Document_And_Entity_Informatio
Document And Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 14-May-14 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'TURBINE TRUCK ENGINES INC | ' |
Entity Central Index Key | '0001138978 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
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 Common Stock, Shares Outstanding | ' | 328,581,880 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
Balance_Sheets
Balance Sheets (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
CURRENT ASSETS: | ' | ' |
Cash | $12,235 | $3,423 |
Prepaid expenses | 34,021 | 55,786 |
Deposit | 237,414 | 285,799 |
Total Current Assets | 283,670 | 345,008 |
Furniture and equipment, net of accumulated depreciation of $58,415 (2014) and $57,208 (2013) | 11,504 | 12,711 |
TOTAL ASSETS | 295,174 | 357,719 |
CURRENT LIABILITIES: | ' | ' |
Accounts payable, including related party payables of $11,920 (2014) and $12,220 (2013) | 133,697 | 146,143 |
Accrued interest | 29,918 | 24,241 |
Accrued payroll taxes | 1,871 | 1,871 |
Convertible notes, net | ' | 10,356 |
Note payable | 226,178 | 375,136 |
Total Current Liabilities | 391,664 | 557,747 |
LONG-TERM LIABILITIES: | ' | ' |
Derivative liability | ' | 6,702 |
Accrued expenses - long term | 73,750 | 67,500 |
Accrued payroll - long term | 503,338 | 503,696 |
Accrued royalty fees | 56,250 | 50,000 |
Note payable | 192,168 | 116,610 |
Note payable to related party | 3,331 | 3,331 |
Total Long-Term Liabilities | 828,837 | 747,839 |
STOCKHOLDERS' DEFICIT | ' | ' |
Series A Convertible Preferred Stock; $0.001 par value; 1,000,000 shares authorized; 500,000 (2014) and 500,000 (2013) shares issued and outstanding | 500 | 500 |
Common stock; $0.001 par value; 499,000,000 shares authorized; 277,098,047 (2014) and 268,465,696 (2013) shares issued and outstanding | 277,099 | 268,464 |
Additional paid in capital | 18,399,173 | 18,329,773 |
Common stock payable | 337,067 | 342,067 |
Prepaid consulting services paid with common stock | -32,882 | -37,993 |
Receivable for common stock | -212,000 | -212,000 |
Deferred noncash offering costs | -1,154,326 | -1,219,598 |
Accumulated other comprehensive income | 25,014 | ' |
Deficit accumulated during development stage | -18,564,972 | -18,419,080 |
Total Stockholders' Deficit | -925,327 | -947,867 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $295,174 | $357,719 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
CURRENT ASSETS: | ' | ' |
Furniture and equipment, accumulated depreciation (in dollars) | $58,415 | $57,208 |
CURRENT LIABILITIES: | ' | ' |
Related party payables, included in accounts payable (in dollars) | $11,920 | $12,220 |
STOCKHOLDERS' DEFICIT | ' | ' |
Series A convertible preferred stock, par value (in dollars per share) | $0.00 | $0.00 |
Series A convertible preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Series A Convertible Preferred stock, shares issued | 500,000 | 500,000 |
Series A Convertible Preferred stock, shares outstanding | 500,000 | 500,000 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 499,000,000 | 499,000,000 |
Common stock, shares issued | 277,098,047 | 268,465,696 |
Common stock, shares outstanding | 277,098,047 | 268,465,696 |
Statements_of_Comprehensive_Lo
Statements of Comprehensive Loss (Unaudited) (USD $) | 3 Months Ended | 160 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Statements Of Comprehensive Loss | ' | ' | ' |
Research and development costs | ' | ' | $3,882,494 |
Operating costs | 48,050 | 100,902 | 13,186,654 |
Total operating costs and expenses | 48,050 | 100,902 | 17,069,148 |
OTHER EXPENSE | ' | ' | ' |
Change in fair value of derivative liability | 5,129 | 79,975 | 118,420 |
Loss on investment | ' | ' | 197,500 |
Interest expense | 92,713 | 61,675 | 1,179,904 |
TOTAL OTHER EXPENSE | 97,842 | 141,650 | 1,495,824 |
NET LOSS | -145,892 | -242,552 | -18,564,972 |
Unrealized gain on translation | -25,014 | ' | -25,014 |
COMPREHENSIVE LOSS | ($120,878) | ($242,552) | ($18,539,958) |
NET LOSS PER COMMON SHARE, BASIC | ' | ' | ($0.48) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC | 272,373,029 | 73,678,138 | 38,610,462 |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | 160 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' | ' |
Net loss | ($145,892) | ($242,552) | ($18,564,972) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' | ' |
Common stock and long-term debt issued for acquisition of license agreement | ' | ' | 2,735,649 |
Common stock issued for services and amortization of common stock issued for services | 5,112 | 7,103 | 5,423,087 |
Loss on deposit | ' | ' | 197,500 |
Contribution from shareholder | ' | ' | 188,706 |
Unrealized loss (gain) on derivative liability | 5,129 | 79,975 | 120,164 |
Amortization of beneficial conversion feature | ' | ' | 539,876 |
Amortization of deferred loan costs | ' | ' | 24,750 |
Amortization of deferred offering costs | 65,272 | ' | 169,254 |
Write off of deferred offering costs | ' | ' | 119,383 |
Write off of deferred non cash offering costs | ' | ' | 49,120 |
Gain on disposal of fixed assets | ' | ' | -1,965 |
Depreciation | 1,207 | 1,206 | 61,498 |
Amortization of agency fee | ' | ' | 100,000 |
Amortization of discount on notes payable | ' | 36,704 | 296,258 |
Decrease (increase) in prepaid expenses | 21,763 | 2,322 | 53,039 |
Increase (decrease) in: | ' | ' | ' |
Accounts payable | -12,446 | 1,966 | 342,535 |
Accrued expenses | 4,379 | 6,250 | 306,285 |
Accrued payroll | 1,513 | 31,163 | 857,365 |
Accrued royalty fees | 6,250 | 6,250 | 1,774,417 |
