Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 30, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | DAIS ANALYTIC CORP | ||
Entity Central Index Key | 1,125,699 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
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 | Smaller Reporting Company | ||
Entity Public Float | $ 1,071,387 | ||
Entity Common Stock, Shares Outstanding | 139,351,432 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 122,036 | $ 21,066 |
Accounts receivable, net | 5,058 | 1,500 |
Other receivables | 3,598 | 11,004 |
Inventory | 101,607 | 77,599 |
Prepaid expenses | 12,294 | 20,714 |
Total Current Assets | 244,593 | 131,883 |
Property and equipment, net | 91,900 | 131,003 |
OTHER ASSETS: | ||
Deposits | 5,080 | 4,780 |
Patents, net | 117,606 | 118,115 |
Total Other Assets | 122,686 | 122,895 |
TOTAL ASSETS | 459,179 | 385,781 |
CURRENT LIABILITIES: | ||
Accounts payable, including related party payables of $104,543 and $61,986 at December 31, 2017 and 2016, respectively | 353,193 | 378,123 |
Accrued expenses, other | 345,654 | 232,802 |
Accrued compensation and related benefits | 1,727,259 | 1,549,399 |
Customer deposits | 120,579 | |
Note Payable to related party | 1,332,000 | 385,400 |
Current portion of deferred revenue | 498,656 | 7,741 |
Derivative liabilities | 243,501 | |
Convertible notes payable, net of unamortized debt discount and deferred debt issuance costs | 3,788 | |
Total Current Liabilities | 4,624,630 | 2,553,465 |
Total Liabilities | 4,624,630 | 2,553,465 |
STOCKHOLDERS’ DEFICIT | ||
Preferred stock; $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding | ||
Common stock; $0.01 par value; 240,000,000 shares authorized; 140,608,645 and 121,300,077 shares issued and 139,351,432 and 120,042,864 shares outstanding at December 31, 2017 and 2016, respectively | 1,406,087 | 1,213,001 |
Capital in excess of par value | 43,003,003 | 41,745,913 |
Accumulated deficit | (47,112,429) | (43,664,486) |
Total | (2,703,339) | (705,572) |
Treasury stock at cost,1,257,213 and 1,257,213 at December 31, 2017 and 2016, respectively | (1,462,112) | (1,462,112) |
Total Stockholders’ Deficit | (4,165,451) | (2,167,684) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ 459,179 | $ 385,781 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
CURRENT LIABILITIES: | ||
Accounts payable related party payables | $ 104,543 | $ 61,986 |
STOCKHOLDERS' DEFICIT | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 240,000,000 | 240,000,000 |
Common stock, shares issued | 140,608,645 | 121,300,077 |
Common stock, shares outstanding | 139,351,432 | 120,042,864 |
Treasury stock shares | 1,257,213 | 1,257,213 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
REVENUE | ||
Sales | $ 381,590 | $ 477,926 |
Royalty and license fees | 1,344 | 1,725,514 |
Total Revenue | 382,934 | 2,203,440 |
COST OF GOODS SOLD | 312,547 | 384,048 |
GROSS MARGIN | 70,387 | 1,819,392 |
OPERATING EXPENSES | ||
Research and development, net of government grant proceeds of $150,912 and $510,675 for the years ended December 31, 2017 and 2016, respectively | 316,612 | 428,734 |
Selling, general and administrative | 2,208,887 | 1,655,839 |
TOTAL OPERATING EXPENSES | 2,525,499 | 2,084,573 |
LOSS FROM OPERATIONS | (2,455,112) | (265,181) |
OTHER INCOME (EXPENSE) | ||
Other income (expense) | 32,338 | |
Interest income | 135 | |
Interest expense | (1,554,803) | (43,299) |
Change in fair value of derivative | (134,289) | |
Gain on extinguishment of debt | 696,261 | |
TOTAL OTHER EXPENSE, NET | (992,831) | (10,826) |
NET LOSS | $ (3,447,943) | $ (276,007) |
NET LOSS PER COMMON SHARE, BASIC AND DILUTED | $ (0.03) | $ 0 |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED | 126,707,140 | 119,769,367 |
STATEMENTS OF OPERATIONS (Paren
STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Statements Of Operations | ||
Research and development expenses, net of government grant | $ 150,912 | $ 510,675 |
STATEMENTS OF STOCKHOLDERS' DEF
STATEMENTS OF STOCKHOLDERS' DEFICIT - USD ($) | Common Stock | Common Stock Payable | Capital in Excess of Par Value | Accumulated Deficit | Treasury Stock | Total |
Beginning Balance, Shares at Dec. 31, 2015 | 120,800,077 | |||||
Beginning Balance, Amount at Dec. 31, 2015 | $ 1,208,001 | $ 41,560,619 | $ (43,388,479) | $ (1,272,112) | $ (1,891,971) | |
Stock based compensation | 163,294 | 163,294 | ||||
Issuance of common stock for services, Shares | 300,000 | |||||
Issuance of common stock for services, Amount | $ 3,000 | 12,000 | 15,000 | |||
Issuance of common stock in lieu of cash payment to related party, Shares | 200,000 | |||||
Issuance of common stock in lieu of cash payment to related party, Amount | $ 2,000 | 10,000 | 12,000 | |||
Acquisition of treasury shares upon divestiture of Investment in China Operating Company | (190,000) | (190,000) | ||||
Net loss | (276,007) | (276,007) | ||||
Ending Balance, Shares at Dec. 31, 2016 | 121,300,077 | |||||
Ending Balance, Amount at Dec. 31, 2016 | $ 1,213,001 | 41,745,913 | (43,664,486) | (1,462,112) | (2,167,684) | |
Stock based compensation | 332,966 | 332,966 | ||||
Issuance of common stock for services, Shares | 15,050,000 | |||||
Issuance of common stock for services, Amount | $ 150,500 | 340,000 | 490,500 | |||
Issuance of common stock in lieu of cash payment to related party, Shares | 480,000 | |||||
Issuance of common stock in lieu of cash payment to related party, Amount | $ 4,800 | 12,400 | 17,200 | |||
Issuance of common stock for accrued expenses, Shares | 3,028,568 | |||||
Issuance of common stock for accrued expenses, Amount | $ 30,286 | 89,714 | 120,000 | |||
Issuance of common stock for debt issue costs, Shares | 750,000 | |||||
Issuance of common stock for debt issue costs, Amount | $ 7,500 | 15,000 | 22,500 | |||
Net loss | (3,447,943) | |||||
Ending Balance, Shares at Dec. 31, 2017 | 140,608,645 | |||||
Ending Balance, Amount at Dec. 31, 2017 | $ 1,406,087 | $ 43,003,003 | $ (47,112,429) | $ (1,462,112) | $ (4,165,451) |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (3,447,943) | $ (276,007) |
Adjustments to reconcile net loss to net cash and cash equivalents used by operating activities: | ||
Amortization of deferred debt issue costs | 11,021 | |
Depreciation and amortization | 60,789 | 76,108 |
Common stock payable for interest to related party | 45,400 | |
Gain on extinguishment of debt | (696,261) | |
Change in fair value of derivative liability | 134,289 | |
Non-cash interest expenses | 606,531 | |
Fair value of warrant issued for debt modification | 467,010 | |
Amortization of debt discount | 170,633 | |
Stock issued for finance cost | 1,800 | |
Stock compensation | 793,466 | 178,294 |
(Increase) decrease in: | ||
Accounts receivable | (3,558) | 132,277 |
Inventory | (24,008) | 17,312 |
Other receivables | (3,598) | 77,239 |
Prepaid expenses/Other current assets | 19,124 | 28,513 |
Increase (decrease) in: | ||
Accounts payable | (24,930) | 82,389 |
Accrued related party | 227,441 | |
Accrued expenses | 453,712 | 92,684 |
Customer deposits | 120,579 | |
Deferred revenue | 490,915 | (1,646,107) |
Net cash used by operating activities | (870,428) | (952,457) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Increase in patent costs | (18,940) | (31,660) |
Purchases of property and equipment | (2,237) | (33,571) |
Net cash used by investing activities | (21,177) | (65,231) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Payments on note payable | (371,425) | |
Proceeds from note payable - related party | 992,000 | 340,000 |
Proceeds from note payables | 372,000 | |
Net cash provided by financing activities | 992,575 | 340,000 |
Net increase (decrease) in cash and cash equivalents | 100,970 | (677,688) |
Cash and cash equivalents, beginning of period | 21,066 | 698,754 |
Cash and cash equivalents, end of period | 122,036 | 21,066 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for interest | 928 | |
NON-CASH FINANCING AND FINANCING ACTIVITIES | ||
Treasury stock from investment in China operating company | (190,000) | |
Payment of accrued expense with note payable | 43,000 | |
Issuance of common stock for settlement of accrued expenses | 150,000 | |
Issuance of common stock for settlement of interest due to related party | 15,400 | |
Issuance of common stock for deferred debt issuance costs | 22,500 | |
Debt discount and initial derivative liability at issuance of note | 1,043,282 | |
Issuance of warrants for debt modification | 467,010 | |
Total non-cash change | $ 1,741,192 | $ (190,000) |
Background Information
Background Information | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 1. Background Information | Dais Analytic Corporation (the Company), a New York corporation, has developed and is commercializing applications using its nanostructure polymer technology. The first commercial product is an energy recovery ventilator (ERV) (core and systems) for use in commercial Heating, Ventilating, and Air Conditioning (HVAC) applications. The second commercial product is NanoClear TM The Company is dependent on third parties to manufacture the key components needed for its nanostructured based materials and some portion of the value-added products made with these materials. Accordingly, a suppliers failure to supply components in a timely manner, or to supply components that meet the Companys quality, quantity and cost requirements or technical specifications, or the inability to obtain alternative sources of these components on a timely basis or on acceptable terms, would create delays in production of the Companys products and/or increase its unit costs of production. Certain of the components or the processes of the Companys suppliers are proprietary. If the Company was ever required to replace any of its suppliers, it should be able to obtain comparable components from alternative suppliers at comparable costs but this would create a delay in production. |
Going Concern and Management's
Going Concern and Management's Plans | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 2. Going Concern and Management's Plans | The accompanying financial statements have been prepared assuming the Company will continue as a going concern. For the year ended December 31, 2017, the Company generated a net loss of $3,447,943 and has incurred significant losses since inception. As of December 31, 2017, the Company has an accumulated deficit of $47,112,429, total stockholders deficit of $4,165,451, negative working capital of $4,380,037 and cash and cash equivalents of $122,036. The Company used $870,428 and $952,457 of cash from operations during the years ended December 31, 2017 and 2016, respectively, which was funded primarily by proceeds from loans from related parties and equity financings. There is no assurance that any such financing will be available in the future. These factors raise substantial doubt about the Companys ability to continue as a going concern. The Company is currently pursuing the following sources of short and long-term working capital: 1. The Company is holding preliminary discussions with parties who are interested in licensing, purchasing the rights to or establishing a joint venture to commercialize applications of the Companys technology. 2. The Company is seeking growth capital from certain strategic and/or government (grant) related sources. These sources may, pursuant to any agreements that may be developed in conjunction with such funding, assist in the product definition and design, roll-out and channel penetration of products. 3. The Company is holding discussions with investors and investment banks to obtain debt and/or equity financing. Any failure by the Company to timely procure additional financing or investment adequate to fund our ongoing operations, including planned product development initiatives and commercialization efforts, will have material adverse consequences on our financial condition, results of operations and cash flows as could any unfavorable terms. There are no assurances we will be able to obtain the financing and planned product development and commercialization. Accordingly, the Company may not have the ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 3. Significant Accounting Policies | The significant accounting policies followed are: Use of estimates Significant estimates underlying the Companys reported financial position and results of operations include the allowance for doubtful accounts, fair value of unit based compensation, fair value impairment analysis, fair value of derivative liabilities, valuation allowance on deferred taxes and the warranty reserve. Cash and cash equivalents Accounts receivable Concentrations Other receivables Fair Value of Financial Instruments Inventory Property and equipment Intangible assets Long-lived assets Government Funding Research and development expenses and funding proceeds Stock issuance costs Common stock Revenue recognition In certain instances, the Companys ConsERV TM TM TM TM For the year ended December 31, 2017 and 2016, one customer, Multistack LLC, accounted for approximately 15% and 67% of the Companys sales revenue, respectively. At December 31, 2017 and 2016, amounts due from MultiStack were approximately 0% of total accounts receivable. No amounts were due from MultiStack at December 31, 2016 as a result of the termination of the license agreement between the Company and Multistack on December 8, 2016. See Note 11 for a discussion of Multistack LLC and the licensing agreement with MG Energy LLC. In December 2017, the Company and Zhejiang MENRED Environmental Tech Co, Ltd., Zhejiang Province, China (Menred), entered into a License and Supply Agreement (the Agreement), effective December 21, 2017. Pursuant to the Agreement, the Company licensed certain intellectual property and improvements to Menred, for use in the manufacture and sale of energy recovery ventilators (ERV) and certain other HVAC systems for installation in commercial, residential or industrial buildings in China. Menred also agreed to purchase its requirements of certain products from the Company for Menreds use, pursuant to the terms and conditions of the Agreement. Menred will also pay royalties, as defined, to the Company on a quarterly basis, based on price and production volume as provided by Menred. No royalties are due within the first year of the Agreement. Also pursuant to the Agreement, the Company is required to purchase 50,000 square meters of Product from Menred for delivery as an annual minimum with a 10,000 square meter minimum order quantity per delivery. The Agreement has a ten-year term with mutually agreed upon five year extensions. Revenue derived from the sale of licenses is deferred and recognized as license fee revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. The Company recognized license fee revenue of $1,344 and $1,653,847 for the years ended December 31, 2017 and 2016, respectively. Royalties are recognized as earned. The Company recognized royalty revenue of $0 and $71,667 for the years ended December 31, 2017 and 2016, respectively. The Company accounts for revenue arrangements with multiple elements under the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 605-25, Revenue Recognition-Multiple-Element Arrangements. In order to account for these agreements, the Company must identify the deliverables included within the agreement and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether the delivered element has stand-alone value to the licensee. