Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 04, 2016 | |
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, 2016 | |
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 | 199,045,026 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash | $ 385,360 | $ 349,186 |
Prepaid expenses and other current assets | 35,389 | 50,596 |
Total current assets | 420,749 | 399,782 |
Property and equipment, net of accumulated depreciation of $30,627 and $60,242 at September 30, 2016 and December 31, 2015, respectively | 18,490 | 21,798 |
Other assets | 7,180 | 6,480 |
Total assets | 446,419 | 428,060 |
Current liabilities: | ||
Accounts payable-license agreements | 730,626 | 590,001 |
Accounts payable and accrued expenses | 209,888 | 182,334 |
Accrued expenses and accounts payable-related parties | 143,151 | 190,750 |
Deposits and other current liabilities | 4,500 | 25,000 |
Convertible debentures, net of discounts of $254,116 and $100,833 at September 30, 2016 and December 31, 2015, respectively | 304,744 | 222,195 |
Total current liabilities | 1,392,909 | 1,210,280 |
Commitments and contingencies | ||
Stockholders' deficit | ||
Common stock, $.001 par value: 300,000,000 shares authorized 197,802,026 and 183,831,577 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 197,802 | 183,832 |
Additional paid-in capital | 103,509,548 | 100,308,100 |
Accumulated deficit | (104,653,840) | (101,274,152) |
Total stockholders' deficit | (946,490) | (782,220) |
Total liabilities and stockholders' deficit | $ 446,419 | $ 428,060 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation | $ 30,627 | $ 60,242 |
Discounts on convertible debentures | $ 254,116 | $ 100,833 |
Common stock, par value | $ .001 | $ 0.001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 197,802,026 | 183,831,577 |
Common stock, shares outstanding | 197,802,026 | 183,831,577 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||||
Revenues | $ 0 | $ 0 | $ 0 | $ 0 |
Costs and Expenses | ||||
Operating expenses | 467,579 | 727,587 | 1,728,129 | 2,409,551 |
Research and development expenses | 51,595 | 80,082 | 199,772 | 500,517 |
Loss before other income (expense) | (519,174) | (807,669) | (1,927,901) | (2,910,068) |
Other income (expense) | ||||
Other income | 690 | 7,858 | 1,150 | 10,858 |
Interest and financing expense | (516,712) | (25,986) | (1,449,594) | (643,868) |
Loss on disposition of equipment | 0 | 0 | (3,343) | 0 |
Net loss | $ (1,035,196) | $ (825,797) | $ (3,379,688) | $ (3,543,078) |
Net loss per common share, basic and diluted | $ (.01) | $ 0 | $ (.02) | $ (.02) |
Weighted average common shares outstanding, basic and diluted | 195,342,504 | 183,128,577 | 190,874,796 | 181,943,768 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Deficit Accumulated [Member] | Total |
Beginning balance, shares at Dec. 31, 2015 | 183,831,577 | |||
Beginning balance, value at Dec. 31, 2015 | $ 183,832 | $ 100,308,100 | $ (101,274,152) | $ (782,220) |
Common stock issued on conversion of notes payable, shares issued | 13,670,449 | |||
Common stock issued on conversion of notes payable, value | $ 13,670 | 1,353,374 | 1,367,044 | |
Fair value of stock issued for services, shares issued | 300,000 | |||
Fair value of stock issued for services, value | $ 300 | 47,700 | 48,000 | |
Fair value of warrants and beneficial conversion feature of issued convertible notes | 1,442,769 | 1,442,769 | ||
Fair value of options and warrants issued as compensation | 357,605 | 357,605 | ||
Net loss | (3,379,688) | (3,379,688) | ||
Ending balance, shares at Sep. 30, 2016 | 197,802,026 | |||
Ending balance, value at Sep. 30, 2016 | $ 197,802 | $ 103,509,548 | $ (104,653,840) | $ (946,490) |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities | ||
Net Loss | $ (3,379,688) | $ (3,543,078) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock based compensation expense | 405,605 | 593,732 |
Amortization of debt discount | 1,433,763 | 643,868 |
Accrued interest on convertible notes | 15,831 | |
Loss on disposition of assets | 3,343 | 0 |
Depreciation and amortization | 5,249 | 9,803 |
Changes in operating assets and liabilities: | ||
Prepaid expenses and other current assets | 14,507 | 14,414 |
Accounts payable and accrued expenses | 27,554 | (4,403) |
Accounts payable - license agreements | 140,625 | 137,813 |
Accounts payable and accrued expenses - related parties | (47,599) | (52,610) |
Deposits and other current liabiilities | (20,500) | 0 |
Net cash used in operating activities | (1,401,310) | (2,200,461) |
Cash flows from investing activities | ||
Purchase of equipment | (5,285) | (12,914) |
Net cash used in investing activities | (5,285) | (12,914) |
Cash flows from financing activities | ||
Net proceeds from issuance of convertible notes and warrants | 1,442,769 | 475,500 |
Net proceeds from exercise of warrants and options | 0 | 50,000 |
Net cash provided by financing activities | 1,442,769 | 525,500 |
Net increase (decrease) in cash | 36,174 | (1,687,875) |
Cash, beginning of period | 349,186 | 2,247,557 |
Cash, end of period | 385,360 | 559,682 |
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 | ||
Conversion of convertible debentures to common stock | 1,367,044 | 602,800 |
Fair value of warrants and beneficial conversion feature associated with issued convertible notes | $ 1,442,769 | $ 470,945 |
1. Description of Business
1. Description of Business | 9 Months Ended |
Sep. 30, 2016 | |
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 Company’s common stock is quoted under the symbol “QSEP” on the Over-the-Counter Bulletin Board. More information including the Company’s fact sheet, logos and media articles are available at our corporate website, www.qsenergy.com QS Energy 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 properties include a portfolio of 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. Engineered specifically to reduce pipeline pressure loss, increase pipeline flow rate and capacity, and reduce shippers’ reliance on diluents and drag reducing agents to meet pipeline maximum viscosity requirements, AOT is a 100% solid-state system that reduces crude oil viscosity by applying a high intensity electrical field to crude oil feedstock while in transit. The AOT product has transitioned from the research and development stage to initial production for continued testing in advance of our goal of seeking acceptance and adoption by the midstream pipeline marketplace. 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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2015 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, 2016 | |