Accrued interest | 5,677 | 20,322 | 35,018 |
Net cash used by operating activities | -42,037 | -49,281 | -5,173,034 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' | ' |
Payment of agency fee rights | ' | ' | -100,000 |
Issuance of notes receivable from stockholders | ' | ' | -23,000 |
Deposit for Global Hydrogen Energy Corp. | ' | ' | -197,500 |
Repayment of notes receivable from stockholders | ' | ' | 22,095 |
Advances to related party | ' | ' | 805 |
Proceeds from sale of fixed assets | ' | ' | 2,500 |
Purchase of fixed assets | ' | ' | -68,538 |
Net cash used by investing activities | ' | ' | -363,638 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' | ' |
Repayment of stockholder advances | ' | ' | -162,084 |
Advances from stockholders | ' | ' | 272,582 |
Increase in deferred offering costs | ' | ' | -194,534 |
Proceeds from issuance of common stock | 50,849 | 35,000 | 4,440,758 |
Proceeds from exercise of options | ' | ' | 45,000 |
Debt issuance costs | ' | ' | -19,750 |
Repayment of convertible notes payable | ' | ' | -66,200 |
Proceeds from issuance of notes payable | ' | ' | 118,385 |
Proceeds from issuance of convertible notes payable | ' | 32,500 | 1,114,750 |
Net cash provided by financing activities | 50,849 | 67,500 | 5,548,907 |
Net (decrease) increase in cash | 8,812 | 18,219 | 12,235 |
Cash, beginning of period | 3,423 | 6,293 | ' |
Cash, end of period | 12,235 | 24,512 | 12,235 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ' | ' | ' |
Cash paid for interest | 322 | ' | 55,903 |
NON-CASH FINANCING AND INVESTING ACTIVITIES: | ' | ' | ' |
Subscription receivable for issuance of common stock | ' | 10,000 | 29,090 |
Option to acquire license for issuance of common stock | ' | ' | 10,000 |
Deferred offering costs netted against issuance of common stock under private placement | ' | ' | 33,774 |
Deferred offering costs netted against issuance of common stock | ' | ' | 41,735 |
Value of beneficial conversion feature of notes payable | ' | ' | 19,507 |
Deferred non-cash offering costs in connection with private placement | ' | ' | 74,850 |
Application of amount due from shareholder against related party debt | ' | ' | 8,099 |
Amortization of offering costs related to stock for services | ' | ' | 25,730 |
Settlement of notes payable in exchange for prepaid services | ' | ' | 356,466 |
Common stock issued in exchange for prepaid services | ' | 5,400 | 2,460,064 |
Common stock issued in exchange for accrued royalties | ' | ' | 1,718,167 |
Common stock issued for accruals | ' | ' | 206,750 |
Receivable issued for exercise of common stock options | ' | ' | 367,000 |
Common stock issued in exchange for fixed assets | ' | ' | 5,000 |
Acquisition of agency fee intangible through accrued expenses | ' | ' | 900,000 |
Beneficial conversion feature on convertible notes | ' | ' | 531,561 |
Conversion of convertible debt to equity (65,562,422 shares since inception) | 10,356 | ' | 937,373 |
Conversion of convertible debt to equity (3,303,437 shares since inception) | ' | 33,850 | 66,500 |
Common stock issued for accounts payable | ' | ' | 208,838 |
Common stock issued for accrued payroll | ' | ' | 15,000 |
Preferred stock issued for accrued payroll | ' | ' | 335,285 |
Common stock payable for prepaid services | ' | ' | 245,000 |
Issuance of common stock to employees | ' | ' | 274,000 |
Common stock issued for accrued expenses | ' | ' | 29,400 |
Derivative liability and debt discount | ' | 32,500 | 275,070 |
Write off uncollectible stock subscription receivable | ' | ' | 155,000 |
Write off of intangible asset and agency fee payable | ' | ' | 900,000 |
Conversion of accrued interest to common stock | ' | 1,667 | 5,100 |
Construction in process financed with a note payable | ' | ' | 285,799 |
Deferred loan costs paid with common stock | ' | ' | 992,913 |
Deferred loan costs paid with common stock payable | ' | ' | 330,667 |
Common stock issued to extinguish derivative liability | 11,832 | 37,544 | 376,562 |
Prepaid Interest Reserve | ' | ' | 87,062 |
Settlement of notes payable with refund of deposits | 48,385 | ' | 48,385 |
Foreign currency translation adjustment | $25,014 | ' | $25,014 |
Statements_of_Cash_Flows_Paren
Statements of Cash Flows (Parenthetical) (Unaudited) | 160 Months Ended |
Mar. 31, 2014 | |
Statements Of Cash Flows Parenthetical | ' |
Conversion of convertible debt to equity (in shares) | 65,562,422 |
Conversion of convertible debt to equity (in shares) | 3,303,437 |
Background_Information
Background Information | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
1. Background Information | ' |
Turbine Truck Engines, Inc. (the “Company”) is a development stage enterprise that was incorporated in the state of Delaware on November 27, 2000, and converted to a Nevada corporation in 2008. To date, the Company’s activities have been limited to raising capital, organizational matters, and the structuring of its business plan. The corporate headquarters is located in Paisley, Florida. | |
We are currently working on the development of three (3) separate revolutionary technologies: (a) Detonation Cycle Gas Turbine Engine (DCGT); (b) Hydrogen Production Burner System (HPBS); and (c) the Gas To Methanol Technology (GTM) | |
Effective August 29, 2013, the Company amended its Articles of Incorporation filed with the Nevada Secretary of State, to reflect the Board of Directors adoption of a resolution, consented to by those holding a majority of the common shareholder votes, which increased the authorized common stock of the company to 499,000,000 shares of common stock, having a par value of $0.001. | |
