Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | Oct. 02, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'GS ENVIROSERVICES, INC. | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0001163966 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Voluntary Filers | 'No | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Entity Common Stock, Shares Outstanding | ' | 370,722,572 |
BALANCE_SHEETS
BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
BALANCE SHEETS | ' | ' |
Cash | ' | ' |
Deferred finance costs (OID), current portion | 36,900 | ' |
Total current assets | 36,900 | ' |
Deferred finance costs (OID) | 49,200 | ' |
Total other assets | 49,200 | ' |
TOTAL ASSETS | 86,100 | ' |
Cash overdraft | 488 | 488 |
Convertible debenture-affiliate | 189,000 | 189,000 |
Accounts payable | 92,238 | 82,511 |
Accrued expenses | 441,318 | 367,967 |
Convertible note | 36,750 | 36,750 |
Liabilities to be settled in stock | 10,000 | 10,000 |
Liability for derivative conversion feature - convertible debenture-affiliate | 1,257,454 | 1,256,706 |
Liability for derivative conversion feature - convertible note | 47,875 | 28,664 |
Due to affiliates | 27,222 | 25,792 |
Total current liabilities | 2,102,345 | 1,997,878 |
Convertible debenture - long term | 172,200 | ' |
Liability for derivative conversion feature - convertible debenture - long term | 40,492 | ' |
Total long term liabilities | 212,692 | ' |
Total Liabilities | 2,315,037 | 1,997,878 |
Common stock, $0.0001 par value, 10,000,000,000 shares authorized: 370,722,572 shares issued and outstanding as of March 31, 2014 and December 31, 2013 | 46,166 | 46,166 |
Treasury stock, 99,394,946 shares, at cost | -578,008 | -578,008 |
Common stock subscribed | 18,950 | 18,950 |
Additional paid in capital | 7,123,652 | 7,123,652 |
Note receivable - shareholder | ' | ' |
Accumulated deficit | -8,839,697 | -8,608,638 |
Total stockholders' equity (deficit) | -2,228,937 | -1,997,878 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $86,100 | ' |
BALANCE_SHEET_PARENTHETICAL
BALANCE SHEET PARENTHETICAL (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
BALANCE SHEET PARENTHETICAL | ' | ' |
Common stock par value | $0.00 | $0.00 |
Common stock shares authorized | 10,000,000,000 | 10,000,000,000 |
Common stock shares issued | 370,722,572 | 370,722,572 |
Common stock shares outstanding | 370,722,572 | 370,722,572 |
Treasury stock shares | 99,394,946 | 99,394,946 |
STATEMENTS_OF_OPERATIONS
STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
STATEMENTS OF OPERATIONS | ' | ' |
Revenue | ' | ' |
Cost of revenues | ' | ' |
Gross profit | ' | ' |
Professional fees | 135,000 | 10,308 |
Officers' salaries | ' | 45,000 |
General and administrative-other | 580 | 2,929 |
Research and development | 25,000 | 26,550 |
Total operating expenses | -160,580 | -84,787 |
Loss from operations | -160,580 | -84,787 |
(Loss) income from change in value of conversion feature - convertible debenture | -748 | 54,508 |
(Loss) from change in value of conversion feature - convertible notes | -19,211 | ' |
Cost of conversion feature - convertible note | -40,492 | ' |
Amortization of debt discount | 0 | -62,714 |
Interest income - affiliate | ' | 5,848 |
Interest expense | -10,028 | -7,754 |
Total other income (expense), net | -70,479 | -10,112 |
Loss before provision for income taxes | -231,059 | -94,889 |
(Provision for)/benefit from income taxes | ' | ' |
Net loss | ($231,059) | ($94,889) |
Weighted average common shares outstanding, basic and diluted | 370,722,572 | 72,605,054 |
Net income (loss) per share - basic and diluted | ' | ' |
STATEMENT_OF_CASH_FLOWS
STATEMENT OF CASH FLOWS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
STATEMENT OF CASH FLOWS | ' | ' |
Net (loss) | ($231,059) | ($94,889) |
Interest receivable | ' | -5,848 |
Change in fair value - conversion features | 19,959 | -54,508 |
Cost of conversion feature | 40,492 | ' |
Amortization of debt discount | ' | 62,964 |
Direct payment of operating expenses by affiliates | ' | 15,960 |
Change in accounts payable and accrued expenses | 83,078 | 69,790 |
Net cash flows (used in) operating activities | -87,530 | -6,541 |
Proceeds from convertible debenture | 86,100 | ' |
Advances from affiliates | 1,430 | 7,500 |
Net cash provided by financing activities | 87,530 | 7,500 |
Net increase (decrease) in cash | ' | 959 |
Cash at beginning of period | ' | 2,048 |
Cash at end of period | ' | 3,007 |
Original Issue Discount - convertible debt | $86,100 | ' |
Note_1_Business_Description_an
Note 1 - Business Description and Basis of Presentation | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 1 - Business Description and Basis of Presentation | ' |
NOTE 1 BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS | |