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, during the nine-months ended September 30, 2016, the Company incurred a net loss of $3,379,688, used cash in operations of $1,401,310 and had a stockholders’ deficit of $946,490 as of that date. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. 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, 2015 consolidated financial statements, has raised substantial doubt about the Company's ability to continue as a going concern. At September 30, 2016, the Company had cash on hand in the amount of $385,360. Management estimates that the current funds on hand will be sufficient to continue operations through January 2017. 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 technology; 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, payment of license and other fees to Temple University, salaries to our executive officers pursuant to employment agreements, certain payments to a former officer and consulting fees, during the remainder of 2016 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 stockholders in case of equity financing. 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, 2016 and 2015, 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, 2016 September 30, 2015 Options 23,624,256 21,706,512 Warrants 12,451,892 3,677,704 Common stock issuable upon conversion of notes payable 3,776,792 399,667 Total 39,852,940 25,783,883 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 (FASB) 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 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. 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 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly. Level 3—Unobservable 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, 2016, the carrying amounts for cash, accounts payable, accrued expenses and convertible debentures approximate their fair value due to their short-term nature. Patent Costs Patent costs consist of patent-related legal and filing fees. Due to the uncertainty associated with the successful development of our AOT and Joule Heat products, all patent costs are expensed as incurred. During the nine-month periods ended September 30, 2016 and 2015, patent costs were $49,265 and $35,379, respectively, and were included as part of operating expenses in the accompanying consolidated statements of operations. During the three-month periods ended September 30, 2016 and 2015, patent costs were $18,891 and $5,525, respectively, and were included as part of operating expenses in the accompanying consolidated statements of operations. 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 February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures. In March 2016, the FASB issued the ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require, among other things, that all income tax effects of awards be recognized in the income statement when the awards vest or are settled. The ASU also allows for an employer to repurchase more of an employee's shares than it can today for tax withholding purposes without triggering liability accounting and allows for a policy election to account for forfeitures as they occur. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures. 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, 2016 | |
Related Party Transactions [Abstract] | |
Certain Relationships and Related Transactions | As of September, 30, 2016 and December 31, 2015, the Company had accrued expenses and accounts payable to related parties in the amount of $143,151 and $190,750, respectively. Included in these amounts at September 30, 2016 and December 31, 2015 were unpaid salaries due to our former President and current member of the Company’s Board of Directors of $30,429 and $75,429, 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, 2016 and December 31, 2015 are accrued directors’ fees of $76,089. |
4. Property and Equipment
4. Property and Equipment | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | At September 30, 2016 and December 31, 2015, property and equipment consists of the following: September 30, 2016 December 31, 2015 (unaudited) Office equipment $ 28,040 $ 65,051 Furniture and fixtures 2,880 4,075 Testing equipment 18,197 12,914 Subtotal 49,117 82,040 Less accumulated depreciation (30,627 ) (60,242 ) Total $ 18,490 $ 21,798 Depreciation expense for the nine-month periods ended September 30, 2016 and 2015 was $5,249 and $9,803, respectively. During the period ended September 30, 2016, the Company disposed certain property and equipment with aggregate costs of $38,206 and accumulated depreciation of $34,863 which resulted in a loss of $3,343. |
5. Convertible Notes
5. Convertible Notes | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Convertible Notes | September 30, 2016 December 31, 2015 (unaudited) Balance due on convertible notes $ 541,024 $ 321,024 Accrued interest 17,836 2,004 Subtotal 558,860 323,028 Unamortized note discount (254,116 ) (100,833 ) Balance on convertible notes, net of note discount $ 304,744 $ 222,195 During 2014 and 2015, the Company conducted a private placement and issued approximately $1 million of its unsecured convertible notes for proceeds of $920,900 or an original issue discount (“OID”) of $85,490. The notes do not bear any interest: however, the implied interest rate used was 10% because the notes were issued for a purchase price of 10% less than their face value. The notes are unsecured and mature in twelve months from issuance. The notes are convertible, at the option of the note holder, into the Company’s common stock at conversion prices ranging from $0.10 per share through $0.48 per share. In addition, each note holder also received a warrant to purchase common stock equivalent to 25% of the number of shares the notes are convertible into or a total of 1,942,704 shares of common stock. Each warrant is exercisable on a cash basis only at prices ranging from $0.10 through $0.48 per share. The warrants vest immediately upon issuance, and are exercisable for one year from the date of issuance. As a result, in prior periods, the Company recorded a note discount of $842,105 to account for the relative fair value of the warrants, the notes’ beneficial conversion feature (“BCF”), and OID. The note discounts are being amortized over the life of the note or will be amortized in full upon the conversion of the corresponding notes to common stock. At December 31, 2015, total outstanding notes payable amounted to $321,024 and unamortized note discount