Financial_Statements
Financial Statements | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
2. Financial Statements | ' |
In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three month periods ended March 31, 2014 and 2013 and the period November 27, 2000 (Date of Inception) through March 31, 2014, (b) the financial position at March 31, 2014 and December 31, 2013, and (c) cash flows for the three month periods ended March 31, 2014 and 2013, and the period November 27, 2000 (Date of Inception) through March 31, 2014, have been made. | |
The unaudited financial statements and notes are presented as permitted by Form 10-Q. Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The accompanying financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended December 31, 2013. The results of operations for the three month period ended March 31, 2014 are not necessarily indicative of those to be expected for the entire year. | |
Going_Concern
Going Concern | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
3. Going Concern | ' |
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ended March 31, 2014 and since November 27, 2000 (date of inception) through March 31, 2014, the Company had a net loss of $145,892 and $18,564,972, respectively. As of March 31, 2014, the Company has not emerged from the development stage and has a working capital deficit of $107,994. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to begin operations and to achieve a level of profitability. Since inception, the Company has financed its activities principally from the sale of public equity securities. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes and proceeds from sub-licensing agreements until such time that funds provided by operations are sufficient to fund working capital requirements. 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_Policie
Significant Accounting Policies | 3 Months Ended | ||
Mar. 31, 2014 | |||
Notes to Financial Statements | ' | ||
4. Significant Accounting Policies | ' | ||
The significant accounting policies followed are: | |||
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. | |||
Cash is maintained at financial institutions and, at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances. All of our non-interest bearing cash balances were fully insured at March 31, 2014 and December 31, 2013. Insurance coverage was $250,000 per depositor at each financial institution, and our non-interest bearing cash balances may again exceed federally insured limits. At March 31, 2014 and December 31, 2013, there were no amounts held in interest bearing accounts. | |||
The Company’s financial instruments include cash, accounts payable, accrued liabilities and notes payable. The carrying amounts of cash, accounts payable and accrued liabilities approximate their fair value, due to the short-term nature of these items. The carrying amount of notes payable approximates their fair value due to the use of market rates of interest and maturity schedules for similar issues. The derivative liability is recorded at fair value (see Note 7). | |||
Furniture and equipment are recorded at cost and depreciated on a declining balance and straight-line basis over their estimated useful lives, principally two to seven years. Accelerated methods are used for tax depreciation. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When furniture and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. | |||
The Company evaluates the recoverability of its long-lived assets or asset groups whenever adverse events or changes in business climate indicate that the expected undiscounted future cash flows from the related assets may be less than previously anticipated. If the net book value of the related assets exceed the undiscounted future cash flows of the assets, the carrying amount would be reduced to the present value of their expected future cash flows and an impairment loss would be recognized. There have been no impairment losses in any of the periods presented. | |||
Research and development costs are charged to operations when incurred and are included in operating expenses. The amounts charged for the three months ended March 31, 2014 and 2013 and the period November 27, 2000 (date of inception) to March 31, 2014 amounted to $0, $0 and $3,882,494, respectively. | |||
Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending on the classification of the assets or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. | |||
The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10), January 1, 2007. The Company has not recognized a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there are no unrecognized benefits at March 31, 2014 and December 31, 2013 and since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. 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 Company entered into various loan agreements with a Canadian company. In accordance with the loan agreements, the Company issued shares of common stock to the Canadian company as additional costs in obtaining the financing. These shares have been accounted for as contra-equity deferred non-cash offering issuance costs and they are being amortized as interest expense over the life of the notes which are five years. Foreign currency translation gains and losses, when material, have been recorded as other comprehensive income. | |||