GS EnviroServices, Inc. (“we,” “our,” “us,” “GSEN,” or the “Company”) is a clean energy technology and sustainable project development company. Our operations consist of research and development activities involving proprietary technology that we have licensed. Our technology development model involves the early-stage development and intellectual property protection of our technologies with a view towards generating revenue through technology licensing of successfully developed clean energy technologies. | |
The balance sheet at December 31, 2013 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The other information in these financial statements is unaudited but, in the opinion of management, reflects all adjustments necessary for a fair presentation of the results for the periods covered. All such adjustments are of a normal recurring nature unless disclosed otherwise. These financial statements, including notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These financial statements should be read in conjunction with the financial statements and additional information as contained in our Annual Report on Form 10-K for the year ended December 31, 2013. |
Note_2_Going_Concern_Note
Note 2 - Going Concern Note | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 2 - Going Concern Note | ' |
NOTE 2 GOING CONCERN | |
The accompanying financial statements referred to above have been prepared assuming that the company will continue as a going concern. The Company has no established source of revenue and is dependent on its ability to raise capital from shareholders or other sources to sustain operations. These factors raise substantial doubt that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our ability to raise capital will depend on our success in obtaining financing and our success in developing revenue sources. |
Note_3_Summary_of_Significant_
Note 3 - Summary of Significant Accounting Policies | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Notes | ' | ||||||
Note 3 - Summary of Significant Accounting Policies | ' | ||||||
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||
EVALUATION OF LONG LIVED ASSETS | |||||||
Long-lived assets are assessed for recoverability on an ongoing basis. In evaluating the fair value and future benefits of long-lived assets, their carrying value would be reduced by the excess, if any, of the long-lived asset over management’s estimate of the anticipated undiscounted future net cash flows of the related long-lived asset. Acquired intangible assets with finite lives are amortized over the life of the underlying asset. | |||||||
INCOME TAXES | |||||||
The Company provides for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. | |||||||
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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. | |||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | |||||||
The carrying amounts reported in the balance sheets as of March 31, 2014 and December 31, 2013 for cash equivalents and accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes payable, notes receivable, and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. | |||||||
FAIR VALUE MEASUREMENTS | |||||||
The Company adopted ASC 820, Fair Value Measurements and Disclosures. This topic defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In January 2010, the FASB issued an update to ASC 820, which requires additional disclosures about inputs into valuation techniques, disclosures about significant transfers into or out of Levels 1 and 2, and disaggregation of purchases, sales, issuances, and settlements in the Level 3 rollforward disclosure. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: | |||||||
Level 1 | quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded securities and exchange-based derivatives | ||||||
Level 2 | inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges | ||||||
Level 3 | unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models | ||||||
The following table presents the embedded derivative, the Company’s only financial asset or liability measured and recorded at fair value on the Company’s Balance Sheet on a recurring basis and its level within the fair value hierarchy during the quarter ended March 31, 2014: | |||||||
Embedded conversion liabilities as of March 31, 2014: | |||||||
Level 1 | $ | - | |||||
Level 2 | - | ||||||
Level 3 | 1,345,821 | ||||||
Total | $ | 1,345,821 | |||||
The following table reconciles, for the quarter ended March 31, 2014 and the year ended December 31, 2013 the beginning and ending balances for financial instruments that are recognized at fair value in the consolidated financial statements: | |||||||
Balance of embedded conversion liability at December 31, 2012 | $ | 497,111 | |||||