was $100,833. During the nine-month period ended September 30, 2016, the Company issued similar convertible promissory notes in the amount of $1,587,045 for cash proceeds of $1,442,769 or a discount of $144,276. The notes do not bear any interest; however, the implied interest rate used was 10% because the notes were issued for purchase prices of 10% less than their face value. The notes are unsecured, mature in twelve months from issuance and are convertible at $0.10 per share. In addition, the Company also granted these note holders warrants to purchase 7,935,225 shares of the Company’ common stock. The warrants are fully vested, exercisable at $0.10 per share and will expire in one year from the date of their issuance. As a result, the Company recorded a note discount of $1,587,045 to account for the relative fair value of the warrants, the notes’ BCF and OID. The note discounts are being amortized over the life of the note on the effective interest method. During the nine-month period ended September 30, 2016, a total of $1,367,044 of notes payable were converted int o As of September 30, 2016, total outstanding notes payable amounted to $541,024 and an unamortized note discount of $254,116. Included in the Company’s outstanding notes payable are three notes in the aggregate of $211,024 that had reached maturity without conversion and are past maturity and are currently due with accrued interest in the amount of $17,836. During the nine-month period ending September 30, 2016, the Company accrued interest of $15,831 pursuant to the terms of the notes. As of September 30, 2016, these notes were convertible to 3,776,792 shares of common stock in aggregate. |
6. Research and Development
6. Research and Development | 9 Months Ended |
Sep. 30, 2016 | |
Research and Development [Abstract] | |
Research and Development | Research and development costs consist of costs of construction, development and testing of the AOT and Joule Heat technologies with internal resources and through the assistance of various third party entities. Costs incurred and expensed include fees such as testing 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 Company’s AOT and Joule Heat prototypes. In addition, research and development costs also include licensing fees and research and development fees due to Temple University. For the nine-month periods ended September 30, 2016 and 2015, our research and development expenses were $199,772 and $500,517 respectively. For the three-month periods ended September 30, 2016 and 2015, our research and development expenses were $51,595 and $80,082 respectively. AOT Product Development and Testing In 2014, the Company entered into a lease agreement with Kinder Morgan Crude & Condensate, LLC for the manufacture and delivery of our AOT Prototype Equipment. The AOT Prototype Equipment is currently undergoing testing at a Kinder Morgan facility. See Note 7 for further discussion. During the nine-month periods ended September 30, 2016 and 2015, the Company incurred total expenses of $58,947 and $110,439, respectively, in the manufacture, delivery and testing of the AOT prototype equipment. During the three-month periods ended September 30, 2016 and 2015, the Company incurred total expenses of $4,720 and $31,843, respectively. These expenses have been reflected as part of Research and Development expenses on the accompanying consolidated statements of operations. Joule Heat Product Development and Testing On October 15, 2014, the Company entered into a Joint Development Agreement with Newfield Pipeline Exploration Company (“Newfield”) to test the effectiveness of the Company’s Joule Heat technology under operating conditions on Newfield’s oil pipeline. The Company’s first Joule Heat prototype unit was delivered to Newfield in May 2015 for further testing. In December 2015, we temporarily suspended development activities for the Joule Heat technology in order to focus the Company resources on finalizing the commercial development of the AOT technology. We currently plan to resume Joule Heat development in 2017 depending on the availability of sufficient capital and other resources. During the nine-month periods ended September 30, 2016 and 2015, the Company incurred total expenses of $200 and $184,765, respectively, in the manufacture, delivery and testing of the Joule Heat prototype equipment. During the three-month periods ended September 30, 2016 and 2015, the Company incurred total expenses of $0 and $1,364, respectively, in the manufacture, delivery and testing of the Joule Heat prototype equipment. These expenses have been reflected as part of Research and Development expenses on the accompanying consolidated statement of operations. Temple University Licensing Agreement On August 1, 2011, the Company and Temple University (“Temple”) entered into two (2) Exclusive License Agreements (collectively, the “License Agreements”) relating to Temple’s 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. Pursuant to the two License Agreements, the Company agreed to pay Temple the following: (i) non-refundable license maintenance fee of $300,000; (ii) annual maintenance fees of $187,500; (iii) royalty fee ranging from 4% up to 7% from revenues generated from the licensing agreements; and (iv) 25% of all revenues generated from sub-licensees to secure or maintain the sub-license or option thereon. Temple also agreed to defer $37,500 of the amount due if the Company agreed to fund at least $250,000 in research or development of Temple’s patent rights licensed to the Company. The term of the licenses commenced in August 2011 and will expire upon the expiration of the patents. The agreement can also be terminated by either party upon notification under terms of the Licensing Agreements or if the Company ceases the development of the patent or failure to commercialize the patent rights. Total expenses recognized during each nine-month period ended September 30, 2016 and 2015 pursuant to these two agreements amounted to $140,625. Total expenses recognized during each three-month period ended September 30, 2016 and 2015 pursuant to these two agreements amounted to $46,875. These expenses have been reflected in Research and Development expenses on the accompanying consolidated statements of operations. As of September 30, 2016 and December 31, 2015, total unpaid fees due to Temple pursuant to these agreements amounted to $601,250 and $460,625, respectively, which are included as part of Accounts Payable – licensing agreement in the accompanying consolidated balance sheets. As of September 30, 2016, $193,750 of the $601,250 payable has been deferred until the Licensing Agreements are terminated and $407,500 is deemed past due. The Company is currently in negotiations with Temple to settle this amount. There were no revenues generated from these two licenses during the nine-month periods ended September 30, 2016 and 2015. 