat product development and testing amounted to $12,167, and $44,355, respectively, and have been reflected as part of Research and Development expenses on the accompanying consolidated statement of operations. AOT Prototypes During the three and nine month periods ended September 30, 2015, the Company incurred total expenses of $31,843 and $84,864, respectively, in the manufacture and delivery of AOT prototype equipment. During the three and nine month periods ended September 30, 2014, the Company incurred total expenses of $54,708 and $458,706, respectively, in the manufacture and delivery of AOT prototype equipment. These prototype equipment expenses have been reflected as part of Research and Development expenses on the accompanying consolidated statement of operations. Joule Heat Prototypes During the three and nine month periods ended September 30, 2015, the Company incurred total expenses of $1,364 and $184,765, respectively, in the manufacture and delivery of Joule Heat prototype equipment. These expenses have been reflected as part of Research and Development expenses on the accompanying consolidated statement of operations. No such expenses were incurred in the three and nine month period ended September 30, 2014. Temple University Licensing Agreements On August 1, 2011, the Company and Temple University (Temple) entered into two Exclusive License Agreements (collectively, the License Agreements) relating to Temples patent applications, patents and technical information pertaining to technology associated with an electric and/or magnetic field assisted fuel injector system (the First Temple License), and to technology to reduce crude oil viscosity (the Second Temple License). The License Agreements are exclusive and the territory licensed to the Company is worldwide and replace previously issued License Agreements. A license maintenance fee of $187,500 is due annually through the life of the underlying patents or until otherwise terminated by either party. Total expenses recognized during the three-month period ended September 30, 2015 and 2014 pursuant to these two agreements amounted to $46,875 in each period. Total expenses recognized during the nine month period ended September 30, 2015 and 2014 pursuant to these two agreements amounted to $140,625 in each period. These expenses are reflected in Research and Development expenses on the accompanying consolidated statement of operations. As of September 30, 2015 and December 31, 2014, total unpaid fees due to Temple pursuant to these agreements amounted to $413,750 and $340,625, respectively, which are included as part of Accounts Payable licensing agreement in the accompanying consolidated balance sheets. Of the total unpaid fees due pursuant to these agreements as of September 30, 2015, a total of $257,500 is past due and payment of the remaining $156,250 is deferred until a minimum sales threshold of $500,000 has been met. The Company is currently in discussions with Temple University regarding settlement of these past due amounts. There were no revenues generated from these two licenses during the three and nine month periods ended September 30, 2015. Revenues generated from these two licenses during the three and nine month periods ended September 30, 2014 were $180,000 and $240,000, respectively. Revenues generated in 2014 did not meet the annual minimum threshold for payment of license royalties. No license royalty fees accrued under these two license agreements in the three and nine month periods ended September 30, 2015 and 2014. Temple University Sponsored Research Agreement On March 19, 2012, the Company entered into a Sponsored Research Agreement (Research Agreement) with Temple University (Temple), whereby Temple, under the direction of Dr. Rongjia Tao, will perform ongoing research related to the Companys AOT device (the Project), for the period April 1, 2012, through April 1, 2014. All rights and title to intellectual property resulting from Temples work related to the Project shall be subject to the Exclusive License Agreements between Temple and the Company, dated August 1, 2011. In exchange for Temples research efforts on the Project, the Company has agreed to pay Temple $500,000, payable in quarterly installments of $62,500 through December 2013. In August 2013, the Company and Temple amended the Research Agreement. Under the amended agreement, parties agreed that total cost for Phase 1 of the agreement was $241,408 and total cost for Phase 2 of the agreement was $258,592 payable beginning September 1, 2013 in eight quarterly installments of $32,324 through September 2015. During the three and nine month periods ended September 30, 2015 the Company recognized a total expense of $0 and $64,688, respectively, pursuant to this agreement. During the three and nine month periods ended September 30, 2014 the Company recognized a total expense of $32,344 and $97,359, respectively, pursuant to this agreement. These expenses are reflected in Research and Development expenses on the accompanying consolidated statement of operations. As of September 30, 2015 and December 31, 2014, total unpaid fees due to Temple pursuant to this agreement amounted to $129,376 and $64,688, respectively, which are included as part of Accounts Payable licensing agreement in the accompanying consolidated balance sheets. The unpaid fees of $129,376 were due September 1, 2015 and are past due. As of the date of this report, the Company is in discussions with Temple University regarding settlement of these past due amounts. |