Present value of beneficial conversion feature of new debentures | 56,259 | ||||||
Adjustments to fair value of conversion feature | 746,425 | ||||||
Reduction in fair value due to principal conversions | -14,425 | ||||||
Balance of embedded conversion liability at December 31, 2013 | 1,285,370 | ||||||
Present value of beneficial conversion feature of new debentures | 40,492 | ||||||
Adjustments to fair value of conversion feature | 19,959 | ||||||
Reduction in fair value due to principal conversions | - | ||||||
Balance at March 31, 2014 | $ | 1,345,821 | |||||
The fair value of the conversion features are calculated at the time of issuance and the Company records a conversion liability for the calculated value. The Company recognizes interest expense for the conversion liability which is added to the principal of the debenture. The Company also recognizes interest expense for accretion of the conversion liability to fair value over the term of the note. The Company has adopted ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in each debenture could result in the note principal being converted to a variable number of the Company’s common shares. | |||||||
The Company’s valuation measurements as noted above are Level 3 measurements. The unobservable inputs used by the Company included inputs to a Black-Scholes pricing model (estimated volatility, expected lives of conversion features), and an estimated valuation of the fully-diluted common stock per share (see Note 7, Convertible Debenture). These estimates of the common stock value are based on numerous factors, including the average closing price and the standard deviation of the closing price. Changes in the unobservable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments. The significant unobservable input used in the fair value measurement is the estimated valuation of a fully-diluted common share (see Note 7, Convertible Debenture). A significant increase (decrease) in the Company’s estimated valuation of the common stock would result in a higher (lower) fair value measurement. | |||||||
LIMITATIONS | |||||||
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. | |||||||
CASH AND CASH EQUIVALENTS | |||||||
For purposes of balance sheet classification and the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. | |||||||
BASIC AND DILUTED EARNINGS PER SHARE (“EPS”) | |||||||
Basic (loss) earnings per share is computed by dividing net income by the weighted average common shares outstanding during a period. Diluted (loss) earnings per share is based on the treasury stock method and includes the effect from potential issuance of common stock assuming the exercise of all stock options. Common share equivalents have been excluded where their inclusion would be anti-dilutive. Potentially future dilutive shares at March 31, 2014 are 28,142,518 shares from the conversions of outstanding common stock warrants, 1,590,000,000 shares (based on conversion price at March 31, 2014) from conversion of the convertible debenture issued by 11235 Factor Fund LLC (see Note 5, Convertible Debenture, below), 3,295,455 shares (based on conversion price at March 31, 2014) from conversions of the convertible promissory note issued on April 29, 2013 (see Note 6, Convertible Promissory Note, below) and 5,446,135 shares (based on conversion price at March 31, 2014) from conversion of the convertible debenture issued by Flux Carbon Starter Fund, LLC (see Note 5, Convertible Debenture, below). | |||||||
STOCK BASED COMPENSATION | |||||||
The Company accounts for stock based compensation in accordance with Financial Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation.” Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. The Company accounts for stock issued for services to non-employees by reference to the fair market value of the Company's stock on the date of issuance as it is the more readily determinable value. | |||||||
DEFERRED FINANCING CHARGES AND DEBT DISCOUNTS | |||||||
Deferred finance costs represent costs which may include direct costs incurred to third parties in order to obtain long-term financing and have been reflected as other assets. Costs incurred with parties who are providing the actual long-term financing, which generally include the value of warrants, or the intrinsic value of beneficial conversion features associated with the underlying debt, are reflected as a debt discount. These costs and discounts are generally amortized over the life of the related debt. During the quarters ended March 31, 2014 and 2013, the Company recorded amortization of the note discounts in the amount of $0 and $62,714, respectively. |
Note_4_Financing_Arrangements
Note 4 - Financing Arrangements | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes | ' | |||||||
Note 4 - Financing Arrangements | ' | |||||||