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Shipping and handling fees billed to customers are included in revenue. Shipping and handling fees associated with freight are generally included in cost of revenue. Warranties Stock based compensation The value of each grant is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the years ended December 31, 2017 and 2016: Years Ended December 31, 2017 2016 Dividend rate 0 % 0 % Risk free interest rate 2.34 % 1.80 % Expected term 10 years 10 years Expected volatility 244 % 185 % The basis for the above assumptions are as follows: the dividend rate is based upon the Companys history of dividends; the risk-free interest rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant; the expected term was calculated based on the Companys historical pattern of options granted and the period of time they are expected to be outstanding; and expected volatility was calculated based upon historical trends in the Companys common stock for periods prior to the date the Companys trading information was available. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on historical experience of forfeitures, the Company estimated forfeitures at 0% for each of the years ended December 31, 2017 and 2016, respectively. Non-employee stock-based compensation Equity-Based Payments to Non-Employees Financial instruments Fair Value Measurements and Disclosures The three levels of the fair value hierarchy are described below: · Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. · Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. · Level 3 - Inputs that are both significant to the fair value measurement and unobservable. Income taxes The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Companys 2013 through 2016 tax years remain open and subject to examination by the Internal Revenue Service. Derivative Financial Instruments Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments and are evaluated and accounted for in accordance with the provisions of ASC 815. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether fair value of warrants issued is required to be classified as equity or as a derivative liability. Fair Value at December 31, Fair Value Measurement Using 2017 Level 1 Level 2 Level 3 Derivative liability $ 243,501 $ - $ - $ 243,501 The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows for the twelve months ended December 31, 2017: Balance at beginning of period $ - Additions to derivative instruments 1,043,283 Extinguished derivative liabilities (934,071 ) Gain on change in fair value of derivative liability 134,289 Balance at end of period $ 243,501 Earnings (loss) per share Recent Accounting Pronouncements In May 2017, the FASB issued ASU 2017-09, Compensation Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. If an award is not probable of vesting at the time a change is made, the new guidance clarifies that no new measurement date will be required if there is no change to the fair value, vesting conditions, and classification. This ASU will be applied prospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The Company does not expect this standard to have a material impact on its financial statements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. 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 currently evaluating the impact of the pending adoption of the new standard on its financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgement and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB voted to defer the effective date of ASU 2014-09 for all entities by one year. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its financial statements and has not yet determined the method by which it will adopt the standard in 2018. Reclassifications |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 4. Property and Equipment | Property and equipment consist of the following: December 31, 2017 2016 Furniture and fixtures $ 20,966 $ 20,966 Computer equipment 21,761 21,761 Demonstration equipment 92,733 92,733 Office and lab equipment 318,649 316,412 Leasehold improvements 9,708 9,708 Property and equipment, gross 463,817 461,580 Less accumulated depreciation 371,917 330,577 Property and equipment, net $ 91,900 $ 131,003 |
Accrued Expenses, Other
Accrued Expenses, Other | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 5. Accrued Expenses, Other | Accrued expenses, other consists of the following: December 31, 2017 2016 Accrued expenses, other $ 254,123 $ 141,271 Accrued warranty costs 91,531 91,531 $ 345,654 $ 232,802 |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 6. Related Party Transactions | The Company rents a building that is owned by two stockholders of the Company, one of which is the Chief Executive Officer. Rent expense for this building is $4,066 per month, including sales tax. The Company recognized rent expense related to this lease of $56,760 and $48,792 for the years ended December 31, 2017 and 2016, respectively. The lease term will terminate upon 30 days written notice from landlord or 90 days written termination from us. On June 24, 2016, the Company entered into a Loan and Security Agreement (Security Agreement) with Patricia Tangredi (the Holder) pursuant to which the Company issued a Senior Secured Promissory Note for $150,000 (the Note). The interest rate is 12% per annum compounded daily with a minimum interest payment of $2,000. The Note grants the Holder a secured interest in the assets of the Company. Ms. Tangredi is the wife of Timothy Tangredi, the Companys CEO and stockholder, and therefore is a related party of the Company. Pursuant to the Note, the Company is to pay the Holder the principal amount of $150,000 plus all interest due thereon in accordance with terms and conditions of the Security Agreement on the earlier of: (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $1,000,000 or (ii) October 31, 2016. During 2016 and 2017, the Holder extended the Note pursuant to various amendments. Pursuant to the amendments, the principal amount due was increased to $1,332,000 with an extended maturity date of April 10, 2018. As consideration for the additional proceeds and modification of the maturity date, the Company issued to the related party warrants to purchase an aggregate of 26,250,000 shares of common stock with an exercise price of $0.01 with a ten year exercise period and 480,000 shares of common stock. The Company is using the proceeds of the Note and related amendments for working capital purposes. Interest expense on the Note was $88,441 and $13,618 for the years ended December 31, 2017 and 2016, respectively. Accrued interest was $102,059 and $13,618 at December 31, 2017 and 2016, respectively. The Company has accrued compensation due to the Chief Executive Officer as of December 31, 2017 and 2016 of $1,631,147 and $1,485,609, respectively, included in accrued compensation and related benefits in the accompanying balance sheets. Timothy N. Tangredi, our Chief Executive Officer and Chairman, is a founder and a member of the board of directors of Aegis BioSciences, LLC (Aegis). Mr. Tangredi currently owns 52% of Aegis outstanding equity and spends approximately one to two days per month on Aegis business for which he is compensated by Aegis. Aegis has two exclusive, world-wide licenses from us under which it has the right to use and sell products containing our polymer technologies in biomedical and health care applications. Pursuant to the second license, Aegis is required to make royalty payments of 1.5% of the net sales price it receives with respect to any personal hygiene product, surgical drape or clothing products (the latter when employed in medical and animal related fields) and license revenue it receives should Aegis grant a sublicense to a third party. Aegis sold no such products nor has it received any licensing fees requiring a royalty payment be made to us. All obligations for such payments ended on June 2, 2015. On February 27, 2015, the Company and Timothy N. Tangredi, the Companys Chief Executive Officer entered into an amendment to Mr. Tangredis Amended and Restated Employment Agreement. Currently, the Company has non-interest bearing accrued compensation due to the Chief Executive Officer for deferred salaries earned and unpaid as described above. The amendment provides that, if at any time during a calendar year, the unpaid compensation is greater than $500,000, Mr. Tangredi must convert $100,000 of unpaid compensation into the Companys common stock during such calendar year. The conversion rate shall be equal to 75% of the average closing price for the Companys common stock for the 30 trading days prior to the date of conversion. The Company shall also pay to Mr. Tangredi a cash payment equal to 20% of the compensation income incurred as a result of the conversion. Further, at any time any person or group (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) becomes the beneficial owner (as defined in Rules 13(d)-3 and 13(d)-5 under such Act) of greater of 40% of the then-outstanding voting power of the voting equity interests or a person or group initiate a tender offer for the Companys common stock, Mr. Tangredi may convert unpaid compensation to Class A Convertible Preferred Stock of the Company at $1.50 per share. The Board of Directors waived the requirement to convert $100,000 of unpaid compensation into common stock during 2016. No amounts have been converted under the terms of the Agreement to date. See Note 12 Commitments and Contingencies for further disclosure of the terms of Mr. Tangredis employment agreement. On April 24, 2014, the Company entered into a Distribution Agreement (the Distribution Agreement) with SoEX (Hong Kong) Industry & Investment Co., Ltd., a Hong Kong corporation (Soex). The Distribution Agreement was a covenant included in a Securities Purchase Agreement, dated January 21, 2014, between the Company and Soex, pursuant to which Soex purchased 37,500,000 shares of the Companys common stock, equal to approximately 31% of the issued and outstanding shares of common stock as of December 31, 2015. Pursuant to the Distribution Agreement, in exchange for $500,000 to be paid by October 20, 2014, royalty payments and a commitment from Soex to purchase nano-material membrane and other products from the Company, Soex obtained the right to distribute and market the Companys products for incorporation in energy recovery ventilators sold and installed in commercial, industrial and residential buildings, transportation facilities and vehicles (the Field) in mainland China, Hong Kong, Macao and Taiwan (the Territory). Further, Soex received an exclusive license in the Territory to use the Companys intellectual property in the manufacture and sale of its products in the Field and Territory and to purchase its requirements of nano-material membrane only from the Company, subject to terms and conditions of the Distribution Agreement. During 2014, $50,000 of the $500,000 license fee was received. Pursuant to the Distribution Agreement, Soex was required to pay the Company $500,000, issue the Company 25% of the equity of a newly-created company, Soex (Beijing) Environmental Protection Technology Company Limited and pay the Company royalties. Soex only paid the Company $50,000 of the required $500,000, did not issue the required equity and did not pay any required royalties. Effective June 12, 2015, the Companys Board of Directors ratified the termination of the Distribution Agreement, dated April 24, 2014, with Soex as a result of a breach of the Distribution Agreement by Soex. There are no early termination penalties for the termination of the Distribution Agreement. The remaining amount of deferred