6. Lease
6. Lease | 9 Months Ended |
Sep. 30, 2015 | |
Leases [Abstract] | |
Lease | Kinder Morgan Crude & Condensate, LLC Lease On July 15, 2014, the Company entered into an Equipment Lease/Option to Purchase Agreement (Lease) with Kinder Morgan Crude & Condensate, LLC (Kinder Morgan). In accordance with the terms and conditions of the agreement, Kinder Morgan agreed to lease and test the effectiveness of the Companys AOT technology and equipment on one of Kinder Morgans operating pipelines. Equipment provided under the Lease includes a single AOT Midstream pressure vessel with a maximum flow capacity of 5,000 gallons per minute. The initial term (Initial Term) of the Lease is four months, with an option to extend the Lease for up to a maximum of 84 months. During the Initial Term, either the Company or Kinder Morgan may terminate the Agreement for any reason on 45 days written notice. Lease payments shall be $20,000 per month; provided however, that in the event the Equipment is removed from service at its initial location during the Initial Term, the monthly lease payments shall be reduced to $5,000 until the Equipment is placed back in service at its new location, at which time the Lease payments shall resume at $20,000 per month. The agreement further provides that Kinder Morgan shall have an option to purchase the equipment during the term of the Lease for a fixed price of between $600,000 and $1,200,000, depending upon the date of purchase. The equipment was delivered to Kinder Morgan in December 2014 and installed in March 2015. In April 2015, the AOT pressure vessel experienced an electrical short and was replaced by another AOT pressure vessel. Subsequently, it was determined that the AOT needed further modification and as a result, a modified AOT unit was installed in July 2015. Subsequently, the Company and Kinder Morgan agreed to hold off acceptance of the AOT unit subject to further laboratory testing and system modifications which are scheduled to be completed during the first quarter of FY 2016. TransCanada Keystone Pipeline, L.P. Lease On August 1, 2013, the Company entered into an Equipment Lease/Option to Purchase Agreement (Lease) with TransCanada Keystone Pipeline, L.P. by its agent TC Oil Pipeline Operations, Inc. (TransCanada) which agreed to lease and test the effectiveness of the Companys AOT technology and equipment on one of TransCanadas operating pipelines. The initial term of the lease was for six months at an amount of $60,000 per month. During the initial term, either the Company or TransCanada had the right to terminate the Agreement for any reason on 90 days written notice. TransCanada had an option to purchase the equipment during the term of the lease for approximately $4.3 million. In June 2014, the equipment was accepted by TransCanada and the lease commenced. The Company accounted for the TransCanada Lease as an operating lease, and recognized lease revenue of $180,000 and $240,000 for the three and nine months ended September 30, 2014, respectively. In October 2014, the lease was mutually terminated by the Company and TransCanada and the AOT equipment was subsequently returned to the Company. |
7. Common Stock
7. Common Stock | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Common Stock | During the nine months ended September 30, 2015, the Company issued 1,943,333 shares of its common stock upon the conversion of $602,800 in convertible notes at $0.30 and $0.48 per share. In addition, the Company also issued 200,000 shares of common stock upon the exercise of warrants at $0.25 per share with proceeds of $50,000. |
8. Stock Options and warrants
8. Stock Options and warrants | 9 Months Ended |
Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | |
Stock Options and Warrants | The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs. Options vest and expire according to terms established at the grant date. Options Pursuant to the Companys 2004 Stock Option Plan (the Plan), the Company could issue options under the Plan to acquire up to 7,000,000 shares of common stock as amended in May 2006. On March 2, 2014, the Plan expired and the Board decided not to extend it. As of September 30, 2015 and December 31, 2014, options to purchase 3,544,908 shares granted under the Plan were outstanding. Employee options vest according to the terms of the specific grant and expire from 2 to 10 years from date of grant. Non-employee option grants have vested upon issuance and up to 2 years from the date of grant. The weighted-average, remaining contractual life of employee and non-employee options outstanding at September 30, 2015 was 5.5 years. Stock option activity for the period December 31, 2014 up to September 30, 2015, was as follows: Options Weighted Avg. December 31, 2014 21,052,030 $ 0.30 Granted 888,552 0.46 Exercised Forfeited (234,070 ) 0.72 September 30, 2015 21,706,512 $ 0.30 The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest as of September 30, 2015 were as follows: Outstanding Options Exercisable Options Option Exercise Price Per Share Shares Life (Years) Weighted Average Exercise Price Shares Weighted Average Exercise Price $ 0.21 - $ 0.99 21,443,283 5.5 $0.29 19,946,498 $0.28 $ 1.00 - $ 1.99 263,229 4.5 $1.22 263,229 $1.22 21,706,512 5.5 $0.30 20,209,727 $0.30 During the nine month period ending September 30, 2015 the Company granted options to purchase 888,522 shares of common stock to members of the Companys Board of Directors and an employee. The options are exercisable at prices ranging from $0.35 per share to $0.48 per share, vest monthly over a twelve month period, and expire ten years from the date granted. Total fair value of these options at grant date was $336,767 using the Black-Scholes Option Pricing model with the following assumptions: life of 5 to 5.5 years; risk free interest rate of 1.56% to 1.72%; volatility of 106% to 121% and dividend yield of 0%. During the three and nine month periods ended September 30, 2015, the Company recognized compensation costs based on the fair value of options that vested of $162,744 and $548,619 respectively. During the three and nine month periods ended September 30, 2014, the Company recognized compensation costs based on the fair value of options that vested of $145,403 and $547,016 respectively. At September 30, 2015 the aggregate intrinsic value of the options outstanding was $1,565,000. Future unamortized compensation expense on the unvested outstanding options at September 30, 2015 is $189,957 to be recognized through June 2016. Warrants The following table summarizes certain information about the Companys stock purchase warrants activity for the period starting December 31, 2014 up to September 30, 2015. Warrants Weighted Avg. December 31, 2014 5,692,087 $ 0.37 Granted 916,667 0.30 Exercised (200,000 ) 0.25 Cancelled (2,731,050 ) 0.35 September 30, 2015 3,677,704 $ 0.37 The weighted average exercise prices, remaining contractual lives for warrants granted, exercisable, and expected to vest as of September 30, 2015 were as follows: Exercisable Warrants Exercisable Warrants Warrant Exercise Price Per Share Shares Life (Years) Weighted Average Exercise Price Shares Weighted Average Exercise Price $ 0.25 - $ 0.99 3,557,704 3.8 $ 0.35 3,347,704 $ 0.33 $ 1.00 - $ 1.99 120,000 0.3 $ 1.01 120,000 $ 1.01 3,677,704 3.7 $ 0.37 3,467,704 $ 0.35 In May 2015 through June 2015, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 916,667 shares with an exercise price of $0.30 per share, vesting immediately upon grant and expiring one year from the date of grant (see Note 4). During the nine month period ending September 30, 2015, warrants to acquire 200,000 shares of common stock were exercised at $0.25 per share resulting in proceeds of $50,000. During the three and nine month periods ended September 30, 2015, the Company recognized compensation costs of $3,816 and $45,113, respectively, based on the fair value of warrants that vested. During the three and nine month periods ended September 30, 2014, the Company recognized compensation costs of $14,292 and $21,901, respectively, based on the fair value of warrants that vested. At September 30, 2015, the aggregate intrinsic value of the warrants outstanding was $119,667. Future unamortized compensation expense on the unvested outstanding warrants at September 30, 2015 is approximately $6,375 to be recognized through June 2016. |
9. Contractual Obligations
9. Contractual Obligations | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contractual Obligations | The Company has certain contractual commitments as of September 30, 2015 for future periods, including office leases, minimum guaranteed compensation payments and other agreements as described in the following table and associated footnotes: Research and Year ending Office License Compensation Total December 31, Lease (1) Agreements (2) Agreements (3) Obligations 2015 $ 17,490 $ 46,875 $ 87,500 $ 151,865 2016 69,960 187,500 84,167 341,627 2017 69,960 187,500 15,429 272,889 2018 40,810 187,500 228,310 2019 187,500 187,500 Total $ 198,220 $ 796,875 $ 187,096 $ 1,182,191 ________________________________ (1) Consists of rent for the Companys Santa Barbara Facility expiring on July 31, 2018. (2) Consists of license maintenance fees to Temple University in the amount of $187,500 paid annually through the life of the underlying patents or until otherwise terminated by either party. (3) Consists of base salary and certain contractually-provided benefits, to an executive officer, pursuant to an employment agreement that expires on January 30, 2016 in the amount of $96,667 and a severance agreement of a former officer in the amount of $90,429. |