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, performed research related to the Company’s AOT device (the “Project”), for the period April 1, 2012, through April 1, 2014. All rights and title to intellectual property resulting from Temple’s work related to the Project were subjected to the Exclusive License Agreements between Temple and the Company, dated August 1, 2011. In exchange for Temple’s research efforts on the Project, the Company has agreed to pay Temple $500,000, payable in quarterly installments of $62,500. The agreement expired in August 2015. During the nine-month period ended September 30, 2015, the Company recognized a total expense of $64,688 pursuant to this agreement. During the three-month period ended September 30, 2015, the Company recognized a total expense of $0 pursuant to this agreement. These costs have been reflected in Research and Development expenses on the accompanying consolidated statements of operations. There was no such cost recorded during 2016 as a result of the expiration of the agreement in August 2015. As of September 30, 2016 and December 31, 2015, total unpaid fees due to Temple pursuant to this agreement amounted to $129,376, which are included as part of Accounts Payable – licensing agreement in the accompanying consolidated balance sheets. As of September 30, 2016, the entire $129,377 is deemed past due. The Company is currently in negotiations with Temple to settle this amount. |
7. Kinder Morgan Crude & Conden
7. Kinder Morgan Crude & Condensate, LLC Leases | 9 Months Ended |
Sep. 30, 2016 | |
Leases [Abstract] | |
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 Company’s AOT technology and equipment on one of Kinder Morgan’s 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 AOT equipment was delivered to Kinder Morgan in December 2014 and installed in March 2015. In April 2015, the AOT equipment experienced technical issues that needed further modifications. In February 2016, the AOT equipment was re-installed at Kinder Morgan’s facility. The Company and Kinder Morgan are continuing to work to finalize installation and acceptance of the equipment under the lease. |
8. Common Stock
8. Common Stock | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity Note [Abstract] | |
Common Stock | During the nine months ended September 30, 2016, the Company issued 13,670,449 shares of its common stock upon the conversion of $1,367,044 in convertible notes at $0.10 per share. In addition, the Company also issued 300,000 shares of common stock to consultants for services rendered with a fair value of $48,000 which is included as part of Operating Expenses in the attached consolidated statements of operations. The shares were valued at the trading price at the date of issuance. |
9. Stock Options and Warrants
9. Stock Options and Warrants | 9 Months Ended |
Sep. 30, 2016 | |
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 Employee options vest according to the terms of the specific grant and expire from 2 to 10 years from date of grant. The weighted-average, remaining contractual life of employee and non-employee options outstanding at September 30, 2016 was 5.0 years. Stock option activity for the period January 1, 2016 up to September 30, 2016, was as follows: Options Weighted Avg. January 1, 2016 21,535,148 $ 0.30 Granted 2,250,527 0.19 Exercised – – Forfeited (161,419 ) 0.77 Outstanding, September 30, 2016 23,624,256 $ 0.28 Exercisable, September 30, 2016 21,373,729 $ 0.29 The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest as of September 30, 2016 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 23,473,810 5.0 $ 0.28 21,223,283 $ 0.29 $ 1.00 - $ 1.99 150,446 6.8 $ 1.18 150,446 $ 1.18 23,624,256 5.0 $ 0.28 21,373,729 $ 0.29 During the nine-month period ending September 30, 2016 the Company granted options to purchase 1,710,527 shares of common stock to members of the Company’s Board of Directors. The options are exercisable at $0.19 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 $273,683 using the Black-Scholes Option Pricing model with the following assumptions: life of 5.5 years; risk free interest rate of 1.73%; volatility of 119% and dividend yield of 0%. The fair value will be amortized over the vesting period. During the nine-month period ending September 30, 2016 the Company granted options to purchase 540,000 shares of common stock to employees of the Company. The options are exercisable at $0.18 per share, vest over periods of twelve and twenty-four months, and expire ten years from the date granted. Total fair value of these options at grant date was $83,500 using the Black-Scholes Option Pricing model with the following assumptions: life of 5.5 to 6 years; risk free interest rate of 1.23%; volatility of 121% and dividend yield of 0%. The fair value will be amortized over the vesting period. During the nine-month periods ended September 30, 2016 and 2015, the Company recognized compensation costs based on the fair value of options that vested of $265,448 and $548,619 respectively, which is included in Operating expenses in the Company’s statement of operations. During the three-month periods ended September 30, 2016 and 2015, the Company recognized compensation costs based on the fair value of options that vested of $84,293 and $162,744 respectively, which is included in Operating expenses in the Company’s statement of operations. At September 30, 2016, the Company’s closing stock price was $0.15 per share. As all outstanding options had an exercise price greater than $0.15 per share, the aggregate intrinsic value of the options outstanding at September 30, 2016 was $0. Future unamortized compensation expense on the unvested outstanding options at September 30, 2016 is $125,462 to be recognized through May 2018. Warrants The following table summarizes certain information about the Company’s stock purchase warrants activity for the period starting January 1, 2016 up to September 30, 2016. Warrants Weighted Avg. January 1, 2016 4,411,667 $ 0.31 Granted 8,735,225 0.11 Exercised – – Cancelled (695,000 ) 0.49 September 30, 2016 12,451,892 $ 0.16 The weighted average exercise prices, remaining contractual lives for warrants granted, exercisable, and