revenue was recognized as income upon the termination of the Distribution Agreement in June 2015. The Company recognized license fee revenue of $49,167 for the year ended December 31, 2015. The Company is pursuing legal action against Soex for breach of the Distribution Agreement as well as the Securities Purchase Agreement entered into in January 2014 (see Note 12, Commitments and Contingencies). In December 2015, the Company reported that it entered into a Share Exchange Agreement (the Exchange Agreement), dated as of December 24, 2015 but effective as of December 1, 2015, with Open Systems Control, a California corporation (the Shareholder), and Synpower Corporation. Ltd., a Hong Kong corporation (Synpower) through the issuance of 1,000,000 of common stock at $.19 per share which was recorded as Investment in China Operating Company on the balance sheet at December 31,2015. Pursuant to the Exchange Agreement, the Company purchased from the Shareholder all of the equity ownership in Synpower. At the time of the Exchange Agreement, Synpower was the owner of 62% of Jixiun-Cast Ltd., an engineering company organized in the Peoples Republic of China (Cast). The Companys plan was to use Cast for its manufacturing and distribution operations in China. On March 7, 2016, the Company and Synpower rescinded the Exchange Agreement, as of December 1, 2015, as a result of the discovery of an undisclosed event, not discoverable in the due diligence, related to Casts ability to function in China as an operating entity for the Company. As a result of the event, the Shareholder breached the representations, warranties and covenants made by the Shareholder in the Exchange Agreement. As a result of the rescission, which was agreed to by the Shareholder, the transaction was unwound as of December 1, 2015, the Company will return the equity interest in Synpower to an entity identified by the Shareholder, and the shares issued to the Shareholder were returned to the Company and will be cancelled pending final notification of cancellation from the Shareholder. As a result of the rescission and return of shares, the Company reduced the Investment in China Operating Company and recorded Treasury Stock of $190,000 during the year ended December 31, 2016. The financial statements of Synpower and its subsidiary, Cast, were not consolidated with the Companys 2015 financial statements for the period from December 1, 2015 through March 7, 2016 because the Company and Shareholder mutually rescinded the Exchange Agreement as of December 1, 2015 and the Company never had control of Synpower or Cast. The above terms and amounts are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties. |
Equity Transactions
Equity Transactions | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 7. Equity Transactions | Preferred Stock At December 31, 2017 and 2016, the Company’s Board of Directors has authorized 10,000,000 shares of preferred stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors. Common Stock At December 31, 2017 and 2016, the Company’s Board of Directors has authorized 240,000,000 shares of common stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors. During the years ended December 31, 2017 and 2016, the Company entered into a series of amendments to the Loan and Security Agreement entered into with a related party. (See Note 6, Related Party Transaction for further discussion). Under the terms of those amendments the Company has issued an aggregate of 480,000 shares of common stock valued at $17,200, of which $15,400 was recorded against debt due to related party. For the period ending December 31, 2017, the Company issued a total of 3,028,568 shares of common stock, valued at a total of $120,000, in payment of accrued expenses relating to legal services. For the period ending December 31, 2017, the Company issued an aggregate of 15,050,000 shares of common stock, valued at $490,500, in payment of consulting agreements to outside business consultants. For the period ending December 31, 2017, the Company issued an aggregate of 750,000 shares of common stock, valued at $22,500, as payment of debt issue costs. On November 30, 2016, the Company entered into a consulting agreement with an outside business consultant. Under the terms of the agreement, services commenced on December 1, 2016 and will continue for three months. The Company is to issue to the consultant $15,000 worth of restricted common stock per month based on the three day average closing price per share of the month. All shares earned under the agreement are considered earned in full and beneficially owned as of November 30, 2016. On December 30, 2016, the Company issued 300,000 shares of $.01 par value common stock to the consultants in payment of the first month’s services. On October 26, 2016, the Company issued 200,000 shares to a related party for accrued interest on the Loan and Security Agreement valued at $8,000 |
Convertible Notes Payable
Convertible Notes Payable | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 8. Convertible Notes Payable | The Companys convertible promissory notes at December 31, 2017 and 2016 are as follows: December 31, 2017 December 31, 2016 Convertible notes payable, bearing interest at 8% $ 100,000 $ - Unamortized debt discount (91,667 ) - Unamortized deferred debt issuance cost (4,545 ) - Total 3,788 - Current portion $ 3,788 $ - On April 21, 2017, the Company issued a convertible note in the amount of $100,000. The note is convertible, at the option of the holder, into shares of the Companys common stock at a per share price of $0.03, subject to adjustment as provided in the note. The note matures on April 21, 2020. The note contained original issue discount of $10,000 which is being amortized over the life of the note. The Company has also incurred costs of $27,500 related to the note, consisting of $5,000 of legal costs and $22,500 for a commitment fee. These costs are also being amortized over the life of the note. The commitment fee was paid with 750,000 shares of common stock with a value of $22,500. The Company also recorded debt discount of $90,000 related to the embedded derivative, as described in Note 9, which is being amortized over the life of the note. On May 17, 2017, the Company issued two convertible notes, each with a face amount of $135,712. The notes contain substantially the same terms. The notes and related accrued interest are convertible, at the option of the holders, into shares of the Companys common stock at a conversion price of 60% of the lowest trading price for 15 days prior to conversion. The notes bear interest at 8% per year and mature on May 17, 2018. The notes contained original issue discount aggregating of $24,675 which is being amortized over the life of the notes. The Company has also incurred aggregate legal costs of $11,750 related to the notes. These costs are also being amortized over the life of the notes. The Company also recorded debt discount of $246,750 related to the embedded derivative, as described in Note 9 which is being amortized over the life of the note. The above notes were redeemed during the fourth quarter of 2017. As a result of the extinguishment of the debt and the related derivative liabilities, we recorded a gain of $696,261. On October 31, 2017, the Company issued a convertible note in the amount of $100,000. The note and related accrued interest are convertible, at the option of the holder, into shares of the Companys common stock at a conversion price of 60% of the lowest trading price for 15 days prior to conversion. The note bears interest at 8% per year and matures on October 31, 2018. The Company incurred legal costs of $5,000 related to the note which are being amortized over the life of the note. The Company also recorded debt discount of $100,000 related to the embedded derivative, as described in Note 9, which is being amortized over the life of the note. During 2017, the Company amortized $170,633 of debt discount and $11,021 of debt issue costs to interest expense. Unamortized debt discount and debt costs of $209,125 and $28,684, respectively, were charged against gain on extinguishment of debt at the time of redemption. At December 31, 2017, unamortized debt discount was $91,667 and unamortized debt issue costs were $4,545. |
Derivative Liabilities
Derivative Liabilities | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 9. Derivative Liabilities | The Company has identified certain embedded derivatives related to its convertible notes. Since the notes are convertible into a variable number of shares or have a price reset feature, the conversion features of those notes are recorded as derivative liabilities. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date and to adjust to fair value as of each subsequent balance sheet date. April 2017 Note The Company identified embedded derivatives related to the conversion features of the April 2017 note. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the note and to adjust the fair value as of each subsequent balance sheet date. The Company calculated the fair value of the embedded derivative at the inception of the note as $99,106, using the Black Scholes Model based on the following assumptions: (1) risk free interest rate of 1.5%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Companys common stock of 301%; and (4) an expected life of 3 years. The initial fair value of the embedded debt derivative was allocated $90,000 as debt discount, which will be amortized to interest expense over the original term of the note, with the balance of $9,106 charged to expense at issue date as non-cash interest expenses. During 2017, the Company recorded expense of $414 related to the change in the fair value of the derivative. The fair value of the embedded derivative was $99,520 at the time of redemption of the related debt, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 1.64%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Companys common stock of 356%; and (4) an expected life of 2.5 years. This amount has been credited to gain on extinguishment upon redemption. May 2017 Notes The Company identified embedded derivatives related to the conversion features of the May 2017 Notes. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the note and to adjust the fair value as of each subsequent balance sheet date. The Company calculated the fair value of the embedded derivative at the inception of the notes as $597,160, using the Black Scholes Model based on the following assumptions: (1) risk free interest rate of 1.171%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Companys common stock of 486%; and (4) an expected life of 1 year. The initial fair value of the embedded debt derivative was allocated $246,750 as debt discount, which will be amortized to interest expense over the original term of the note, with the balance of $350,410 charged to expense at issue date as non-cash interest expenses. The Company has recorded additions to the derivative conversion liabilities related to the conversion feature attributable to interest accrued during the period. These additions totaled $20,789 for 2017 and were charged to non-cash interest expense. During 2017, the Company recorded expense of $216,601 related to the change in the fair value of the derivative. The fair value of the embedded derivative was $834,550 at the time of redemption of the related debt, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 1.46%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Companys common stock of 345%; and (4) an expected life of 6 months. This amount has been credited to gain on extinguishment upon redemption. October 2017 Note The Company identified embedded derivatives related to the conversion features of the October 2017 note. The accounting treatment of derivative financial instruments requires that the Company record the fair value of thederivatives as of the inception date of the note and to adjust the fair value as of each subsequent balance sheet date. The Company calculated the fair value of the embedded derivative at the inception of the note as $324,426, using the Black Scholes Model based on the following assumptions: (1) risk free interest rate of 1.61%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Companys common stock of 407%; and (4) an expected life of 11 months. The initial fair value of the embedded debt derivative was allocated $100,000 as debt discount, which will be amortized to interest expense over the original term of the note, with the balance of $224,426 charged to expense at issue date as non-cash interest expense. The Company has recorded additions to the derivative conversion liabilities related to the conversion feature attributable to interest accrued during the period. These additions totaled $1,801 for 2017 and were charged to non-cash interest expense. During 2017 the Company recorded income of $82,726 related to the change in the fair value of the derivative. The fair value of the embedded derivative was $243,501 at December 31, 2017, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 1.65%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Companys common stock of 423%; and (4) an expected life of 10 months. |
Stock Options and Warrants