Basic loss per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding and dilutive options outstanding during the year. Common stock equivalents for the three months ended March 31, 2014 and 2013 were anti-dilutive due to the net losses sustained by the Company during these periods. For the three months ended March 31, 2014 and 2013 potentially dilutive common stock options and warrants of 6,655,413 and 5,405,413 have been excluded from dilutive earnings per share due to the Company’s losses in all periods presented. Additionally, potential common shares from convertible preferred stock are excluded from the computation of diluted earnings per share of 500,000 shares. | |||
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). | |||
The Company issues common stock and common stock options and warrants to consultants for various services. For these transactions, the Company follows the guidance in FASB ASC Topic 505. Costs for these transactions are measured at the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measureable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instrument is reached or (ii) the date at which the counterparty’s performance is complete. | |||
In September 2006, the Financial Accounting Standards Board (FASB) introduced a framework for measuring fair value and expanded required disclosure about fair value measurements of assets and liabilities. The Company adopted the standard for those financial assets and liabilities as of the beginning of the 2008 fiscal year and the impact of adoption was not significant. FASB Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). 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. | ||
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, accrued compensation and accrued expenses. The Company had a derivative liability at December 31, 2013 associated with an embedded conversion option that was included as a level 2 input. | |||
Recent accounting pronouncements | |||
Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company’s financial statements. |
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
5. Commitments and Contingencies | ' |
The Company leased its corporate headquarters on a month-to-month basis. For each of the three months ended March 31, 2014 and 2013, rent expense was approximately $6,250 and $6,250, respectively. | |
In January 2013, the Company entered into employment agreements with terms that commence on January 1, 2013 and run through December 31, 2013. These agreements have a cumulative annual salary of approximately $104,000 annually and cumulative grants of fully vested stock issuances of 450,000 shares of stock. At the January 1, 2013 grant date, the Company recognized approximately $1,350 in stock-based compensation related to the above grants of common stock made during 2013. Additionally, the employees were entitled to receive a bonus of 1,250,000 common stock options, with an exercise price of $0.05 per share, and expire five years from the date of grant. The grants of common stock and common stock options were essentially sign-on bonuses, and accordingly, the grant-date fair values were recognized as compensation expense at the January 1, 2013. These employment agreements were not renewed upon their expiration on December 31, 2013. | |
On January 23, 2013 the Company entered into a Letter of Intent with BluGen, Inc., a California corporation (“BluGen”) for the purpose of setting the basis for the joint development of a natural gas to Methanol technology (“GTM Technology”). Under the terms of the Agreement, BluGen will work with TTE, and the inventor, Robert Scragg to recreate and expand upon the original designs created by Mr. Scragg and to re-develop a lab version and control system, among other things. These items are to be completed under a timetable that has been agreed upon by the parties. The Parties have agreed to establish at a later date, a joint venture, wherein the Company will have a 15% interest and BluGen will have a 49% interest, and into which the commercial application of the technology will be developed. There has been no activity at the date of this filing. | |
On May 28, 2013, the Company entered into Lease Agreement dated with Fujian Xinchang Leather Company Limited, a Chinese company (“Fujian”), whose address is Jinjiang City, Fujian, China Ying Lin Zhenxin Chang Industrial Park (the “Plant”) for the lease of a Hydrogen boiler combustion equipment system (the “Equipment”) to be installed at their Plant. The Unit price for the Equipment is RMB 4,800,000 Yuan (approximately $800,000 US). The term of the Lease is seven (7) years, and renews on an annual basis if not terminated. Once installation and proven energy efficiency are established, Fujian will post the performance bond of RMB 1 million Yuan and rental payments shall commence, and be paid monthly thereafter. Any termination of the Lease within the first six (6) years will entitle the Company to take possession of the entire performance bond. As of March 31, 2014, the equipment has not been installed and there has not been any payments made on this lease. | |
The Company has entered into various other agreements that have been disclosed in previous 10K and 10Q filings. These agreements have been put on hold but will be further pursued as adequate funding is generated. | |
Notes_Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
6. Notes Payable | ' |