expected to vest as of September 30, 2016 were as follows: Outstanding Warrants Exercisable Warrants Warrant Exercise Price Per Share Shares Life (Years) Weighted Average Exercise Price Shares Weighted Average Exercise Price $ 0.01 - $ 0.14 9,015,225 0.3 $ 0.10 8,915,225 $ 0.10 $ 0.15 - $ 1.99 3,436,667 3.4 $ 0.30 3,436,667 $ 0.30 12,451,892 1.6 $ 0.16 12,451,892 $ 0.16 During the nine-month period ending September 30, 2016, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 7,935,225 shares of common stock with an exercise price of $0.10 per share, vesting immediately upon grant and expiring one year from the date of grant (see Note 5). During the nine-month period ending September 30, 2016 the Company granted warrants to purchase 800,000 shares of common stock to consultants. The options are exercisable starting at $0.12 per share to $0.18 per share, vested upon issuance, and expire in one to three years from the date granted. The fair value of these warrants were computed using the Black-Scholes Option Pricing model with the following assumptions: life of 1 year through 10 years; average stock price of $0.16 per share, average risk free interest rate of 0.82%; average volatility of 110% and dividend yield of 0%. The fair value will be amortized over the vesting period. During the nine-month period ending September 30, 2016, the Company amended the terms of a warrant issued in 2015, extending the expiration date of the warrant by twelve months. The fair value of this warrant at the date of the amendment was $32,083, computed using the Black-Scholes Option Pricing model with the following assumptions: life of 1 year; stock price of $0.17 per share, average risk free interest rate of 0.81%; average volatility of 97% and dividend yield of 0%. During the nine-month periods ended September 30, 2016 and 2015, the Company recognized compensation costs of $92,157 and $45,113, respectively, based on the fair value of warrants that vested, which is included in Operating expenses in the Company’s statement of operations. During the three-month periods ended September 30, 2016 and 2015, the Company recognized compensation costs of $21,396 and $3,816, respectively, based on the fair value of warrants that vested, which is included in Operating expenses in the Company’s statement of operations. At September 30, 2016, the aggregate intrinsic value of the warrants outstanding was $444,761. Future unamortized compensation expense on the unvested outstanding warrants at September 30, 2016 is $12,104 to be recognized through July 2018. |
10. Contractual Obligations
10. Contractual Obligations | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contractual Obligations | The Company has certain contractual commitments as of September 30, 2016 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 2016 $ 17,490 $ 46,875 $ 87,500 $ 151,865 2017 69,960 187,500 305,429 562,889 2018 40,810 187,500 290,000 518,310 2019 – 187,500 54,375 241,875 2020 – 187,500 – 187,500 Total $ 128,260 $ 796,875 $ 737,304 $ 1,662,439 ________________________________ (1) Consists of rent for the Company’s 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 i) an executive officer, pursuant to an employment agreement at a base salary of $290,000 per year and, as amended by the Board on March 10, 2016, expires on March 8, 2019; and ii) and a severance agreement of a former officer in the amount of $45,429. Effective May 1, 2016, the Company vacated the Santa Barbara Facility and subleased the space through the term of the master lease, terminating July 31, 2018. Under the master lease, the Company is committed to pay $5,830 per month. This expense is offset by sublease income of $4,500 per month, for a net monthly expense of $1,330, totaling $35,910 over the remaining 27-month term of the master lease. At September 30, 2016, the Company accrued $29,260 to account for the estimated loss in the Santa Barbara Facility lease agreement which is reflected in as part of Accounts Payable and accrued expense on the accompanying consolidated balance sheet. Effective June 1, 2016, the Company relocated its Santa Barbara office to an office space located at 5266 Hollister Avenue, Suite 219, Santa Barbara, CA 93111, under a twelve-month lease at a lease rate of $751 per month. This expense is reflected in Operating Expenses on the accompanying consolidated statements of operations. |
11. Subsequent Events
11. Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Increase in Outstanding Shares From October 1, 2016 through November 4, 2016, the Company issued 1,243,000 shares of common stock upon conversion of previously issued convertible notes in aggregate value of $124,300. |
2. Summary of Significant Acc18
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Description of business | 1. 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 Company’s common stock is quoted under the symbol “QSEP” on the Over-the-Counter Bulletin Board. More information including the Company’s fact sheet, logos and media articles are available at our corporate website, www.qsenergy.com QS Energy 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 properties include a portfolio of 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. Engineered specifically to reduce pipeline pressure loss, increase pipeline flow rate and capacity, and reduce shippers’ reliance on diluents and drag reducing agents to meet pipeline maximum viscosity requirements, AOT is a 100% solid-state system that reduces crude oil viscosity by applying a high intensity electrical field to crude oil feedstock while in transit. The AOT product has transitioned from the research and development stage to initial production and continued testing in advance of our goal of seeking acceptance and adoption by the midstream pipeline marketplace. 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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2015 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. |
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, during the nine-months ended September 30, 2016, the Company incurred a net loss of $3,379,688, used cash in operations of $1,401,310 and had a stockholders’ deficit of $946,490 as of that date. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. 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, 2015 consolidated financial statements, has raised substantial doubt about the Company's ability to continue as a going concern. At September 30, 2016, the Company had cash on hand in the amount of $385,360. Management estimates that the current funds on hand will be sufficient to continue operations through January 2017. 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 technology; 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, payment of license and other fees to Temple University, salaries to our executive officers pursuant to employment agreements, certain payments to a former officer and consulting fees, during the remainder of 2016 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 stockholders in case of equity financing. |