Stock Options and Warrants | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 10. Stock Options and Warrants | Options In June 2000 and November 2009, the Company’s Board of Directors adopted, and the shareholders approved, the 2000 Plan and 2009 Plan, respectively (together the “Plans”). The Plans provide for the granting of options to qualified employees of the Company, independent contractors, consultants, directors and other individuals. The Company’s Board of Directors approved and made available 11,093,886 and 15,000,000 shares of common stock to be issued pursuant to the 2000 Plan and the 2009 Plan, respectively. On February 27, 2015, the shareholders approved the Dais Analytic Corporation 2015 Stock Incentive Plan (the “2015 Plan”). The number of shares of common stock reserved for issuance under the 2015 Plan is 10,000,000. The Plans and the 2015 Plan permit grants of options to purchase common shares authorized and approved by the Company’s Board of Directors. There were 0 and 50,000 stock options issued to consultants during the year ended December 31, 2017 and 2016, respectively. The Company recognized $3,489 of compensation expense for stock options issued to consultants during the year ended December 31, 2016 included in $163,294 of total stock based compensation. The following summarizes the information relating to outstanding stock options activity during 2017 and 2016: Common Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at December 31, 2015 19,215,058 $ 0.28 9.29 $ 9,000 Granted 2,340,000 0.07 Forfeited or expired (2,712,500 ) 0.15 Outstanding at December 31, 2016 18,842,558 0.25 5.06 $ - Granted 10,150,000 0.04 Forfeited or expired (2,100,000 ) 0.14 Outstanding at December 31, 2017 26,892,558 $ 0.17 6.42 $ - Exercisable at December 31, 2017 26,892,588 $ 0.17 6.42 $ - Stock compensation expense was $332,966 and $163,294 for the years ended December 31, 2017 and 2016, respectively. The weighted average fair value of options granted at market during 2017 and 2016 was $0.04 and $0.07 per option, respectively. The Company calculated the fair value of the options using the Black Scholes model with the following assumptions: (1) risk free rate of 2.24% and 2.34%, respectively; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company's common stock of 185% and 244%, respectively; and (4) an expected life of 10 years. The exercise price is $0.04 and $0.07 for the options granted in 2017 and 2016, respectively. As of December 31, 2017, there was no of unrecognized employee stock-based compensation expense related to non-vested stock options. Warrants At December 31, 2017, the Company had outstanding warrants to purchase the Company’s common stock which were issued in connection with multiple financing arrangements and consulting agreements. Information relating to these warrants is summarized as follows: Number of Shares Weighted Average Remaining Life (Years) Weighted Average Exercise Price Warrants at December 31, 2015 14,624,396 0.74 $ 0.32 Granted - - - Forfeited or expired (9,039,038 ) - - Warrants at December 31, 2016 5,585,358 1.01 $ 0.34 Granted 26,250,000 9.70 0.01 Forfeited or expired (4,375,000 ) - - Warrants at December 31, 2017 27,460,358 9.29 $ 0.03 |
Deferred Revenue
Deferred Revenue | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 11. Deferred Revenue | On October 30, 2012, the Company and MG Energy LLC, a Delaware limited liability company (MG Energy), entered into a License and Supply Agreement (the Agreement), effective October 26, 2012. Pursuant to the Agreement, the Company licensed certain intellectual property and improvements to MG Energy, for use in the manufacture and sale of energy recovery ventilators (ERV) and certain other HVAC systems for installation in commercial, residential or industrial buildings in North America and South America in exchange for the cancellation of $2,034,521 of debt due to MG Energy. MG Energy also agreed to purchase its requirements of certain ConsERV TM The Company has identified all of the deliverables under the Agreement and has determined the significant deliverables to be the license for the intellectual property and the supply services. In determining the units of accounting, the Company evaluated whether the license has stand-alone value to MG Energy based upon consideration of the relevant facts and circumstances of the Agreement. The Company determined that the license does not have stand-alone value to the licensee and, therefore, should be combined with the supply agreement as one unit of accounting. The initial payment for the license agreement will be treated as an advance payment and recognized over the performance period of the supply agreement. On December 8, 2016, the Company, MG Energy, and Multistack, LLC terminated the Agreement, with mutual release. The parties mutually agreed that the Agreement shall be terminated and all licenses, rights and obligations thereunder, and none of the parties shall be responsible for any services or payment. The amount of deferred revenue was recognized as royalty revenue upon the termination of the License Agreement in December 2016. In December 2017, the Company and Zhejiang MENRED Environmental Tech Co, Ltd., Zhejiang Province, China (Menred), entered into a License and Supply Agreement (the Agreement), effective December 21, 2017. Pursuant to the Agreement, the Company licensed certain intellectual property and improvements to Menred, for use in the manufacture and sale of energy recovery ventilators (ERV) and certain other HVAC systems for installation in commercial, residential or industrial buildings in China. Menred also agreed to purchase its requirements of certain products from the Company for Menreds use, pursuant to the terms and conditions of the Agreement. Menred will also pay royalties, as defined, to the Company on a quarterly basis, based on price and production volume as provided by Menred. No royalties are due within the first year of the Agreement. Also pursuant to the Agreement, the Company is required to purchase 50,000 square meters of Product from Menred for delivery as an annual minimum with a 10,000 square meter minimum order quantity per delivery. The Agreement has a ten-year term with mutually agreed upon five year extensions. The Company recognized license revenue of $1,344 and $1,653,848 in years ended December 31, 2017 and 2016. Deferred revenue for the agreements was $498,656 and $0 at December 31, 2017 and 2016, respectively. The Company recognized royalty revenue of $0 and $71,667 in the years ended December 31, 2017 and 2016, respectively. On April 24, 2014, the Company entered into a Distribution Agreement with SoEX (Hong Kong) Industry & Investment Co., Ltd., as discussed in Note 6 Related Party Transactions. The amount of deferred revenue was recognized as income upon the termination of the Distribution Agreement in June 2015. The Company recognized license fee revenue of $49,167 for the year ended December 31, 2015. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 12. Commitments and Contingencies | The Company has employment agreements with some of its key employees and executives. These agreements provide for minimum levels of compensation during current and future years. In addition, these agreements call for grants of stock options and for payments upon termination of the agreements. The Company entered into an amended and restated employment agreement with Mr. Timothy N. Tangredi, the Company’s President, Chief Executive Officer, and director, dated as of September 14, 2011. Mr. Tangredi’s employment agreement provides for an initial term of three years commencing on September 14, 2011 with the term extending on the second anniversary thereof for an additional two year period and on each subsequent anniversary of the commencement date for an additional year. Mr. Tangredi’s initial base salary is $200,000. Mr. Tangredi’s base salary shall be increased annually, if applicable, by a sum equal to his current base salary multiplied by one third of the percentage increase in the Company’s yearly revenue compared to the Company’s prior fiscal year revenue; provided however any annual increase in Mr. Tangredi’s base salary shall not exceed a maximum of 50% for any given year. Any further increase in Mr. Tangredi’s base salary shall be at the sole discretion of the board of directors or compensation committee (if applicable). Additionally, at the discretion of the Company’s board of directors and its compensation committee, Mr. Tangredi may be eligible for an annual bonus, if any, of up to 100% of his then-effective base salary, if he meets or exceeds certain annual performance goals established by the board of directors. In addition to this bonus, Mr. Tangredi may be eligible for a separate merit bonus if approved by the board of directors, for specific extraordinary events or achievements such as a sale of a division, major license or distribution arrangement or merger. Mr. Tangredi is entitled to medical, disability and life insurance, as well as six weeks of paid time off annually, an automobile allowance, reimbursement of all reasonable business expenses, automobile insurance and maintenance, and executive conference or educational expenses. Under his employment agreement, in addition to any other compensation which he may receive, if the Company completes a secondary public offering, Mr. Tangredi will be granted an option to purchase up to 520,000 shares of the Company’s common stock with an exercise price equal to the fair market value per share on the date of grant. This option will become vested and exercisable in thirds, with one third vested upon grant, another third at the one-year anniversary of the grant, and another third upon the second anniversary of the grant. The option shall have a term of ten years, shall be exercisable for up to three years after termination of employment (unless termination is for cause, in which event it shall expire on the date of termination), shall have a “cashless” exercise feature, and shall be subject to such additional terms and conditions as are then applicable to options granted under such plan provided they do not conflict with the terms set forth in the agreement. If Mr. Tangredi’s employment is terminated for any reason, the Company’s will be obligated to pay him his accrued but unpaid base salary, bonus and accrued vacation pay, and any unreimbursed expenses (“Accrued Sums”). In addition to any Accrued Sums owed, if Mr. Tangredi’s employment is terminated by the Company in the event of his disability or without cause or by Mr. Tangredi for good reason, he shall be entitled to: (i) an amount equal to the sum of (A) the greater of 150% of the base salary then in effect or $320,000 plus (B) the cash bonus and/or merit bonus, if any, awarded for the most recent year; (ii) health and life insurance, a car allowance and other benefits set forth in the agreement until two years following termination of employment, and thereafter to the extent required by COBRA or similar statute; and (iii) all stock options, to the extent they were not exercisable at the time of termination of employment, shall become exercisable in full. In addition to any Accrued Sum owed, in the event of termination upon death, Mr. Tangredi shall be entitled to (i) and (iii) above. In addition to any Accrued Sums owed, in the event that Mr. Tangredi elects to terminate employment within one year following a change in control, he shall receive a lump sum payment equal to the sum of (a) the greater of his then current base salary or $210,000 plus (b) the cash bonus and merit bonus, if any, awarded in the most recent year. In addition, he will be entitled to (ii) and (iii) above. The employment agreement also contains customary covenants restricting the use of the Company’s confidential information and solicitation of employees, which are similarly applicable to other executive officers. In addition the Company is obligated to indemnify Mr. Tangredi for any claims made against him in connection with his employment with the Company, to advance indemnification expenses, and maintain his coverage under the Company’s directors’ and officers’ liability insurance policy. Under the employment agreement, the Company and Mr. Tangredi have agreed that the Company will retain an independent compensation consultant, which may modify the compensation program for Mr. Tangredi and other officers, subject to certain conditions including approval of the board of directors. Notwithstanding the recommendation and board consideration, Mr. Tangredi has the right to continue the current terms of the employment agreement. On February 27, 2015, the Company and Timothy N. Tangredi, the Company’s Chief Executive Officer entered into an amendment to Mr. Tangredi’s Amended and Restated Employment Agreement. Currently, the Company has non-interest bearing accrued compensation due to the Chief Executive Officer for deferred salaries earned and unpaid as described above. The amendment provides that, if at any time during a calendar year, the unpaid compensation is greater than $500,000, Mr. Tangredi must convert $100,000 of unpaid compensation into the Company’s common stock during such calendar year. The conversion rate shall be equal to 75% of the average closing price for the Company’s common stock for the 30 trading days prior to the date of conversion. The Company shall also pay to Mr. Tangredi a cash payment equal to 20% of the compensation income incurred as a result of the conversion. Further, at any time any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under such Act) of greater of 40% of the then-outstanding voting power of the voting equity interests or a person or group initiate a tender offer for the Company's common stock, Mr. Tangredi may convert unpaid compensation to Class A Convertible Preferred Stock of the Company at $1.50 per share. The Board of Directors waived the requirement