On July 30, 2013, the Company signed an Agreement with 2367416 Ontario, Inc., a Canadian company (“236”), whereby 236 agrees to provide financing to the Company in the initial sum of CAN $450,000 and a maximum of CAN $10,000,000 in accordance with the terms of the Agreement. The financing to be provided is to be funded in tranches, and will have terms between three (3) and five (5) years, with each tranche being separately negotiated. As a part of the loan costs, 236 shall be issued restricted common stock equal to the issued and outstanding common shares of the Company at the time of the initial advance, with such shares being subject to a Lock Up/Leak Out Agreement to be negotiated between the parties. These shares are considered an additional cost in obtaining the financing and the value of these shares at the commitment date is recorded as a contra equity and amortized over five years. | |
The initial advance of CAN $450,000 is covered by a Loan Agreement dated June 19, 2013, and was signed on July 30, 2013 (the “Loan Agreement”), which provides that (a) the interest rate shall be 20% per annum; and (b) CAN $90,000 shall be withheld by lender in interest rate reserve account for the payment of the first years interest. The total of CAN $300,000 under the Loan Agreement was received during the three months ended September 30, 2013 and delivered to Energy Technology Services Co., Ltd., (ETS) as the initial payment on the first machine to be delivered under a purchase order agreement. As of March 31, 2014, the Company has recorded $330,785 as a note payable and $237,414 as deposits. During the quarter ended March 31, 2014, $48,385 was paid back from the deposit and applied towards the note. | |
During the year ended December 31, 2013, the Company, as part of the above agreement, is required to issue 124,000,000 shares of restricted common stock to 236. These shares are valued at $0.008 which was the share price at commitment date. As of March 31, 2014, the Company has issued 82,666,666 shares to 236 with the remaining 41,333,334 to be issued when the remaining CAN $150,000 is funded and recorded $992,000 in deferred non-cash debt offering costs which are amortized over five years. The balance of these deferred non-cash debt issuance costs at March 31, 2014 was $859,731. The Company recorded a common stock payable of $337,067 related to the shares not yet issued at March 31, 2014. | |
On August 1, 2013, the Company entered into a note agreement with 2367416 Ontario, Inc., a Canadian company (“236”), whereby 236 agrees to provide financing to the Company in the amount of CAN $25,000 for working capital needs. The agreement provides for interest rate at 20% per annum, with interest payable monthly and principle is due five years from the date of advance. As part of the above agreement, the Company is required to issue 5,000,000 shares of restricted common stock to 236. These shares are valued at $0.02 which was the share price at commitment date. As of March 31, 2014, the Company recorded a note payable in the amount of $23,225 and $100,000 in deferred non-cash debt offering costs which are amortized over five years. The balance of these deferred non-cash debt offering costs at March 31, 2014 was $86,740. | |
On August 22, 2013, the Company entered into a note agreement with 2367416 Ontario, Inc., a Canadian company (“236”), whereby 236 agrees to provide financing to the Company in the amount of CAN $50,000 to pay off a convertible note the Company owed. The agreement provides for interest rate at 20% per annum, with interest payable monthly and principle is due five years from the date of advance. As part of the above agreement, the Company is required to issue 13,157,895 shares of restricted common stock to 236. These shares are valued at $0.01 which was the share price at commitment date. As of March 31, 2014, the Company recorded a note payable in the amount of $48,385 and $131,579 in deferred non-cash debt offering costs which are amortized over five years. The balance of these deferred non-cash debt offering costs at March 31, 2014 was $115,645. | |
On October 20, 2013, the Company entered into a note agreement with 2367416 Ontario, Inc., a Canadian company (“236”), whereby 236 agrees to provide financing to the Company in the amount of CAN $25,000 for working capital needs. The agreement provides for interest rate at 20% per annum, with interest payable monthly and principle is due five years from the date of advance. As part of the above agreement, the Company is required to issue 5,000,000 shares of restricted common stock to 236. These shares are valued at $0.008 which was the share price at commitment date. As of March 31, 2014, the Company recorded a note payable in the amount of $23,555 and $40,000 in deferred non-cash debt offering costs which are amortized over five years. The balance of these deferred non-cash debt offering costs at March 31, 2014 was $36,449. | |
On December 3, 2013, the Company entered into a note agreement with 2367416 Ontario, Inc., a Canadian company (“236”), whereby 236 agrees to provide financing to the Company in the amount of CAN $20,000 for working capital needs. The agreement provides for interest rate at 20% per annum, with interest payable monthly and principle is due five years from the date of advance. As part of the above agreement, the Company is required to issue 4,000,000 shares of restricted common stock to 236. These shares are valued at $0.015 which was the share price at commitment date. As of March 31, 2014, the Company recorded a note payable in the amount of $19,953 and $60,000 in deferred non-cash debt offering costs which are amortized over five years. The balance of these deferred non-cash debt offering costs at March 31, 2014 was $56,121. | |