10. Commitments and contingenci
10. Commitments and contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Legal matters The Company may be involved in certain legal proceedings that arise from time to time in the ordinary course of its business. Except for income tax contingencies (commencing April 1, 2009), the Company records accruals for contingencies to the extent that management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. There are no current or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business. |
2. Summary of significant acc17
2. Summary of significant accounting policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Consolidation Policy | Consolidation Policy The accompanying consolidated financial statements of QS Energy Inc. include the accounts of QS Energy Inc. (the Parent) and its wholly owned subsidiaries, QS Energy Pool, Inc. and STWA Asia Pte. Limited. Intercompany transactions and balances have been eliminated in consolidation. |
Going concern | Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. During the nine months ended September 30, 2015, the Company incurred a net loss of $3,543,078 and used cash in operations of $2,200,461. These factors raise substantial doubt about the Companys ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Companys ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company's independent registered public accounting firm, in its report on the Company's December 31, 2014 financial statements, has raised substantial doubt about the Company's ability to continue as a going concern. At September 30, 2015, the Company had cash on hand in the amount of $559,682. Management estimates that the current funds on hand will be sufficient to continue operations through January 2016. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities for cash to operate our business, including without limitation the expenses it will incur in connection with the license and research and development agreements with Temple; costs associated with product development and commercialization of the AOT and Joule Heat technologies; costs to manufacture and ship the products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, as discussed below, the Company has substantial contractual commitments, including without limitation salaries to our executive officers pursuant to employment agreements, certain payments to a former officer and consulting fees, during the remainder of 2015 and beyond. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case of equity financing. |
Revenue Recognition | Revenue Recognition The Company recognizes lease revenue upon commencement of the lease. Revenue on future product sales will be recognized upon meeting the following criteria: persuasive evidence of an arrangement exists; delivery has occurred or services rendered; the seller's price to the buyer is fixed or determinable; and collectability is reasonably assured. |
Basic and Diluted Income per share | Basic and Diluted Income (loss) per share Our computation of earnings per share (EPS) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later. In computing diluted income (loss) per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. Potential common shares that have an antidilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. Income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted (loss) per common share is the same for periods in which the Company reported an operating loss because all warrants and stock options outstanding are anti-dilutive. At September 30, 2015 and 2014, we excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares of common stock as their effect would have been anti-dilutive. September 30, 2015 September 30, 2014 Options 21,706,512 20,757,030 Warrants 3,677,704 5,421,050 Common stock issuable upon conversion of notes payable 399,667 Total 25,783,883 26,178,080 |
Stock-Based Compensation | Stock-Based Compensation The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board (FASB) whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date. The fair value of the Company's stock option and warrant grants is estimated using the Black-Scholes Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes Option Pricing model could materially affect compensation expense recorded in future periods. |