to convert $100,000 of unpaid compensation into common stock during 2016 and 2017. No amounts have been converted under this agreement to date. In December 2015, the Company reported that it entered into a Share Exchange Agreement (the “Exchange Agreement”), dated as of December 24, 2015 but effective as of December 1, 2015, with Open Systems Control, a California corporation (the “Shareholder”), and Synpower Corporation. Ltd., a Hong Kong corporation (“Synpower”) through the issuance of 1,000,000 of common stock at $0.19 per share which was recorded as Investment in China Operating Company on the balance sheet at December 31, 2015. Pursuant to the Exchange Agreement, the Company purchased from the Shareholder all of the equity ownership in Synpower. At the time of the Exchange Agreement, Synpower was the owner of 62% of Jixiun-Cast Ltd., an engineering company organized in the People’s Republic of China (“Cast”). The Company’s plan was to use Cast for its manufacturing and distribution operations in China. On March 7, 2016, the Company and Synpower rescinded the Exchange Agreement, as of December 1, 2015, as a result of the discovery of an undisclosed event, not discoverable in the due diligence, related to Cast’s ability to function in China as an operating entity for the Company. As a result of the event, the Shareholder breached the representations, warranties and covenants made by the Shareholder in the Exchange Agreement. As a result of the rescission, which was agreed to by the Shareholder, the transaction was unwound as of December 1, 2015, the Company will return the equity interest in Synpower to an entity identified by the Shareholder, and the shares issued to the Shareholder were returned to the Company and are cancelled pending final notification of cancellation from the Shareholder. As a result of the rescission and return of shares, the Company reduced the Investment in China Operating Company and recorded Treasury Stock of $190,000 during the three-month period ended March 31, 2016. The financial statements of Synpower and its subsidiary, Cast, were not consolidated with the Company’s 2015 financial statements for the period from December 1, 2015 through March 7, 2016 because the Company and Shareholder mutually rescinded the Exchange Agreement as of December 1, 2015 and the Company never had control of Synpower or Cast. Litigation From time to time, claims are made against the Company in the ordinary course of its business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more products or engaging in other activities. The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on the Company’s results of operations for that period or future periods. In the third quarter of 2015, the Company commenced an action for the cancellation of the 37,500,000 shares issued to Soex (the “Shares”) in connection with a Securities Purchase Agreement, dated January 21, 2014 (“Soex SPA”), and 3,750,000 shares issued to Zan Investment Advisory Limited (“Zan”), which is affiliated with Soex through Aifan Liu, who was appointed as a Company board observer by SOEX and her husband, Xinghong Hua. Sharon Han, General Manager and Chairwoman of Soex, served on the Company’s board pursuant to the provisions of the Soex SPA. Ms. Han resigned from the Board of Directors effective February 1, 2016. On April 24, 2014, the Company entered into a Distribution Agreement (the “Distribution Agreement”), with Soex to distribute certain of the Company’s products in China. The Company was entitled to receive, pursuant to the Distribution Agreement, royalties and a $500,000 payment, of which $50,000 has been received, that was due on or before October 24, 2014. Further, the Company reported it has not received any royalties from Soex. Soex is in breach of the Distribution Agreement. As reported in the Company’s Form 10-Q for the quarter ended June 30, 2015, the Company began pursuing legal action against Soex for breach of the Soex Securities Purchase Agreement and Distribution Agreement. On July 8, 2015, the Company filed a lawsuit in state courts in Florida against Soex and Zan. Pursuant to the Distribution Agreement, Soex is in material breach of the following: (1) Section 1(a) of the Distribution Agreement for Soex’s failure to make a $225,000 payment to the Company for the appointment of Soex as the exclusive distributor of the Products in the Field and Territory (the “Distribution Payment Default”) in accordance with the terms set forth in the Distribution Agreement. Such payment was due on October 20, 2014 (the “Payment Date”). (2) Section 8(b) of the Distribution Agreement for Soex’s failure to make a $225,000 payment to the Company for the grant of the license and right to manufacture, sell, lease and distribute Products (excluding manufacture of MTM), and to use the Intellectual Property in connection therewith (the “License Payment Default” and, together with the Distribution Payment Default, the “Payment Default”) in accordance with the terms set forth in the Distribution Agreement. Such payment was due on the Payment Date. (3) Section 15(b) of the Distribution Agreement for Soex’s failure to issue to the Company 25% of the equity (the “Equity Default”) of SOEX (Beijing) Environmental Protection Technology Company Limited (the “China Subsidiary”). As a result of the above, the Company terminated the Distribution Agreement. As provided in Section 14(e) of the Distribution Agreement, the Company has the right to enforce any obligation due to it by the Soex. As a result, Soex still must (a) pay the remaining $450,000 due under the Distribution Agreement and the amount of Royalties due, plus interest at 1.5% per month (18% per year) with interest accruing from the date that payment was due and (b) issue to us 25% of the equity of SOEX (Beijing) Environmental Protection Technology Company Limited. As provided in Section 14(b), neither the Company nor Soex shall be liable for compensation, reimbursement or damages due to loss of profits on sales or anticipated sales or losses due to expenditures, investments or commitments made or in connection with the establishment, development or maintenance of the business. Further, in consideration of the issuance of the Shares to Soex and the equity to Zan under the Soex SPA was the covenant that Soex would enter into a Distribution Agreement and establish a subsidiary in China and issue shares to the Company in the China Subsidiary. With Soex’s Equity Default, Soex breached the Soex SPA and the Company is seeking return of the Shares from Soex in the lawsuit filed in July 2015. The litigation has been moved to the U.S. District Court for the Middle District of Florida where Soex has instituted a counterclaim (Civil Docket Case#: 8:15-cv-02362-MSS-EAJ). While the Company believes it has a strong case against Soex as a result of its breaches of the agreements with, the Company cannot make any predictions about the success of its action against Soex or whether or not Soex will have the assets to satisfy any judgment. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 13. Income Taxes | On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”), a tax reform bill, was enacted. The Act, among other items, reduces the current federal income tax rate to 21% from 35%. The rate reduction is effective January 1, 2018, and is permanent. The Act has caused the Company’s deferred income taxes to be revalued. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense. Pursuant to the guidance within SEC Staff Accounting Bulletin No. 118 (“SAB 118”), as of December 31, 2017, the Company recognized the provisional effects of the enactment of the Act for which measurement could be reasonably estimated. Since the Company has provided a full valuation allowance against its deferred tax assets, the revaluation of the deferred tax assets did not have a material impact on any period presented. The ultimate impact of the Act may differ from these estimates due to the Company’s continued analysis or further regulatory guidance that may be issued as a result of the Act. As a result of the reduction of the federal corporate income tax rate, the Company reduced the value of its net deferred tax asset by $4,126,000 which was recorded as a corresponding reduction to the valuation allowance during the fourth quarter of 2017. The Company had, subject to limitation, approximately $27,900,000 of net operating loss carryforwards at December 31, 2017, which will expire at various dates beginning in 2019 through 2037. In addition, the Company has research and development tax credits of approximately $308,000 at December 31, 2017 available to offset future taxable income, which will expire from 2030 through 2037. We have provided a 100% valuation allowance for the deferred tax benefits resulting from the net operating loss carryover and our tax credits due to our lack of earnings history. In addressing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. The valuation allowance increased by approximately $671,000 and $56,000 for the years ended December 31, 2017 and 2016, respectively. Significant components of deferred tax assets and liabilities are as follows: 2017 2016 Deferred revenue $ 126,000 $ 2,000 Depreciation 6,000 8,000 Accrued compensation 432,000 386,000 Research and development credit 308,000 278,000 Accrued warranty 46,000 - Net operating loss carryforward 7,049,000 6,599,000 Valuation allowance (7,967,000 ) (7,296,000 ) $ - $ - A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows: December 31, 2017 2016 Federal statutory income tax rate (35.0 )% (35.0 )% State income taxes, net of federal benefit (4.0 ) (4.0 ) Permanent differences 10.4 29.1 Change in valuation allowance 28.6 9.9 Provision for income taxes 0.0 % 0.0 % As of December 31, 2017, the Company has not performed an IRC Section 382 study to determine the amount, if any, of its net operating losses that may be limited as a result of the ownership change percentages during 2017. However, the Company will complete the study prior to the utilization of any of its recorded net operating losses. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Note 14. Subsequent Events | No material events have occurred after December 31, 2017 that requires recognition or disclosure in the financial statements except as follows: On February 7, 2018, the Company issued two convertible notes, each with a face amount of $87,500. The notes contain substantially the same terms. The notes and related accrued interest are convertible, at the option of the holders, into shares of the Companys common stock at a conversion price of 60% of the lowest trading price for 15 days prior to conversion. The notes bear interest at 8% per year and mature on February 7, 2019. The notes contain original issue discount aggregating $17,500 which is being amortized over the life of the notes. The Company has also incurred aggregate legal costs of $7,500 related to the notes. These costs are also being amortized over the life of the notes. The Company received cash proceeds of $157,500. On March 12, 2018, the Company issued a convertible note, with a face amount of $100,000. The note and related accrued interest are convertible, at the option of the holder, into shares of the Companys common stock at a conversion price of $0.15 per share. The note provides for an interest payment of 10% of the principal amount of the note, payable before or upon maturity. The note matures six months from the effective date of March 12, 2018. The note contains original issue discount of $20,000 which is being amortized over the life of the note. The Company has also incurred aggregate legal costs of $6,000 related to the note. These costs are also being amortized over the life of the note. We received cash proceeds of $80,000. On March 19, 2018, the Company entered into a Thirteenth Amendment of the Loan and Security Agreement with a related party (described in Note 6), whereby the Maturity Date of the Note was extended to the earlier of (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $1,000,000 or (ii) April 10, 2018. In consideration of the extension of maturity date, the Company will issue 20,000 shares of common stock. |
Significant Accounting Polici22
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Significant Accounting Policies Policies | |
Use of estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the Companys reported financial position and results of operations include the allowance for doubtful accounts, fair value of unit based compensation, fair value impairment analysis, fair value of derivative liabilities, valuation allowance on deferred taxes and the warranty reserve. |
Cash and cash equivalents | - |
Accounts receivable | Accounts receivable consist primarily of receivables from the sale of the Companys ERV products and royalties due under license and supply agreements. The Company regularly reviews accounts receivable for any bad debts based on an analysis of the Companys collection experience, customer credit worthiness and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on managements review of accounts receivable, an allowance for doubtful accounts of $0 and $3,647 has been recorded at December 31, 2017 and 2016, respectively. |
Concentrations | For the year ended December 31, 2017, one customer accounted for 15% of total revenue. For the year ended December 31, 2016 one customer accounted for 67% of total revenue. |