Basic and Diluted Income (loss) 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, 2016 and 2015, 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, 2016 September 30, 2015 Options 23,624,256 21,706,512 Warrants 12,451,892 3,677,704 Common stock issuable upon conversion of notes payable 3,776,792 399,667 Total 39,852,940 25,783,883 |
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 (FASB) 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 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. |
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 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly. Level 3—Unobservable 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, 2016, the carrying amounts for cash, accounts payable, accrued expenses and convertible debentures approximate their fair value due to their short-term nature. |
Patent costs | Patent Costs Patent costs consist of patent-related legal and filing fees. Due to the uncertainty associated with the successful development of our AOT and Joule Heat products, all patent costs are expensed as incurred. During the nine-month periods ended September 30, 2016 and 2015, patent costs were $49,265 and $35,379, respectively, and were included as part of operating expenses in the accompanying consolidated statements of operations. During the three-month periods ended September 30, 2016 and 2015, patent costs were $18,891 and $5,525, respectively, and were included as part of operating expenses in the accompanying consolidated statements of operations. |
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 February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures. In March 2016, the FASB issued the ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require, among other things, that all income tax effects of awards be recognized in the income statement when the awards vest or are settled. The ASU also allows for an employer to repurchase more of an employee's shares than it can today for tax withholding purposes without triggering liability accounting and allows for a policy election to account for forfeitures as they occur. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures. 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 Acc19
2. Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Antidilutive shares | September 30, 2016 September 30, 2015 Options 23,624,256 21,706,512 Warrants 12,451,892 3,677,704 Common stock issuable upon conversion of notes payable 3,776,792 399,667 Total 39,852,940 25,783,883 |
4. Property and Equipment (Tabl
4. Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | September 30, 2016 December 31, 2015 (unaudited) Office equipment $ 28,040 $ 65,051 Furniture and fixtures 2,880 4,075 Testing equipment 18,197 12,914 Subtotal 49,117 82,040 Less accumulated depreciation (30,627 ) (60,242 ) Total $ 18,490 $ 21,798 |
5. Convertible Notes (Tables)
5. Convertible Notes (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Convertible Notes and Warrants | September 30, 2016 December 31, 2015 (unaudited) Balance due on convertible notes $ 541,024 $ 321,024 Accrued interest 17,836 2,004 Subtotal 558,860 323,028 Unamortized note discount (254,116 ) (100,833 ) Balance on convertible notes, net of note discount $ 304,744 $ 222,195 |
9. Stock Options and Warrants (
9. Stock Options and Warrants (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | |
Stock options outstanding | Options Weighted Avg. January 1, 2016 21,535,148 $ 0.30 Granted 2,250,527 0.19 Exercised – – Forfeited (161,419 ) 0.77 Outstanding, September 30, 2016 23,624,256 $ 0.28 Exercisable, September 30, 2016 21,373,729 $ 0.29 |
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 23,473,810 5.0 $ 0.28 21,223,283 $ 0.29 $ 1.00 - $ 1.99 150,446 6.8 $ 1.18 150,446 $ 1.18 23,624,256 5.0 $ 0.28 21,373,729 $ 0.29 |
Warrants outstanding | Warrants Weighted Avg. January 1, 2016 4,411,667 $ 0.31 Granted 8,735,225 0.11 Exercised – – Cancelled (695,000 ) 0.49 September 30, 2016 12,451,892 $ 0.16 |
Warrants outstanding by Per Share Price | Outstanding Warrants Exercisable Warrants Warrant Exercise Price Per Share Shares Life (Years) Weighted Average Exercise Price Shares Weighted Average Exercise Price $ 0.01 - $ 0.14 9,015,225 0.3 $ 0.10 8,915,225 $ 0.10 $ 0.15 - $ 1.99 3,436,667 3.4 $ 0.30 3,436,667 $ 0.30 12,451,892 1.6 $ 0.16 12,451,892 $ 0.16 |
10. Contractual Obligations (Ta
10. Contractual Obligations (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contractual Obligations | Research and Year ending Office License Compensation Total December 31, Lease (1) Agreements (2) Agreements (3) Obligations 2016 $ 17,490 $ 46,875 $ 87,500 $ 151,865 2017 69,960 187,500 305,429 562,889 2018 40,810 187,500 290,000 518,310 2019 – 187,500 54,375 241,875 2020 – 187,500 – 187,500 Total $ 128,260 $ 796,875 $ 737,304 $ 1,662,439 |
2. Summary of Significant Acc24
2. Summary of Significant Accounting Policies (Details) - shares | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Total shares that would have been anti-dilutive | 39,852,940 | 25,783,883 |
Options [Member] | ||
Total shares that would have been anti-dilutive | 23,624,256 | 21,706,512 |
Warrants [Member] | ||
Total shares that would have been anti-dilutive | 12,451,892 | 3,677,704 |
Convertible Notes [Member] | ||
Total shares that would have been anti-dilutive | 3,776,792 | 399,667 |
2. Summary of Significant Acc25
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | ||||||
Net loss | $ (1,035,196) | $ (825,797) | $ (3,379,688) | $ (3,543,078) | ||
Cash flow from operations | (1,401,310) | (2,200,461) | ||||
Stockholders' deficit | (946,490) | (946,490) | $ (782,220) | |||
Cash on Hand | 385,360 | 559,682 | 385,360 | 559,682 | $ 349,186 | $ 2,247,557 |
Patent costs | $ 18,891 | $ 5,525 | $ 49,265 | $ 35,379 |
3. Certain Relationships and 26
3. Certain Relationships and Related Transactions (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Accrued expenses and accounts payable to related parties | $ 143,151 | $ 190,750 |
Accrued Directors' Fees [Member] | ||