Convertible_Notes_and_Derivati
Convertible Notes and Derivative liability | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
7. Convertible Notes and Derivative liability | ' | ||||||||||||||||
On April 24, 2012 (the “Closing date”), the Company issued a convertible promissory note for $278,000. The lender funded $75,000 to the Company, and the lender at their discretion may fund additional amounts to the Company. The note matures one year from the closing date. If the Company pays the note within 90 days of the closing date, the interest rate is 0%. If the note is not paid within 90 days of the closing date, a one-time interest charge of 5% will be applied to the unpaid principal amount. The conversion option price associated with the note is the lesser of $0.10 or 70% of the lowest trade price in the 25 trading days previous to any conversion. The note is convertible at any time. As a result of the variable feature associated with the conversion option, pursuant to ASC Topic 815, the Company bifurcated the conversion option, and utilized the black Scholes model to determine the fair value of the conversion option. At the issuance date, the Company recorded a debt discount and derivative liability of $75,000 and $100,415, respectively. The debt discount was fully amortized since the Company fully converted the remaining principle of $10,356 into 1,479,000 shares of common stock during the quarter ended March 31, 2014. The derivative liability has been adjusted to fair value each reporting period with unrealized gain (loss) reflected in other income and expense and extinguished due to it being fully converted. | |||||||||||||||||
For the three months ended March 31, 2014, the unrealized loss on the above derivatives was $5,129. | |||||||||||||||||
Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2014 and 2013 related to the above derivative liability are as follows: | |||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||
Measurements at | Measurements at | ||||||||||||||||
March 31, 2014 (1) | December 31, 2013(1) | ||||||||||||||||
Using Level 2 | Total | Using Level 2 | Total | ||||||||||||||
Liabilities: | |||||||||||||||||
Derivative liabilities | $ | - | $ | - | $ | (6,702 | ) | $ | (6,702 | ) | |||||||
Total liabilities | $ | - | $ | - | $ | (6,702 | ) | $ | (6,702 | ) | |||||||
_________ | |||||||||||||||||
-1 | The Company did not have any assets or liabilities measured at fair value using Level 1 or Level 3 of the fair value hierarchy as of March 31, 2014 and December 31, 2013. | ||||||||||||||||
The Company’s derivative liabilities are classified within Level 2 of the fair value hierarchy. The Company utilizes the Black-Scholes Option Pricing Model to value the derivative liabilities utilizing observable inputs such as the Company’s common stock price, the exercise price of the warrants, and expected volatility, which is based on historical volatility. The Black-Scholes model employs the market approach in determining fair value. | |||||||||||||||||
Related_Party_Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
8. Related Party Transactions | ' |
During the year ended December 31, 2003, the Company signed a note payable with a related party in the amount of $15,000. The balance at March 31, 2014 and December 31, 2013 is $1,901. This note payable was unsecured, non-interest bearing and has no specific repayment terms, however, payment is not expected prior to March 31, 2015. | |
As of March 31, 2014 and December 31, 2013, accounts payable included $11,920 and $12,220, respectively, for various accounting services, due to the Company’s Chief Accounting Officer who is also a director of the Company. | |
On March 15, 2012, the Board of Directors resolved to issue 500,000 shares of Series A Convertible Preferred shares to Michael Rouse, the Company’s President and CEO, in exchange for $335,285 of unpaid and accrued salary. | |
During the year ended December 31, 2012, the Company’s CEO advanced the Company $1,430 with no specific terms of repayment and no stated interest rate. | |
The Company entered into a Debt Settlement Agreement (the “Agreement”) dated April 27, 2012 with Alpha Engines Corporation (“Alpha”). The Company and Alpha entered into a License Agreement dated December 31, 2001, pursuant to which the Company has accrued royalties and other payables to Alpha in the amount of $1,508,250 as of the date of the Agreement. Pursuant to the terms of the Agreement, Alpha agreed to accept 250,000 shares of the company common stock in full settlement of the above royalties and other payables and further agreed to reduce the annual license royalty payable under the License Agreement from $250,000 per year to $25,000 per year, retroactive to January 1, 2012, with the first payment being due January 1, 2013. On April 27, 2012, the Company recorded the difference between the fair value of the common stock issued to Alpha and the settlement of the accrued royalties and other payables as a capital contribution from Alpha to the Company, which is included in additional paid-in capital at December 31, 2012. | |
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. | |
Subsequent_Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
9. Subsequent Events | ' |