Other receivables | Other receivables consist primarily of receivables from the U.S. Department of Defense and the U.S. Department of Energy (See Note 3 - Research and development expenses and funding proceeds). The Company prepares invoices as it meets funding program milestones. Based on managements review of other receivables, management has determined that no allowance for other receivables is necessary at December 31, 2017 and 2016. |
Fair Value of Financial Instruments | The Companys financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred revenue, customer deposits and notes payable are carried at historical cost. At December 31, 2017 and 2016 the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments. |
Inventory | Inventory consists of raw materials, work-in-process and finished goods and is stated at the lower of cost, determined by first-in, first-out method, or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration and other factors. At December 31, 2017 and 2016, the Company had $85,173 and $72,059 of raw materials, $9,211 and $4,159 of in-process inventory and $7,223 and $1,381 of finished goods inventory, respectively. A reserve is recorded for any inventory deemed excessive or obsolete. No reserve is recorded at December 31, 2017 and 2016, respectively. |
Property and equipment | Property and equipment is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 7 years. Leasehold improvements are amortized over the shorter of their estimated useful lives of 5 years or the related lease term. Depreciation and amortization expense was $41,340 and $54,053 for the years ended December 31, 2017 and 2016, respectively. Gains and losses upon disposition are reflected in the Statement of Operations in the period of disposition. Maintenance and repair expenditures are charged to expense as incurred. There were no dispositions of property and equipment in 2016 and 2017. |
Intangible assets | Identified intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Companys existing intangible assets consist solely of patents. Patents are amortized over their estimated useful or economic lives of 17 years. Patent amortization expense was $19,449 and $22,055 for the years ended December 31, 2017 and 2016, respectively. Based on current capitalized costs, total patent amortization expense is estimated to be approximately $12,000 per year for the next five years and thereafter. |
Long-lived assets | Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, the Company estimates the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. The Company did not recognize impairment on its long-lived assets during the years ended December 31, 2017 or 2016. |
Government Funding | Government funding represents grants from the U.S. Department of Defense and U.S. Department of Energy and are recognized when there is reasonable assurance that the funding will be received and conditions associated with the funding are met. When fundings are received related to property and equipment, the Company reduces the basis of the assets on the balance sheet, resulting in lower depreciation expense over the life of the associated asset. When fundings are received which relate to expense reimbursement they are recorded as a reduction of the associated expense in the period in which the expense is incurred. |
Research and development expenses and funding proceeds | Expenditures for research, development and engineering of products are expensed as incurred. The Company incurred research and development costs of $467,524 and $939,409 for the years ended December 31, 2017 and 2016, respectively. The Company accounts for proceeds received from government fundings for research as a reduction in research and development costs. The Company recorded proceeds against research and development expenses on the Statements of Operations of $150,912 and $510,675 for the years ended December 31, 2017 and 2016, respectively. |
Stock issuance costs | Stock issuance costs are recorded as a reduction of the related proceeds through a charge to stockholders deficit. |
Common stock | The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied. |
Revenue recognition | The Company recognizes revenue when the following criteria have been met: persuasive evidence of an arrangement exists, no significant Company obligations remain, collection of the related receivable is reasonably assured, and the fees are fixed or determinable. The Company acts as a principal in its revenue transactions as the Company is the primary obligor in the transactions. Generally, the Company recognizes revenue for its products upon shipment to customers, provided no significant obligations remain and collection is probable. In certain instances, the Companys ConsERV TM TM TM TM For the year ended December 31, 2017 and 2016, one customer, Multistack LLC, accounted for approximately 15% and 67% of the Companys sales revenue, respectively. At December 31, 2017 and 2016, amounts due from MultiStack were approximately 0% of total accounts receivable. No amounts were due from MultiStack at December 31, 2016 as a result of the termination of the license agreement between the Company and Multistack on December 8, 2016. See Note 11 for a discussion of Multistack LLC and the licensing agreement with MG Energy LLC. In December 2017, the Company and Zhejiang MENRED Environmental Tech Co, Ltd., Zhejiang Province, China (Menred), entered into a License and Supply Agreement (the Agreement), effective December 21, 2017. Pursuant to the Agreement, the Company licensed certain intellectual property and improvements to Menred, for use in the manufacture and sale of energy recovery ventilators (ERV) and certain other HVAC systems for installation in commercial, residential or industrial buildings in China. Menred also agreed to purchase its requirements of certain products from the Company for Menreds use, pursuant to the terms and conditions of the Agreement. Menred will also pay royalties, as defined, to the Company on a quarterly basis, based on price and production volume as provided by Menred. No royalties are due within the first year of the Agreement. Also pursuant to the Agreement, the Company is required to purchase 50,000 square meters of Product from Menred for delivery as an annual minimum with a 10,000 square meter minimum order quantity per delivery. The Agreement has a ten-year term with mutually agreed upon five year extensions. Revenue derived from the sale of licenses is deferred and recognized as license fee revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. The Company recognized license fee revenue of $1,344 and $1,653,847 for the years ended December 31, 2017 and 2016, respectively. Royalties are recognized as earned. The Company recognized royalty revenue of $0 and $71,667 for the years ended December 31, 2017 and 2016, respectively. The Company accounts for revenue arrangements with multiple elements under the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 605-25, Revenue Recognition-Multiple-Element Arrangements. In order to account for these agreements, the Company must identify the deliverables included within the agreement and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether the delivered element has stand-alone value to the licensee. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Shipping and handling fees billed to customers are included in revenue. Shipping and handling fees associated with freight are generally included in cost of revenue. |
Warranties | The Company offers a limited warranty generally ranging from one to three years, A provision for product warranties has been recorded at December 31, 2017 and 2016. The Company has not incurred any warranty expense in either 2017 or 2016. |
Stock based compensation | The Company recognizes all share-based payments to employees, including grants of employee stock options, as compensation expense in the financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period) or immediately if the share-based payments vest immediately. The value of each grant is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the years ended December 31, 2017 and 2016: Years Ended December 31, 2017 2016 Dividend rate 0 % 0 % Risk free interest rate 2.34 % 1.80 % Expected term 10 years 10 years Expected volatility 244 % 185 % The basis for the above assumptions are as follows: the dividend rate is based upon the Companys history of dividends; the risk-free interest rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant; the expected term was calculated based on the Companys historical pattern of options granted and the period of time they are expected to be outstanding; and expected volatility was calculated based upon historical trends in the Companys common stock for periods prior to the date the Companys trading information was available. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on historical experience of forfeitures, the Company estimated forfeitures at 0% for each of the years ended December 31, 2017 and 2016, respectively. |
Non-employee stock-based compensation | The Companys accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC 505-50 Equity-Based Payments to Non-Employees |
Financial instruments | The Company accounts for financial instruments in accordance with FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures The three levels of the fair value hierarchy are described below: · Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. · Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. · Level 3 - Inputs that are both significant to the fair value measurement and unobservable. |
Income taxes | Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Companys 2013 through 2016 tax years remain open and subject to examination by the Internal Revenue Service. |
Derivative Financial Instruments | The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Companys balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments and are evaluated and accounted for in accordance with the provisions of ASC 815. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether fair value of warrants issued is required to be classified as equity or as a derivative liability. Fair Value at December 31, Fair Value Measurement Using 2017 Level 1 Level 2 Level 3 Derivative liability $ 243,501 $ - $ - $ 243,501 The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows for the twelve months ended December 31, 2017: Balance at beginning of period $ - Additions to derivative instruments 1,043,283 Extinguished derivative liabilities (934,071 ) Gain on change in fair value of derivative liability 134,289 Balance at end of period $ 243,501 |
Earnings (loss) per share | Basic income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted income (loss) per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. Common share equivalents of 62,748,350 and 24,427,916 were excluded from the computation of diluted earnings per share for the years ended December 31, 2017 and 2016, respectively, because their effect is anti-dilutive. |
Recent Accounting Pronouncements | There are new accounting pronouncements issued by the Financial Accounting Standards Board (FASB) which are not yet effective as follows: In May 2017, the FASB issued ASU 2017-09, Compensation Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. If an award is not probable of vesting at the time a change is made, the new guidance clarifies that no new measurement date will be required if there is no change to the fair value, vesting conditions, and classification. This ASU will be applied prospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The Company does not expect this standard to have a material impact on its financial statements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. 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 currently evaluating the impact of the pending adoption of the new standard on its financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgement and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB voted to defer the effective date of ASU 2014-09 for all entities by one year. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its financial statements and has not yet determined the method by which it will adopt the standard in 2018. |
Reclassifications | Certain 2016 amounts have been reclassified to conform to the 2017 presentation with no impact on total stockholders deficit or net loss. |
Significant Accounting Polici23
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Significant Accounting Policies Tables | |
Stock based compensation | Years Ended December 31, 2017 2016 Dividend rate 0 % 0 % Risk free interest rate 2.34 % 1.80 % Expected term 10 years 10 years Expected volatility 244 % 185 % |
Derivative Financial Instruments | Fair Value at December 31, Fair Value Measurement Using 2017 Level 1 Level 2 Level 3 Derivative liability $ 243,501 $ - $ - $ 243,501 |
Reconciliation of derivative liability | Balance at beginning of period $ - Additions to derivative instruments 1,043,283 Extinguished derivative liabilities (934,071 ) Gain on change in fair value of derivative liability 134,289 Balance at end of period $ 243,501 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property And Equipment Tables | |
Property and Equipment | December 31, 2017 2016 Furniture and fixtures $ 20,966 $ 20,966 Computer equipment 21,761 21,761 Demonstration equipment 92,733 92,733 Office and lab equipment 318,649 316,412 Leasehold improvements 9,708 9,708 Property and equipment, gross 463,817 461,580 Less accumulated depreciation 371,917 330,577 Property and equipment, net $ 91,900 $ 131,003 |
Accrued Expenses, Other (Tables
Accrued Expenses, Other (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accrued Expenses Other Tables | |