Accrued expenses and accounts payable to related parties | 76,089 | 76,089 |
Former President | Unpaid Salaries [Member] | ||
Accrued expenses and accounts payable to related parties | $ 30,429 | $ 75,429 |
4. Property and Equipment (Deta
4. Property and Equipment (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Property and equipment, gross | $ 49,117 | $ 82,040 |
Less: accumulated depreciation | (30,627) | (60,242) |
Property and equipment, net | 18,490 | 21,798 |
Office equipment [Member] | ||
Property and equipment, gross | 28,040 | 65,051 |
Furniture and fixtures [Member] | ||
Property and equipment, gross | 2,880 | 4,075 |
Testing equipment [Member] | ||
Property and equipment, gross | $ 18,197 | $ 12,914 |
4. Property and Equipment (De28
4. Property and Equipment (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Depreciation expense | $ 5,249 | $ 9,803 | |
Property and equipment, gross | 49,117 | $ 82,040 | |
Less: accumulated depreciation | 30,627 | $ 60,242 | |
Loss on disposal of equipment | (3,343) | $ 0 | |
Property Disposed [Member] | |||
Property and equipment, gross | 38,206 | ||
Less: accumulated depreciation | $ 34,863 |
5. Convertible Notes (Details)
5. Convertible Notes (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Debt Disclosure [Abstract] | ||
Balance due on convertible notes | $ 541,024 | $ 321,024 |
Accrued Interest | 17,836 | 2,004 |
Subtotal | 558,860 | 323,028 |
Unamortized note discount | (254,116) | (100,833) |
Balance on convertible notes, net of note discount | $ 304,744 | $ 222,195 |
5. Convertible Notes (Details N
5. Convertible Notes (Details Narrative) - USD ($) | 9 Months Ended | 24 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Convertible notes issued | $ 1,587,045 | ||
Proceeds from convertible notes | 1,442,769 | $ 475,500 | |
Discount on notes issued | $ 144,276 | ||
Warrants issued with notes | 7,935,225 | ||
Discount on fair value of warrants, BCF and OID | $ 1,587,045 | ||
Notes payable balance | 541,024 | $ 321,024 | |
Unamortized discount | 254,116 | 100,833 | |
Debt converted during year | $ 1,367,044 | ||
Debt converted, shares issued | 13,670,449 | ||
Interest expense | $ 1,433,762 | ||
Accrued interest payable | 17,836 | 2,004 | |
Notes Convertible to common stock | $ 3,776,792 | ||
Common stock that could be issued upon conversion of remaining notes | 39,852,940 | 25,783,883 | |
Convertible Notes [Member] | |||
Common stock that could be issued upon conversion of remaining notes | 3,776,792 | 399,667 | |
Three Convertible Notes [Member] | |||
Notes payable balance | $ 211,024 | ||
Interest expense | 15,831 | ||
Accrued interest payable | $ 17,836 | ||
Private Placement [Member] | |||
Convertible notes issued | 1,000,000 | ||
Proceeds from convertible notes | 920,900 | ||
Discount on notes issued | $ 85,490 | ||
Warrants issued with notes | 1,942,704 | ||
Discount on fair value of warrants, BCF and OID | $ 842,105 | ||
Notes payable balance | 321,024 | ||
Unamortized discount | $ 100,833 |
6. Research and Development (De
6. Research and Development (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | $ 51,595 | $ 80,082 | $ 199,772 | $ 500,517 | |
Accounts payable - licensing agreement | 730,626 | 730,626 | $ 590,001 | ||
License revenue generated | 0 | 0 | 0 | 0 | |
AOT Prototypes [Member] | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | 4,720 | 31,843 | 58,947 | 110,439 | |
Joule Heat Prototype [Member] | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | 0 | 1,364 | 200 | 184,765 | |
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 | |
Accounts payable - licensing agreement | 601,250 | 601,250 | 460,625 | ||
License revenue generated | 0 | 0 | |||
Temple University License Agreements [Member] | Accounts payable deferred [Member] | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Accounts payable - licensing agreement | 193,750 | 193,750 | |||
Temple University License Agreements [Member] | Accounts payable past due [Member] | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Accounts payable - licensing agreement | 407,500 | 407,500 | |||
Temple University Sponsored Research Agreement [Member] | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Research and development expenses incurred | $ 0 | $ 64,688 | |||
Accounts payable - licensing agreement | 129,376 | 129,376 | $ 129,376 | ||
Temple University Sponsored Research Agreement [Member] | Accounts payable past due [Member] | |||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||
Accounts payable - licensing agreement | $ 129,377 | $ 129,377 |
8. Common Stock (Details Narrat
8. Common Stock (Details Narrative) | 9 Months Ended |
Sep. 30, 2016USD ($)shares | |
Value of notes converted | $ 1,367,044 |
Fair value of stock issued for services, value | $ 48,000 |
Consultant [Member] | |
Fair value of stock issued for services, shares issued | shares | 300,000 |
Fair value of stock issued for services, value | $ 48,000 |
Convertible Notes Payable [Member] | |
Common stock issued on conversion of notes, shares | shares | 13,670,449 |
Value of notes converted | $ 1,367,044 |
9. Stock Options and Warrants33
9. Stock Options and Warrants (Details-Options Outstanding) - Options [Member] | 9 Months Ended |
Sep. 30, 2016$ / sharesshares | |
Beginning Balance | shares | 21,535,148 |
Granted | shares | 2,250,527 |
Exercised | shares | 0 |
Forfeited | shares | (161,419) |
Ending Balance | shares | 23,624,256 |
Exercisable, ending balance | shares | 21,373,729 |
Weighted Average Exercise Price, Outstanding Beginning Balance | $ / shares | $ 0.30 |
Weighted Average Exercise Price, Granted | $ / shares | .19 |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited | $ / shares | .77 |
Weighted Average Exercise Price, Outstanding Ending Balance | $ / shares | .28 |
Exericsable, ending balance | $ / shares | $ .29 |
9. Stock Options and Warrants34
9. Stock Options and Warrants (Details-Options by Exercise Price Per Share) - Options [Member] - $ / shares | 9 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | |
Outstanding Options | ||
Options outstanding | 23,624,256 | 21,535,148 |
Life (Years), options outstanding | 5 years | |
Weighted Average Exercise Price, options outstanding | $ .28 | $ 0.30 |
Exercisable Options | ||
Options exercisable | 21,373,729 | |
Weighted Average Exercise Price, options exercisable | $ .29 | |
$0.21 - $0.99 [Member] | ||
Outstanding Options | ||
Options outstanding | 23,573,810 | |
Life (Years), options outstanding | 5 years | |
Weighted Average Exercise Price, options outstanding | $ .28 | |