Business and Credit Concentrations | Business and Credit Concentrations The Companys cash balances in financial institutions at times may exceed federally insured limits. As of September 30, 2015 and December 31, 2014, before adjustments for outstanding checks and deposits in transit, the Company had $559,682 and $2,247,557, respectively, on deposit with two banks. The deposits are federally insured up to $250,000 at each bank. The Company believes that no significant concentration of credit risk exists with respect to these cash balances because of its assessment of the creditworthiness and financial viability of these financial institutions. |
Estimates | 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. Significant estimates include those related to assumptions used in valuing equity instruments issued for financing and services. Actual results could differ from those estimates. |
Fair value of financial instruments | Fair Value of Financial Instruments Effective January 1, 2008, fair value measurements are determined by the Company's adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities as permitted. The adoption of the authoritative guidance did not have a material impact on the Company's fair value measurements. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows: Level 1Quoted prices in active markets for identical assets or liabilities. Level 2Inputs, other than the quoted prices in active markets, are observable either directly or indirectly. Level 3Unobservable inputs based on the Company's assumptions. The Company is required to use observable market data if such data is available without undue cost and effort. At September 30, 2015, the recorded amounts for accounts payable, accrued expenses and convertible debentures approximate their fair value due to their short-term nature. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company's financial statements and disclosures. In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation Stock Compensation (Topic 718). The pronouncement was issued to clarify the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2014-12 is not expected to have a significant impact on the Companys consolidated financial position or results of operations. On August 27, 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern In April 2015, the FASB issued Accounting Standards Update No. 2015-03, InterestImputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statement presentation or disclosures. |
2. Summary of Significant Acc18
2. Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Antidilutive shares | September 30, 2015 September 30, 2014 Options 21,706,512 20,757,030 Warrants 3,677,704 5,421,050 Common stock issuable upon conversion of notes payable 399,667 Total 25,783,883 26,178,080 |
4. Convertible Notes (Tables)
4. Convertible Notes (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Convertible notes table | September 30, 2015 (unaudited) December 31, 2014 Balance due on convertible notes $ 191,840 $ 244,640 Unamortized note discounts (7,119 ) (105,542 ) Balance on convertible notes, net of note discounts $ 184,721 $ 139,098 |
8. Stock Options and warrants (
8. Stock Options and warrants (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | |
Stock options outstanding | Options Weighted Avg. December 31, 2014 21,052,030 $ 0.30 Granted 888,552 0.46 Exercised Forfeited (234,070 ) 0.72 September 30, 2015 21,706,512 $ 0.30 |
Options outstanding by Per Share Price | Outstanding Options Exercisable Options Option Exercise Price Per Share Shares Life (Years) Weighted Average Exercise Price Shares Weighted Average Exercise Price $ 0.21 - $ 0.99 21,443,283 5.5 $0.29 19,946,498 $0.28 $ 1.00 - $ 1.99 263,229 4.5 $1.22 263,229 $1.22 21,706,512 5.5 $0.30 20,209,727 $0.30 |
Warrants outstanding | Warrants Weighted Avg. December 31, 2014 5,692,087 $ 0.37 Granted 916,667 0.30 Exercised (200,000 ) 0.25 Cancelled (2,731,050 ) 0.35 September 30, 2015 3,677,704 $ 0.37 |
Warrants outstanding by Per Share Price | Exercisable Warrants Exercisable Warrants Warrant Exercise Price Per Share Shares Life (Years) Weighted Average Exercise Price Shares Weighted Average Exercise Price $ 0.25 - $ 0.99 3,557,704 3.8 $ 0.35 3,347,704 $ 0.33 $ 1.00 - $ 1.99 120,000 0.3 $ 1.01 120,000 $ 1.01 3,677,704 3.7 $ 0.37 3,467,704 $ 0.35 |
9. Contractual Obligations (Tab