Accrued Expenses | December 31, 2017 2016 Accrued expenses, other $ 254,123 $ 141,271 Accrued warranty costs 91,531 91,531 $ 345,654 $ 232,802 |
Convertible Notes Payable (Tabl
Convertible Notes Payable (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Convertible Notes Payable Tables | |
Convertible Notes Payable | December 31, 2017 December 31, 2016 Convertible notes payable, bearing interest at 8% $ 100,000 $ - Unamortized debt discount (91,667 ) - Unamortized deferred debt issuance cost (4,545 ) - Total 3,788 - Current portion $ 3,788 $ - |
Stock Options and Warrants (Tab
Stock Options and Warrants (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Stock Options And Warrants Tables | |
Outstanding stock options activity | Common Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at December 31, 2015 19,215,058 $ 0.28 9.29 $ 9,000 Granted 2,340,000 0.07 Forfeited or expired (2,712,500 ) 0.15 Outstanding at December 31, 2016 18,842,558 0.25 5.06 $ - Granted 10,150,000 0.04 Forfeited or expired (2,100,000 ) 0.14 Outstanding at December 31, 2017 26,892,558 $ 0.17 6.42 $ - Exercisable at December 31, 2017 26,892,588 $ 0.17 6.42 $ - |
Warrants outstanding | Number of Shares Weighted Average Remaining Life (Years) Weighted Average Exercise Price Warrants at December 31, 2015 14,624,396 0.74 $ 0.32 Granted - - - Forfeited or expired (9,039,038 ) - - Warrants at December 31, 2016 5,585,358 1.01 $ 0.34 Granted 26,250,000 9.70 0.01 Forfeited or expired (4,375,000 ) - - Warrants at December 31, 2017 27,460,358 9.29 $ 0.03 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes Tables | |
Deferred tax assets and deferred tax liabilities | 2017 2016 Deferred revenue $ 126,000 $ 2,000 Depreciation 6,000 8,000 Accrued compensation 432,000 386,000 Research and development credit 308,000 278,000 Accrued warranty 46,000 - Net operating loss carryforward 7,049,000 6,599,000 Valuation allowance (7,967,000 ) (7,296,000 ) $ - $ - |
Reconciliation of the federal statutory income tax rate | December 31, 2017 2016 Federal statutory income tax rate (35.0 )% (35.0 )% State income taxes, net of federal benefit (4.0 ) (4.0 ) Permanent differences 10.4 29.1 Change in valuation allowance 28.6 9.9 Provision for income taxes 0.0 % 0.0 % |
Background Information (Details
Background Information (Details Narrative) | 12 Months Ended |
Dec. 31, 2017 | |
Background Information Details Narrative | |
Date of incorporation | Apr. 30, 1993 |
State of incorporation | Florida |
Going Concern and Management'30
Going Concern and Management's Plans (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Going Concern And Managements Plans Details Narrative | |||
Net loss | $ (3,447,943) | $ (276,007) | |
Accumulated deficit | (47,112,429) | (43,664,486) | |
Stockholders' deficit | (4,165,451) | (2,167,684) | $ (1,891,971) |
Working capital deficit | (4,380,037) | ||
Cash and cash equivalents | 122,036 | 21,066 | $ 698,754 |
Net cash used by operating activities | $ (870,428) | $ (952,457) |
Significant Accounting Polici31
Significant Accounting Policies (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Significant Accounting Policies Details | ||
Dividend rate | 0.00% | 0.00% |
Risk free interest rate | 2.34% | 1.80% |
Expected term | 10 years | 10 years |
Expected volatility | 244.00% | 185.00% |
Significant Accounting Polici32
Significant Accounting Policies (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Derivative Liability | $ 243,501 | |
Level 1 [Member] | ||
Derivative Liability | ||
Level 2 [Member] | ||
Derivative Liability | ||
Level 3 [Member] | ||
Derivative Liability | $ 243,501 |
Significant Accounting Polici33
Significant Accounting Policies (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Significant Accounting Policies Details 2 | ||
Balance at beginning of period | ||
Additions to derivative instruments | 1,043,283 | |
Extinguished derivative liabilities | (934,071) | |
Gain on change in fair value of derivative liability | 134,289 | |
Balance at end of period | $ 243,501 |
Significant Accounting Polici34
Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Allowance for doubtful accounts | $ 0 | $ 3,647 |
Inventory raw materials | 85,173 | 72,059 |
Inventory in process | 9,211 | 4,159 |
Inventory finished goods | 7,223 | 1,381 |
Depreciation and amortization expense | $ 41,340 | 54,053 |
Patents estimated useful life | 17 years | |
Patent amortization expense | $ 19,449 | 22,055 |
Future amortization expense, 2018 | 12,000 | |
Future amortization expense, 2019 | 12,000 | |
Future amortization expense, 2020 | 12,000 | |
Future amortization expense, 2021 | 12,000 | |
Future amortization expense, 2022 | 12,000 | |
Future amortization expense, thereafter | 12,000 | |
Research and development costs | 467,524 | 939,409 |
Research and development expenses, net of government grant | 150,912 | 510,675 |
Accrued future warranty expenses | 91,531 | 91,531 |
Revenue recognition from license agreements | 1,344 | 1,653,847 |
Revenue recognition from royalties | $ 0 | $ 71,667 |
Common share excluded from diluted earnings per share | 62,748,350 | 24,427,916 |
Description for product warranty | In certain instances, the Companys ConsERV system product may carry a limited warranty of up to two years for all parts contained therein with the exception of the energy recovery ventilator core produced and sold by the Company. The distributor of the ConsERV system may carry a limited warranty of up to ten years | |
Leasehold Improvements [Member] | ||
Property and equipment estimated useful life | 5 years | |
Maximum [Member] | ||
Property and equipment estimated useful life | 7 years | |
Minimum [Member] | ||
Property and equipment estimated useful life | 3 years | |
One Customer [Member] | ||
Total revenue percentage | 15.00% | 67.00% |
Multistack LLC [Member] | One Customer [Member] | ||
Sales revenue percentage | 15.00% | 67.00% |
Accounts receivable percentage | 0.00% | 0.00% |
Intellectual property royalties' agreement description | The Company is required to purchase 50,000 square meters of Product from Menred for delivery as an annual minimum with a 10,000 square meter minimum order quantity per delivery. The Agreement has a ten-year term with mutually agreed upon five year extensions. |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Property And Equipment Details | ||
Furniture and fixtures | $ 20,966 | $ 20,966 |
Computer equipment | 21,761 | 21,761 |
Demonstration equipment | 92,733 | 92,733 |
Office and lab equipment | 318,649 | 316,412 |
Leasehold improvements | 9,708 | 9,708 |
Property and equipment, gross | 463,817 | 461,580 |
Less accumulated depreciation | 371,917 | 330,577 |
Property and equipment, net | $ 91,900 | $ 131,003 |
Accrued Expenses, Other (Detail
Accrued Expenses, Other (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Accrued Expenses Other Details | ||
Accrued expenses, other | $ 254,123 | $ 141,271 |
Accrued warranty costs | 91,531 | 91,531 |
Accrued Expenses | $ 345,654 | $ 232,802 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||||||||
Oct. 31, 2017 | Apr. 21, 2017 | Jun. 24, 2016 | Feb. 27, 2015 | Oct. 20, 2014 | Apr. 24, 2014 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Oct. 26, 2016 | |
Rent expense | $ 56,760 | $ 48,792 | ||||||||
Lease term description | The lease term will terminate upon 30 days' written notice from landlord or 90 days written termination from us. | |||||||||
Principal loan amount increased | $ 1,332,000 | $ 1,332,000 | ||||||||
Debt instrument maturity date | Oct. 31, 2018 | Apr. 21, 2020 | Apr. 10, 2018 | |||||||
Common stock shares issued | 140,608,645 | 121,300,077 | ||||||||
Common stock par value per share | $ 0.01 | $ 0.01 | ||||||||
License fee revenue | $ 49,167 | |||||||||
Issuance of common stock in lieu of cash payment to related party, Shares | 750,000 | |||||||||
Building [Member] | ||||||||||
Monthly rent expense | $ 4,066 | |||||||||
Chief Executive Officer [Member] | ||||||||||
Accrued compensation | $ 1,631,147 | $ 1,485,609 | ||||||||
Unpaid compensation conversion into common stock amount | $ 100,000 | 100,000 | ||||||||
Conversion rate of common stock description | The conversion rate shall be equal to 75% of the average closing price for the Company's common stock for the 30 trading days prior to the date of conversion. The Company shall also pay to Mr. Tangredi a cash payment equal to 20% of the compensation income incurred as a result of the conversion. | |||||||||
Royalty payments percentage | 1.50% | |||||||||
Accrued compensation, description | the unpaid compensation is greater than $500,000 | |||||||||
Equity ownership percentage | 52.00% | |||||||||
Chief Executive Officer [Member] | Class A Convertible Preferred Stock [Member] | ||||||||||
Common stock par value per share | $ 1.50 | |||||||||
Voting equity rate beneficial owner | 40.00% | |||||||||
Share Exchange Agreement [Member] | ||||||||||
Treasury stock recorded in China Operating Company | 190,000 | |||||||||
Loan And Security Agreement [Member] | ||||||||||
Senior secured Promissory Note | $ 150,000 | |||||||||
Senior secured interest rate | 12.00% | |||||||||
Senior secured minimum interest payment | $ 2,000 | |||||||||
Principal loan amount | $ 150,000 | |||||||||
Common stock shares issued | 200,000 | |||||||||
Security Agreement description | (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $1,000,000 or (ii) October 31, 2016. | |||||||||
Soex [Member] | Distribution Agreement [Member] | ||||||||||
Royalty payments paid | $ 500,000 | |||||||||
Purchased outstanding shares | 37,500,000 | |||||||||
Purchased issued and outstanding shares approximate percentage | 31.00% | |||||||||
Distribution agreement description | During 2014, $50,000 of the $500,000 license fee was received. Pursuant to the Distribution Agreement, Soex was required to pay the Company $500,000, issue the Company 25% of the equity of a newly-created company, Soex (Beijing) Environmental Protection Technology Company Limited and pay the Company royalties. Soex only paid the Company $50,000 of the required $500,000, did not issue the required equity and did not pay any required royalties. Effective June 12, 2015, the Companys Board of Directors ratified the termination of the Distribution Agreement, dated April 24, 2014, with Soex as a result of a breach of the Distribution Agreement by Soex. | |||||||||
Related Party [Member] | ||||||||||
Warrant issued | 26,250,000 | |||||||||
Exercise price | $ 0.01 | |||||||||
Exercise period | 10 years | |||||||||
Accrued interest | $ 102,059 | 13,618 | ||||||||
Interest expense | $ 88,441 | $ 13,618 | ||||||||
Issuance of common stock in lieu of cash payment to related party, Shares | 480,000 | |||||||||
Synpower [Member] | Share Exchange Agreement [Member] | ||||||||||
Common stock shares issued | 1,000,000 | |||||||||
Equity ownership percentage | 62.00% | |||||||||
Issuance of common stock for Investment in China Operating Company, Per Shares | $ 0.19 |
Equity Transactions (Details Na
Equity Transactions (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |||
Nov. 30, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 30, 2016 | Oct. 26, 2016 | |
Common stock par value | $ 0.01 | $ 0.01 | |||
Common stock shares issued | 140,608,645 | 121,300,077 | |||
Common stock shares authorized | 240,000,000 | 240,000,000 | |||
Preferred stock shares authorized | 10,000,000 | 10,000,000 | |||
Preferred stock, par value | $ 0.01 | $ 0.01 | |||
Issue shares | $ 120,000 | ||||
Common stock, value | 1,406,087 | $ 1,213,001 | |||
Issuance of warrants for debt modification | 467,010 | ||||
Due to related party | $ 104,543 | $ 61,986 | |||
Consultants [Member] | |||||
Common stock par value | $ 0.01 | ||||
Common stock shares issued | 15,050,000 | 300,000 | |||
Common stock, value | $ 490,500 | ||||
Consultants [Member] | Restricted Stock [Member] | |||||
Issue shares | $ 15,000 | ||||
Loan And Security Agreement [Member] | |||||
Common stock shares issued | 200,000 | ||||
Common stock, value | $ 8,000 | ||||
Common Stock | |||||
Issue shares | $ 30,286 | ||||
Common Stock | Loan And Security Agreement [Member] | |||||
Common stock shares issued | 480,000 | ||||
Common stock, value | $ 17,200 | ||||
Due to related party | $ 15,400 | ||||
Legal services [Member] | |||||
Common stock shares issued | 3,028,568 | ||||
Common stock, value | $ 120,000 | ||||
Debt issue costs [Member] | |||||
Common stock shares issued | 750,000 | ||||
Common stock, value | $ 22,500 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Convertible Notes Payable Details | ||
Convertible notes payable, bearing interest at 8% | $ 100,000 | |
Unamortized debt discount | 91,667 | |
Unamortized deferred debt issuance cost | 4,545 | |
Total | 3,788 | |
Long term portion | $ 3,788 |
Convertible Notes Payable (De40
Convertible Notes Payable (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||||
Oct. 31, 2017 | May 17, 2017 | May 17, 2017 | Apr. 21, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Convertible notes payable | $ 100,000 | $ 100,000 | ||||
Common stock price per share | $ 0.03 | |||||
Maturity date of convertible notes payable | Oct. 31, 2018 | Apr. 21, 2020 | Apr. 10, 2018 | |||
Amortization of deferred debt issue costs | $ 24,675 | $ 10,000 | $ 11,021 | |||
Note related costs | 27,500 | |||||
Legal costs | $ 5,000 | 11,750 | 5,000 | |||
Commitment fee | $ 22,500 | |||||
Common stock shares issued for services, shares | 750,000 | |||||
Common stock shares issued for services, value | $ 22,500 | |||||