Exercisable Options | ||
Options exercisable | 21,223,283 | |
Weighted Average Exercise Price, options exercisable | $ .29 | |
$1.00 - $1.99 [Member] | ||
Outstanding Options | ||
Options outstanding | 150,446 | |
Life (Years), options outstanding | 6 years 9 months 18 days | |
Weighted Average Exercise Price, options outstanding | $ 1.18 | |
Exercisable Options | ||
Options exercisable | 150,446 | |
Weighted Average Exercise Price, options exercisable | $ 1.18 |
9. Stock Options and Warrants35
9. Stock Options and Warrants (Details-Warrants Outstanding) - Warrants [Member] | 9 Months Ended |
Sep. 30, 2016$ / sharesshares | |
Warrants outstanding, beginning balance | shares | 4,411,667 |
Warrants granted | shares | 7,935,225 |
Warrants exercised | shares | 0 |
Warrants cancelled | shares | (695,000) |
Warrants outstanding, ending balance | shares | 12,451,892 |
Weighted Average Exercise Price, Outstanding Beginning Balance | $ / shares | $ .31 |
Weighted Average Exercise Price, Granted | $ / shares | .11 |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Cancelled | $ / shares | .49 |
Weighted Average Exercise Price, Outstanding Ending Balance | $ / shares | $ .16 |
9. Stock Options and Warrants36
9. Stock Options and Warrants (Details-Warrant Exercise Price per Share) - Warrants [Member] - $ / shares | 9 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | |
Outstanding Warrants | ||
Warrants outstanding | 12,451,892 | 4,411,667 |
Life (Years), warrants outstanding | 1 year 7 months 6 days | |
Weighted Average Exercise Price, warrants outstanding | $ 0.16 | |
Exercisable Warrants | ||
Warrants exercisable | 12,451,892 | |
Weighted Average Exercise Price, warrants exercisable | $ 0.16 | |
$0.01 - $0.14 [Member] | ||
Outstanding Warrants | ||
Warrants outstanding | 9,015,225 | |
Life (Years), warrants outstanding | 3 months 18 days | |
Weighted Average Exercise Price, warrants outstanding | $ .10 | |
Exercisable Warrants | ||
Warrants exercisable | 8,915,225 | |
Weighted Average Exercise Price, warrants exercisable | $ .10 | |
$0.15 - $1.99 [Member] | ||
Outstanding Warrants | ||
Warrants outstanding | 3,436,667 | |
Life (Years), warrants outstanding | 3 years 4 months 24 days | |
Weighted Average Exercise Price, warrants outstanding | $ .30 | |
Exercisable Warrants | ||
Warrants exercisable | 3,436,667 | |
Weighted Average Exercise Price, warrants exercisable | $ .30 |
9. Stock options and Warrants37
9. Stock options and Warrants (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Valuation assumptions | ||||
Share-based compensation | $ 405,605 | $ 593,732 | ||
Options [Member] | ||||
Options granted, shares | 2,250,527 | |||
Valuation assumptions | ||||
Share-based compensation | $ 84,293 | $ 162,744 | $ 265,448 | 548,619 |
Aggregate intrinsic value of options outstanding | 0 | 0 | ||
Future unamortized compensation expense on unvested outstanding options | 125,462 | $ 125,462 | ||
Options [Member] | Board of Directors [Member] | ||||
Options granted, shares | 1,710,527 | |||
Fair value of options at grant date, per share price | $ 0.19 | |||
Fair value of options at grant date | $ 273,683 | |||
Valuation assumptions | ||||
Expected life | 5.5 years | |||
Risk free interest rate | 1.73% | |||
Volatility | 119.00% | |||
Expected dividend yield | 0.00% | |||
Options [Member] | Employees [Member] | ||||
Options granted, shares | 540,000 | |||
Fair value of options at grant date, per share price | $ 0.18 | |||
Fair value of options at grant date | $ 83,500 | |||
Valuation assumptions | ||||
Expected life | 5.5 to 6 years | |||
Risk free interest rate | 1.23% | |||
Volatility | 121.00% | |||
Expected dividend yield | 0.00% | |||
Warrants [Member] | ||||
Valuation assumptions | ||||
Share-based compensation | $ 21,396 | $ 3,816 | $ 92,157 | $ 45,113 |
Warrants granted | 7,935,225 | |||
Warrant exercise price | 0.16 | |||
Aggregate intrinsic value of warrants outstanding | $ 444,761 | $ 444,761 | ||
Future unamortized compensation expense on unvested outstanding warrants | $ 12,104 | $ 12,104 | ||
Warrants [Member] | Amended Agreement [Member] | ||||
Valuation assumptions | ||||
Expected life | 1 year | |||
Stock price | $ .17 | $ .17 | ||
Risk free interest rate | 0.81% | |||
Volatility | 97.00% | |||
Expected dividend yield | 0.00% | |||
Fair value of warrants granted | $ 32,083 | |||
Warrants [Member] | Consultants [Member] | ||||
Valuation assumptions | ||||
Expected life | 1 to 3 years | |||
Stock price | $ .16 | $ .16 | ||
Risk free interest rate | 0.82% | |||
Volatility | 110.00% | |||
Expected dividend yield | 0.00% | |||
Warrants granted | 800,000 | |||
Warrant exercise price | $.012 to $0.18 per share | |||
Warrants [Member] | Convertible Notes [Member] | ||||
Valuation assumptions | ||||
Warrants granted | 7,935,225 | |||
Warrant exercise price | $0.10 per share |
10. Contractual Obligations (De
10. Contractual Obligations (Details) | Sep. 30, 2016USD ($) | |
Year ending 2016 | $ 151,865 | |
Year ending 2017 | 562,889 | |
Year ending 2018 | 518,310 | |
Year ending 2019 | 241,875 | |
Year ending 2020 | 187,500 | |
Total obligations | 1,662,439 | |
Office lease | ||
Year ending 2016 | 17,490 | |
Year ending 2017 | 69,960 | [1] |
Year ending 2018 | 40,810 | [1] |
Year ending 2019 | 0 | |
Year ending 2020 | 0 | |
Total obligations | 128,260 | [1] |
Research and License Agreements | ||
Year ending 2016 | 46,875 | |
Year ending 2017 | 187,500 | [2] |
Year ending 2018 | 187,500 | [2] |
Year ending 2019 | 187,500 | [2] |
Year ending 2020 | 187,500 | [2] |
Total obligations | 796,875 | [2] |
Compensation Agreements | ||
Year ending 2016 | 87,500 | |
Year ending 2017 | 305,429 | [3] |
Year ending 2018 | 290,000 | [3] |
Year ending 2019 | 54,375 | [3] |
Year ending 2020 | 0 | |
Total obligations | $ 737,304 | [3] |
[1] | Consists of rent for the Company's 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 i) an executive officer, pursuant to an employment agreement at a base salary of $290,000 per year and, as amended by the Board on March 10, 2016, expires on March 8, 2019; and ii) and a severance agreement of a former officer in the amount of $45,429. |
10. Contractual Obligations (39
10. Contractual Obligations (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Contractual obligation | $ 1,662,439 | |
Accounts payable | 209,888 | $ 182,334 |
Santa Barbara Facility [Member] | Rent Expense Through End Of Lease [Member] | ||
Contractual obligation | 35,910 | |
Santa Barbara Facility [Member] | Loss on Facility Lease Agreement [Member] | ||
Accounts payable | $ 29,260 |