A total of CAN $300,000 was advanced under the Loan Agreement with 2367416 Ontario, Inc, and was delivered to ETS, as the initial payment on the first machine to be delivered under a purchase order agreement for a Hydrogen Production Burner System (HPBS). Despite positive initial reports from ETS during the manufacturing of the Equipment, they did not deliver the machine as promised under the Agreement. The Company has declared ETS to be in default and the Company has asked to be refunded as per the purchase order agreement the Company has received CAN 50,000 and are in negotiations to receive the CAN 250,000 plus interest owed. On 4/13/14 the Company filed a criminal complaint with the DA office in Taipei Taiwan charging ETS and its principles of alleged fraud. | |
The Company is now in final negotiations directly with the Inventor, Dr. Chang and his new Company ZHENG YU CO. (ZYC), to provide us with the equipment necessary to fulfill our business plan. ZYC has agreed to sell us the rights to the technology for $1.8 million US for the H2 generator upon the completion and certification of the generator. We are currently working to formalize this agreement and expect to do so in the second quarter of 2014. | |
Subsequent to March 31, 2014, the Company issued 51,333,333 shares of common stock for advances of CAN $50,000 under Loan Agreements with 2367416 Ontario, Inc. The Company also issued 150,000 shares of common stock for $3,000. | |
Significant_Accounting_Policie1
Significant Accounting Policies (Policies) | 3 Months Ended | ||
Mar. 31, 2014 | |||
Significant Accounting Policies Policies | ' | ||
Cash | ' | ||
Cash is maintained at financial institutions and, at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances. All of our non-interest bearing cash balances were fully insured at March 31, 2014 and December 31, 2013. Insurance coverage was $250,000 per depositor at each financial institution, and our non-interest bearing cash balances may again exceed federally insured limits. At March 31, 2014 and December 31, 2013, there were no amounts held in interest bearing accounts. | |||
The Company’s financial instruments include cash, accounts payable, accrued liabilities and notes payable. The carrying amounts of cash, accounts payable and accrued liabilities approximate their fair value, due to the short-term nature of these items. The carrying amount of notes payable approximates their fair value due to the use of market rates of interest and maturity schedules for similar issues. The derivative liability is recorded at fair value (see Note 7). | |||
Furniture and equipment | ' | ||
Furniture and equipment are recorded at cost and depreciated on a declining balance and straight-line basis over their estimated useful lives, principally two to seven years. Accelerated methods are used for tax depreciation. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When furniture and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. | |||
The Company evaluates the recoverability of its long-lived assets or asset groups whenever adverse events or changes in business climate indicate that the expected undiscounted future cash flows from the related assets may be less than previously anticipated. If the net book value of the related assets exceed the undiscounted future cash flows of the assets, the carrying amount would be reduced to the present value of their expected future cash flows and an impairment loss would be recognized. There have been no impairment losses in any of the periods presented. | |||
Research and Development | ' | ||
Research and development costs are charged to operations when incurred and are included in operating expenses. The amounts charged for the three months ended March 31, 2014 and 2013 and the period November 27, 2000 (date of inception) to March 31, 2014 amounted to $0, $0 and $3,882,494, respectively. | |||
Income Tax | ' | ||
Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending on the classification of the assets or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. | |||
The Company follows the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10), January 1, 2007. The Company has not recognized a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there are no unrecognized benefits at March 31, 2014 and December 31, 2013 and since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. 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. | |||
Earnings Per Share | ' | ||
The Company entered into various loan agreements with a Canadian company. In accordance with the loan agreements, the Company issued shares of common stock to the Canadian company as additional costs in obtaining the financing. These shares have been accounted for as contra-equity deferred non-cash offering issuance costs and they are being amortized as interest expense over the life of the notes which are five years. Foreign currency translation gains and losses, when material, have been recorded as other comprehensive income. | |||
Basic loss per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding and dilutive options outstanding during the year. Common stock equivalents for the three months ended March 31, 2014 and 2013 were anti-dilutive due to the net losses sustained by the Company during these periods. For the three months ended March 31, 2014 and 2013 potentially dilutive common stock options and warrants of 6,655,413 and 5,405,413 have been excluded from dilutive earnings per share due to the Company’s losses in all periods presented. Additionally, potential common shares from convertible preferred stock are excluded from the computation of diluted earnings per share of 500,000 shares. | |||
Share 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). | |||
Equity policy | ' | ||