Description of conversion price | The note and related accrued interest are convertible, at the option of the holder, into shares of the Companys common stock at a conversion price of 60% of the lowest trading price for 15 days prior to conversion. | |||||
Interest rate | 8.00% | |||||
Debt discount | $ 100,000 | 246,750 | $ 90,000 | |||
Amortized debt discount | 170,633 | |||||
Gain on extinguishment of debt | 696,261 | |||||
Unamortized debt discount and debt costs | 209,125 | |||||
Debt discount charged against gain on extinguishment of debt | 28,684 | |||||
Unamortized debt discount | 91,667 | |||||
Unamortized deferred debt issuance cost | $ 4,545 | |||||
Convertible Notes [Member] | ||||||
Convertible notes payable | $ 135,712 | $ 135,712 | ||||
Maturity date of convertible notes payable | May 17, 2018 | |||||
Description of conversion price | The notes and related accrued interest are convertible, at the option of the holders, into shares of the Companys common stock at a conversion price of 60% of the lowest trading price for 15 days prior to conversion. | |||||
Interest rate | 8.00% | 8.00% | ||||
Convertible Notes Payable One [Member] | ||||||
Convertible notes payable | $ 135,712 | $ 135,712 | ||||
Maturity date of convertible notes payable | May 17, 2018 | |||||
Description of conversion price | The notes and related accrued interest are convertible, at the option of the holders, into shares of the Companys common stock at a conversion price of 60% of the lowest trading price for 15 days prior to conversion. | |||||
Interest rate | 8.00% | 8.00% |
Derivative Liabilities (Details
Derivative Liabilities (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Debt discount | $ 170,633 | |
Interest expense | 1,554,803 | $ 43,299 |
October 2017 Note One [Member] | ||
Fair value of the embedded derivative | $ 243,501 | |
Risk free interest rate | 1.65% | |
Dividend yield | 0.00% | |
Volatility | 423.00% | |
Expected life | 10 months | |
Change in the fair value of the derivative | $ 82,726 | |
October 2017 Note [Member] | ||
Fair value of the embedded derivative | $ 324,426 | |
Risk free interest rate | 1.61% | |
Dividend yield | 0.00% | |
Volatility | 407.00% | |
Expected life | 11 months | |
Debt discount | $ 100,000 | |
Interest expense | 1,801 | |
Non cash interest expense | 224,426 | |
May 2017 Note One [Member] | ||
Fair value of the embedded derivative | $ 834,550 | |
Risk free interest rate | 1.46% | |
Dividend yield | 0.00% | |
Volatility | 345.00% | |
Expected life | 6 months | |
Change in the fair value of the derivative | $ 216,601 | |
May 2017 Note [Member] | ||
Fair value of the embedded derivative | $ 597,160 | |
Risk free interest rate | 1.171% | |
Dividend yield | 0.00% | |
Volatility | 486.00% | |
Expected life | 1 year | |
Debt discount | $ 246,750 | |
Interest expense | 20,789 | |
Non cash interest expense | 350,410 | |
April 2017 Note [Member] | ||
Fair value of the embedded derivative | $ 99,106 | |
Risk free interest rate | 1.50% | |
Dividend yield | 0.00% | |
Volatility | 301.00% | |
Expected life | 3 years | |
Debt discount | $ 90,000 | |
Interest expense | 9,106 | |
April 2017 Note One [Member] | ||
Fair value of the embedded derivative | $ 99,520 | |
Risk free interest rate | 1.64% | |
Dividend yield | 0.00% | |
Volatility | 356.00% | |
Expected life | 2 years 6 months | |
Change in the fair value of the derivative | $ 414 |
Stock Options and Warrants (De
Stock Options and Warrants (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Weighted average exercise price of shares granted | $ 0.04 | $ 0.07 |
Option [Member] | ||
Outstanding, beginning balance | 18,842,558 | 19,215,058 |
Stock options granted | 10,150,000 | 2,340,000 |
Stock options expired/forfeited | (2,100,000) | (2,712,500) |
Outstanding, ending balance | 26,892,558 | 18,842,558 |
Exercisable, ending balance | 26,892,588 | |
Weighted average exercise price of shares outstanding, beginning balance | $ 0.25 | $ 0.28 |
Weighted average exercise price of shares granted | 0.04 | 0.07 |
Weighted average exercise price of shares expired/forfeited | 0.14 | 0.15 |
Weighted average exercise price of shares outstanding, ending balance | 0.17 | $ 0.25 |
Weighted average exercise price of shares exercisable, ending balance | $ 0.17 | |
Weighted average remaining contractual term (in years) of shares outstanding, beginning balance | 5 years 22 days | 9 years 3 months 15 days |
Weighted average remaining contractual term (in years) of shares outstanding, ending balance | 6 years 5 months 1 day | 5 years 22 days |
Weighted average remaining contractual term (in years) of shares exercisable, ending balance | 6 years 5 months 1 day | |
Aggregate intrinsic value of shares outstanding, Beginning Balance | $ 9,000 | |
Aggregate intrinsic value of shares outstanding, Ending Balance | ||
Aggregate intrinsic value of shares exercisable |
Stock Options and Warrants (Det
Stock Options and Warrants (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Weighted average exercise price of granted | $ 0.04 | $ 0.07 |
Warrant [Member] | ||
Outstanding, beginning balance | 5,585,358 | 14,624,396 |
Common shares granted | 26,250,000 | |
Common shares expired/forfeited | (4,375,000) | (9,039,038) |
Outstanding, ending balance | 27,460,358 | 5,585,358 |
Weighted average remaining contractual term (in years) of shares outstanding, begining balance | 1 year 4 days | 8 months 26 days |
Weighted average remaining contractual term (in years) of shares granted | 9 years 8 months 12 days | |
Weighted average remaining contractual term (in years) of shares outstanding, ending balance | 9 years 3 months 15 days | 1 year 4 days |
Weighted average exercise price of shares outstanding, beginning balance | $ 0.34 | $ 0.32 |
Weighted average exercise price of granted | 0.01 | |
Weighted average exercise price of shares outstanding, ending balance | $ 0.03 | $ 0.34 |
Stock Options and Warrants (D44
Stock Options and Warrants (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Weighted average exercise price of shares granted | $ 0.04 | $ 0.07 |
Common stock shares issued | 140,608,645 | 121,300,077 |
Stock based compensation | $ 332,966 | $ 163,294 |
Risk-free interest rate | 2.34% | 1.80% |
Expected life in years | 10 years | 10 years |
Dividend yield | 0.00% | 0.00% |
Expected volatility | 244.00% | 185.00% |
2000 Plan [Member] | ||
Common stock shares issued | 11,093,886 | |
2009 Plan [Member] | ||
Common stock shares issued | 15,000,000 | |
2015 Plan [Member] | ||
Common stock reserved for future issuance | 10,000,000 | |
Consultants [Member] | ||
Stock options issued | $ 0 | $ 50,000 |
Compensation expense for stock options recognized | 3,489 | |
Stock based compensation | $ 163,294 | |
Minimum [Member] | ||
Risk-free interest rate | 2.24% | |
Expected volatility | 185.00% | |
Maximum [Member] | ||
Risk-free interest rate | 2.34% | |
Expected volatility | 244.00% | |
Options [Member] | ||
Exercise Price | $ 0.04 | $ 0.07 |
Deferred Revenue (Details Narra
Deferred Revenue (Details Narrative) - USD ($) | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Oct. 30, 2012 | |
License revenue | $ 1,344 | $ 1,653,848 | ||
Deferred revenue | 498,656 | 0 | ||
Royalty revenue | $ 0 | $ 71,667 | ||
Soex [Member] | ||||
License revenue | $ 49,167 | |||
Zhejiang Province [Member] | ||||
License and supply agreement description | The Company is required to purchase 50,000 square meters of Product from Menred for delivery as an annual minimum with a 10,000 square meter minimum order quantity per delivery. The Agreement has a ten-year term with mutually agreed upon five year extensions. | |||
MG Energy LLC [Member] | ||||
Cancellation of related party debt | $ 2,034,521 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | Jul. 08, 2015 | Dec. 24, 2015 | Feb. 27, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Apr. 24, 2014 |
Treasury Stock | $ 1,462,112 | $ 1,462,112 | ||||||
Soex [Member] | ||||||||
Litigation | ||||||||
Cancellation of share issued | 37,500,000 | |||||||
Royalty received | $ 500,000 | |||||||
Payment received | $ 50,000 | |||||||
Payment due date | Oct. 20, 2014 | |||||||
Failure to make payment, amount | $ 225,000 | |||||||
Percentage of equity default | 25.00% | |||||||
Zan [Member] | ||||||||
Litigation | ||||||||
Cancellation of share issued | 37,500,000 | |||||||
Failure to make payment, amount | $ 225,000 | |||||||
Employment Agreement [Member] | Soex [Member] | ||||||||
Litigation | ||||||||
Percentage of equity default | 25.00% | |||||||
Remaining balance to pay | $ 450,000 | |||||||
Interest rate per month | 1.50% | |||||||
Interest rate per year | 18.00% | |||||||
Synpower [Member] | Exchange Agreement [Member] | ||||||||
Issuance of common stock | 1,000,000 | |||||||
Issuance of common stock per shares | $ 0.19 | |||||||
Ownership percentage | 62.00% | |||||||
Treasury Stock | $ 190,000 | |||||||
Tangredi [Member] | Employment Agreement [Member] | ||||||||
Base salary | $ 200,000 | |||||||
Date of agreement | Sep. 14, 2011 | |||||||
Percentage of upper limit increment in base salary per year | 50.00% | |||||||
Annual bonus description | Eligible for an annual bonus, if any, of up to 100% of his then-effective base salary. | |||||||
Term of agreement | 3 Years | |||||||
Option granted to purchase | 520,000 | |||||||
Employment termination description | Shall be entitled an amount equal to the sum of (A) the greater of 150% of the base salary then in effect or $320,000 plus (B) the cash bonus and/or merit bonus, if any, awarded for the most recent year. | |||||||
Amount as cash bonus | $ 320,000 | |||||||
Conditional base salary addition to accrued sums owed | 210,000 | |||||||
Upper limit of compensation | $ 500,000 | |||||||
Unpaid compensation if upper limit reaches | $ 100,000 | |||||||
Conversion rate | 75.00% | |||||||
Number of trading days | 30 days | |||||||
Percentage of cash payment on compensation income incurred | 20.00% | |||||||
Class A Convertible Preferred Stock | $ 1.50 | |||||||
Voting equity interests | 40.00% | |||||||
Board of Directors [Member] | Employment Agreement [Member] | ||||||||
Unpaid compensation if upper limit reaches | $ 100,000 | $ 100,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Taxes Details | ||
Deferred revenue | $ 126,000 | $ 2,000 |
Depreciation | 6,000 | 8,000 |
Accrued compensation | 432,000 | 386,000 |
Research and development credit | 308,000 | 278,000 |
Accrued warranty | 46,000 | |
Net operating loss carryforward | 7,049,000 | 6,599,000 |
Valuation allowance | (7,967,000) | (7,296,000) |
Deferred tax assets and liabilities |
Income Taxes (Details 1)
Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details 1 | ||
Federal statutory income tax rate | (35.00%) | (35.00%) |
State income taxes, net of federal benefit | (4.00%) | (4.00%) |
Permanent differences | 10.40% | 29.10% |
Change in valuation allowance | 28.60% | 9.90% |
Provision for income taxes | 0.00% | 0.00% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details Narrative | ||
Net operating loss carry-forward | $ 27,900,000 | |
Net operating loss carry-forward expire | through 2,037 | |
Change in valuation allowance | $ 671,000 | $ 56,000 |
Research and development tax credits | $ 308,000 | $ 278,000 |
Deferred tax benefits valuation allowance | 100.00% | |
Current federal income tax rate, Description | The Act, among other items, reduces the current federal income tax rate to 21% from 35%. The rate reduction is effective January 1, 2018, and is permanent. | |
Net deferred tax assets | $ 4,126,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Mar. 12, 2018 | Feb. 07, 2018 | Mar. 19, 2018 | Oct. 31, 2017 | May 17, 2017 | May 17, 2017 | Apr. 21, 2017 | Dec. 31, 2017 | Dec. 31, 2016 |
Description of conversion price | The note and related accrued interest are convertible, at the option of the holder, into shares of the Companys common stock at a conversion price of 60% of the lowest trading price for 15 days prior to conversion. | ||||||||
Maturity Date | Oct. 31, 2018 | Apr. 21, 2020 | Apr. 10, 2018 | ||||||
Amortized original issue discount | $ 24,675 | $ 10,000 | $ 11,021 | ||||||
Legal costs | $ 5,000 | $ 11,750 | $ 5,000 | ||||||
Common stock, shares issued | 140,608,645 | 121,300,077 | |||||||
Convertible Notes [Member] | |||||||||
Description of conversion price | The notes and related accrued interest are convertible, at the option of the holders, into shares of the Companys common stock at a conversion price of 60% of the lowest trading price for 15 days prior to conversion. | ||||||||
Maturity Date | May 17, 2018 | ||||||||
Subsequent Event [Member] | |||||||||
Description of conversion price | common stock at a conversion price of $0.15 per share. | common stock at a conversion price of 60% of the lowest trading price for 15 days prior to conversion | |||||||
Interest rate | 10.00% | 8.00% | |||||||
Maturity Date | Feb. 7, 2019 | ||||||||
Maturity term | 6 months | ||||||||
Amortized original issue discount | $ 20,000 | $ 17,500 | |||||||
Legal costs | 6,000 | 7,500 | |||||||
Maturity date of note description | the earlier of (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $1,000,000 or (ii) April 10, 2018. | ||||||||
Common stock, shares issued | 20,000 | ||||||||
Proceeds from Issuance of Common Stock | 80,000 | 157,500 | |||||||
Subsequent Event [Member] | Convertible Notes One [Member] | |||||||||
Debt instrument, face amount | 87,500 | ||||||||
Subsequent Event [Member] | Convertible Notes Two [Member] | |||||||||
Debt instrument, face amount | $ 87,500 | ||||||||
Subsequent Event [Member] | Convertible Notes [Member] | |||||||||
Debt instrument, face amount | $ 100,000 |