9. Contractual Obligations (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contractual obligations | Research and Year ending Office License Compensation Total December 31, Lease (1) Agreements (2) Agreements (3) Obligations 2015 $ 17,490 $ 46,875 $ 87,500 $ 151,865 2016 69,960 187,500 84,167 341,627 2017 69,960 187,500 15,429 272,889 2018 40,810 187,500 228,310 2019 187,500 187,500 Total $ 198,220 $ 796,875 $ 187,096 $ 1,182,191 ________________________________ (1) Consists of rent for the Companys Santa Barbara Facility expiring on July 31, 2018. (2) Consists of license maintenance fees to Temple University in the amount of $187,500 paid annually through the life of the underlying patents or until otherwise terminated by either party. (3) Consists of base salary and certain contractually-provided benefits, to an executive officer, pursuant to an employment agreement that expires on January 30, 2016 in the amount of $96,667 and a severance agreement of a former officer in the amount of $90,429. |
2. Summary of Significant Acc22
2. Summary of Significant Accounting Policies (Details) - shares | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Antidilutive shares | 25,783,883 | 26,178,080 |
Options | ||
Antidilutive shares | 21,706,512 | 20,757,030 |
Warrants | ||
Antidilutive shares | 3,667,704 | 5,421,050 |
Common stock issuable upon converstion of notes payable | ||
Antidilutive shares | 399,667 | 0 |
2. Summary of significant acc23
2. Summary of significant accounting policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ||||||
Net loss | $ (825,797) | $ (715,774) | $ (3,543,078) | $ (3,127,640) | ||
Cash used in operations | (2,200,461) | (2,908,618) | ||||
Cash in bank | $ 559,682 | $ 2,641,734 | $ 559,682 | $ 2,641,734 | $ 2,247,557 | $ 4,137,068 |
3. Certain relationships and 24
3. Certain relationships and related (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Accounts payable to related parties | $ 206,897 | $ 259,507 |
Former President [Member] | Unpaid salaries | ||
Accounts payable to related parties | 90,429 | 135,429 |
Directors [Member] | Accrued director fees | ||
Accounts payable to related parties | $ 76,089 | $ 80,586 |
4. Convertible Notes (Details)
4. Convertible Notes (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Debt Disclosure [Abstract] | ||
Balance due on convertible notes | $ 191,840 | $ 244,640 |
Unamortized note discounts | (7,119) | (105,542) |
Balance on convertible notes, net of note discounts | $ 184,721 | $ 139,098 |
4. Convertible Notes (Details N
4. Convertible Notes (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Proceeds from convertible debt | $ 475,500 | $ 0 | $ 254,900 | |
Unamortized discount | $ 7,119 | 7,119 | 105,542 | |
Convertible notes balance | 184,721 | 184,721 | 139,098 | |
Convertible Notes Payable [Member] | Spring 2015 | ||||
Convertible notes face amount issued | 550,000 | 550,000 | ||
Proceeds from convertible debt | 475,500 | |||
Unamortized discount | $ 50,000 | 50,000 | ||
Commission paid | $ 24,500 | |||
Interest rate on debt | 10.00% | 10.00% | ||
Conversion description | Convertible into 1,833,333 shares of common stock at a conversion price of $0.30 per share. | |||
Conversion price | $ .30 | $ .30 | ||
Warrants to purchase common stock issued | 916,667 | |||
Fair value of warrants issued | $ 118,806 | $ 118,806 | ||
Debt discount | 545,445 | 545,445 | ||
Interest expense amortized | 0 | 545,445 | ||
Beneficial conversion feature | 352,139 | |||
Debt converted during year, amount | $ 550,000 | |||
Debt converted, shares issued | 1,833,333 | |||
Convertible notes balance | 0 | $ 0 | ||
Convertible Notes Payable [Member] | Fall 2014 | ||||
Convertible notes face amount issued | 280,390 | |||
Proceeds from convertible debt | 254,900 | |||
Unamortized discount | 7,119 | 7,119 | $ 105,542 | |
Interest rate on debt | 10.00% | |||
Conversion description | Convertible into 584,147 shares of common stock at a conversion price of $0.48 per share. | |||
Conversion price | $ .48 | |||
Warrants to purchase common stock issued | 146,037 | |||
Fair value of warrants issued | $ 24,826 | |||
Debt discount | 145,161 | |||
Interest expense amortized | 25,986 | 98,231 | ||
Beneficial conversion feature | 94,845 | |||
Debt converted during year, amount | $ 52,800 | |||
Debt converted, shares issued | 110,000 | |||
Convertible notes balance | $ 191,840 | $ 191,840 | $ 244,640 |
5. Research and Development (De
5. Research and Development (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | $ 80,082 | $ 146,094 | $ 500,517 | $ 741,045 | |
License revenue generated | 0 | 180,000 | 0 | 240,000 | |
Accounts payable - licensing agreements | 543,126 | 543,126 | $ 405,313 | ||
AOT and Joule Heat Product Development and Testing | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | 0 | 12,167 | 25,575 | 44,355 | |
AOT Prototype | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | 31,843 | 54,708 | 84,864 | 458,706 | |
Joule Heat Prototypes | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | 1,364 | 0 | 184,765 | 0 | |
Temple University License Agreements [Member] | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | 46,875 | 46,875 | 140,625 | 140,625 | |
License revenue generated | 180,000 | 240,000 | |||
Royalty fees earned | 0 | 0 | |||