The Company issues common stock and common stock options and warrants to consultants for various services. For these transactions, the Company follows the guidance in FASB ASC Topic 505. Costs for these transactions are measured at the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measureable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instrument is reached or (ii) the date at which the counterparty’s performance is complete. | |||
Fair Value Measurement | ' | ||
In September 2006, the Financial Accounting Standards Board (FASB) introduced a framework for measuring fair value and expanded required disclosure about fair value measurements of assets and liabilities. The Company adopted the standard for those financial assets and liabilities as of the beginning of the 2008 fiscal year and the impact of adoption was not significant. FASB Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). 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. | ||
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, accrued compensation and accrued expenses. The Company had a derivative liability at December 31, 2013 associated with an embedded conversion option that was included as a level 2 input. | |||
Recent accounting pronouncements | ' | ||
Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company’s financial statements. |
Convertible_Notes_and_Derivati1
Convertible Notes and Derivative liability (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
Convertible Notes And Derivative Liability Tables | ' | ||||||||||||||||
Schedule of fair value liabilities measured on recurring basis | ' | ||||||||||||||||
Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2014 and 2013 related to the above derivative liability are as follows: | |||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||
Measurements at | Measurements at | ||||||||||||||||
March 31, 2014 (1) | December 31, 2013(1) | ||||||||||||||||
Using Level 2 | Total | Using Level 2 | Total | ||||||||||||||
Liabilities: | |||||||||||||||||
Derivative liabilities | $ | - | $ | - | $ | (6,702 | ) | $ | (6,702 | ) | |||||||
Total liabilities | $ | - | $ | - | $ | (6,702 | ) | $ | (6,702 | ) | |||||||
_________ | |||||||||||||||||
-1 | The Company did not have any assets or liabilities measured at fair value using Level 1 or Level 3 of the fair value hierarchy as of March 31, 2014 and December 31, 2013. | ||||||||||||||||
Going_Concern_Detail_Narrative
Going Concern (Detail Narrative) (USD $) | 3 Months Ended | 160 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Going Concern Detail Narrative | ' | ' | ' |
Net loss | $145,892 | $242,552 | $18,564,972 |
Working capital deficit | $107,994 | ' | $107,994 |
Significant_Accounting_Policie2
Significant Accounting Policies (Detail Narrative) (USD $) | 3 Months Ended | 160 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Significant Accounting Policies Detail Narrative | ' | ' | ' |
Research and development costs | ' | ' | $3,882,494 |
Potentially dilutive common stock options and warrants | 6,655,413 | 5,405,413 | ' |
Commitments_and_Contingencies_
Commitments and Contingencies (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Commitments And Contingencies Details Narrative | ' | ' |
Rent expense | $6,250 | $6,250 |
Notes_Payable_Details_Narrativ
Notes Payable (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | |
Note payable | $330,785 | ' |
Deposit | 237,414 | 285,799 |
Paid back from deposit | 48,385 | ' |
Sares of restricted common stock | ' | 124,000,000 |
Shares issued | 82,666,666 | ' |
Deferred non-cash debt issuance costs | 992,000 | ' |
Remaining shares to be issued | 41,333,334 | ' |
Balance of deferred non cash debt issuance costs | 859,731 | ' |
Common stock payable | 337,067 | 342,067 |
Ontario Inc [Member] | ' | ' |
Note payable | 23,225 | ' |
Deferred non-cash debt issuance costs | 100,000 | ' |
Balance of deferred non cash debt issuance costs | 86,740 | ' |
Ontario Inc one [Member] | ' | ' |
Note payable | 48,385 | ' |
Deferred non-cash debt issuance costs | 131,579 | ' |
Balance of deferred non cash debt issuance costs | 115,645 | ' |
Ontario Inc Two [Member] | ' | ' |
Note payable | 23,555 | ' |
Deferred non-cash debt issuance costs | 40,000 | ' |
Balance of deferred non cash debt issuance costs | 36,449 | ' |
Ontario Inc Three [Member] | ' | ' |
Note payable | 19,953 | ' |
Deferred non-cash debt issuance costs | 60,000 | ' |
Balance of deferred non cash debt issuance costs | $56,121 | ' |
Convertible_Notes_and_Derivati2
Convertible Notes and Derivative liability (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Liabilities: | ' | ' |
Derivative liabilities | ' | ($6,702) |
Total liabilities | ' | -6,702 |
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ' | ' |
Liabilities: | ' | ' |
Derivative liabilities | ' | -6,702 |
Total liabilities | ' | ($6,702) |
Convertible_Notes_and_Derivati3
Convertible Notes and Derivative liability (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Convertible Notes And Derivative Liability Details Narrative | ' |
Convertible note converted into common stock, value | $10,356 |
Convertible note converted into common stock, shares | 1,479,000 |
Unrealized loss on derivative | $5,129 |
Related_Party_Transactions_Det
Related Party Transactions (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Related Party Transactions Details Narrative | ' | ' |
Note payable to related party | ' | $15,000 |
Notes payable outstanding balance | 1,901 | 1,901 |
Accounts payable included due to Chief Accounting Officer | $11,920 | $12,220 |