Accounts payable - licensing agreements | 413,750 | 413,750 | 340,625 | ||
Temple University Sponsored Research Agreement | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | 0 | $ 32,344 | 64,688 | $ 97,359 | |
Accounts payable - licensing agreements | $ 129,376 | $ 129,376 | $ 64,688 |
7. Common Stock (Details Narrat
7. Common Stock (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($)shares | |
Convertible Notes Payable [Member] | |
Common stock issued on conversion of notes, shares | shares | 1,943,333 |
Value of notes converted | $ 602,800 |
Warrant [Member] | |
Stock issued upon exercise of warrants, shares issued | shares | 200,000 |
Proceeds from exercise of warrants | $ 50,000 |
8. Stock options and warrants29
8. Stock options and warrants (Details-Option activity) - Options | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Options outstanding, beginning balance | 21,052,030 |
Granted | 888,552 |
Exercised | 0 |
Forfeited | (234,070) |
Options outstanding, ending balance | 21,706,512 |
Vested and exercisable | 20,209,727 |
Weighted Average Exercise Price, Outstanding Beggining Balance | $ / shares | $ .30 |
Weighted Average Exercise Price, Granted | $ / shares | 0.46 |
Weighted Average Exercise Price, Forfeited | $ / shares | 0.72 |
Weighted Average Exercise Price, Outstanding Ending Balance | $ / shares | $ .30 |
8. Stock options and warrants30
8. Stock options and warrants (Details-Options outstanding and exercisable) - Options - $ / shares | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Outstanding Options | ||
Shares | 21,706,512 | 21,052,030 |
Life (Years) | 5 years 6 months | |
Weighted Average Exercise Price | $ .30 | $ .30 |
Exercisable Options | ||
Shares | 20,209,727 | |
Weighted Average Exercise Price | $ .30 | |
$ 0.21 - $ 0.99 [Member] | ||
Outstanding Options | ||
Shares | 21,443,283 | |
Life (Years) | 5 years 6 months | |
Weighted Average Exercise Price | $ .29 | |
Exercisable Options | ||
Shares | 19,946,498 | |
Weighted Average Exercise Price | $ .28 | |
$ 1.00 - $ 1.99 [Member] | ||
Outstanding Options | ||
Shares | 263,229 | |
Life (Years) | 4 years 6 months | |
Weighted Average Exercise Price | $ 1.22 | |
Exercisable Options | ||
Shares | 263,229 | |
Weighted Average Exercise Price | $ 1.22 |
8. Stock options and warrants31
8. Stock options and warrants (Details-Warrant activity) - Warrants | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Beginning Balance | shares | 5,692,087 |
Granted | shares | 916,667 |
Exercised | shares | (200,000) |
Cancelled | shares | (2,731,050) |
Ending Balance | shares | 3,677,704 |
Weighted Average Exercise Price, Outstanding Beginning Balance | $ .37 |
Weighted Average Exercise Price, Granted | 0.30 |
Weighted Average Exercise Price, Exercised | .25 |
Weighted Average Exercise Price, Cancelled | .35 |
Weighted Average Exercise Price, Outstanding Ending Balance | $ .37 |
8. Stock options and warrants32
8. Stock options and warrants (Details-Warrants outstanding and exercisable) - Warrants - $ / shares | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Outstanding Warrants | ||
Shares | 3,677,704 | 5,692,087 |
Life (Years) | 4 months 13 days | |
Weighted Average Exercise Price | $ .37 | $ .37 |
Exercisable Warrants | ||
Shares | 3,467,704 | |
Weighted Average Exercise Price | $ 0.35 | |
$0.25 - $0.99 | ||
Outstanding Warrants | ||
Shares | 3,577,704 | |
Life (Years) | 3 years 9 months 18 days | |
Weighted Average Exercise Price | $ .33 | |
Exercisable Warrants | ||
Shares | 3,347,704 | |
Weighted Average Exercise Price | $ .33 | |
$1.00 - $1.99 | ||
Outstanding Warrants | ||
Shares | 120,000 | |
Life (Years) | 1 year 4 days | |
Weighted Average Exercise Price | $ 1.01 | |
Exercisable Warrants | ||
Shares | 120,000 | |
Weighted Average Exercise Price | $ 1.01 |
8. Stock options and warrants33
8. Stock options and warrants (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Share based compensation | $ 593,732 | $ 596,917 | |||
Options | |||||
Options outstanding | 21,706,512 | 21,706,512 | 21,052,030 | ||
Weighted average remaining contractual life, options outstanding | 5 years 6 months | ||||
Options granted | 888,552 | ||||
Fair value of options at grant date | $ 336,767 | ||||
Aggregate intrinsic value of options outstanding | $ 1,565,000 | 1,565,000 | |||
Share based compensation | 162,744 | $ 145,403 | 548,619 | 547,016 | |
Future unamortized compensation expense on unvested outstanding options | 189,957 | 189,957 | |||
Warrants | |||||
Share based compensation | 3,816 | $ 14,292 | 45,113 | $ 21,901 | |
Aggregate intrinsic value of warrants outstanding | 119,667 | 119,667 | |||
Future unamortized compensation expense on unvested warrants | $ 6,375 | $ 6,375 | |||
Warrants exercised | 200,000 | ||||
Proceeds from warrants exercised | $ 50,000 | ||||
2004 Stock Option Plan | |||||
Options outstanding | 3,544,908 | 3,544,908 | 3,544,908 |