NOTE 4 FINANCING ARRANGEMENTS | ||||||||
The following is a summary of the Company’s financing arrangements as of March 31, 2014 and December 31, 2013: | ||||||||
3/31/14 | 12/31/13 | |||||||
Current portion of convertible debenture: | ||||||||
Current portion of convertible debenture to 11235 Factor Fund | $ | 189,000 | $ | 189,000 | ||||
Total current portion of convertible debenture | 189,000 | 189,000 | ||||||
Current portion of convertible promissory note: | ||||||||
Convertible promissory note to Asher Enterprises | 36,750 | 36,750 | ||||||
Total current portion of convertible promissory note | $ | 36,750 | $ | 36,750 | ||||
Long term portion of convertible debenture: | ||||||||
Convertible debenture to Flux Carbon Starter Fund | 172,200 | - | ||||||
Total long term portion of convertible debenture | $ | 172,200 | $ | - | ||||
Note_5_Convertible_Debenture
Note 5 - Convertible Debenture | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 5 - Convertible Debenture | ' |
NOTE 5 CONVERTIBLE DEBENTURE | |
The Company has a secured convertible debenture with 11235 Factor Fund LLC (“Factor”) with a face value of $189,000. The Factor Debenture is convertible into common stock of the Company at a rate equal to the lesser of $0.0001 per share or 50% of the VWAP for the 90 days preceding conversion. | |
The value of the Factor Debenture at March 31, 2014 was $1,446,454, which represented the face value of $189,000 plus the fair value of the liability for the conversion features of $1,257,454. The Company recognized a loss of $748 for the quarter ended March 31, 2014 from the change in fair value of the underlying conversion feature for the period. | |
On January 15, 2014, the Company entered into a securities purchase agreement (the “SPA”) with Flux Carbon Starter Fund, LLC (“Flux”). Flux is owned by a business associate of Kevin Kreisler, who is a control person with respect to the majority shareholder of the Company. The SPA provides that Flux shall purchase certain debentures (the “Debenture(s)”) from the Company on a quarterly basis in exchange for cash paid to the Company, or on behalf of the Company, to Core Strategic Services, LLC (“CSS”), in connection with the Company’s payment obligations under that certain Master Professional Services Agreement dated January 1, 2014 by and among the Company and CSS. The balance of the Debentures shall be calculated in each case equal to two (2) times the cash paid by Flux, with the remainder treated as original issue discount. Jeffrey Hickman, who is the CEO and sole director of the Company, is an employee of CSS. | |
On March 31, 2014, the Company issued a Debenture to Flux in the amount of $172,200 (the “March 2014 Debenture”) with a maturity date of December 31, 2015. The March 2014 Debenture accrues interest at a rate of 20% per annum through the maturity date. The holder of the March 2014 Debenture shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock of the Company at a conversion price defined as the lowest volume weighted average closing market price for the Common Stock for the 90 trading days preceding conversion as posted on the OTCQB or on such US National Exchange upon which the Company may be listed. In connection with the March 2014 Debenture, the Company recognized an original issuance discount of $86,100, which will be amortized over the life of the March 2014 Debenture. | |
The value of the Flux Debenture at March 31, 2014 was $212,692, which represented the face value of $172,200 plus the fair value of the liability for the conversion features of $40,492. The fair value of the derivative liability was determined utilizing a Black-Scholes valuation model and the following range of assumptions during 2014: expected life - three to fourth months; volatility (231.93%); risk-free rate (0.07%); dividends (none). The Company recognized expense of $40,492 for the quarter ended March 31, 2014 for the initial cost of the underlying conversion feature for the period. |
Note_6_Convertible_Promissory_
Note 6 - Convertible Promissory Note | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 6 - Convertible Promissory Note | ' |
NOTE 6 CONVERTIBLE PROMISSORY NOTE | |
On April 29, 2013, the Company entered into a convertible promissory note (the “Note”) with Asher Enterprises (“Holder”) for $32,500 due on January 31, 2014 (“maturity date”). The Note accrues interest of 8% per annum through the maturity date. If the Note is not paid in full by the maturity date, the interest rate will increase to 22% per annum from the maturity date. The Holder of the Note shall have the right, at any time during the period beginning on the date which is one hundred eighty days from the date of the Note, to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock at a conversion price defined as 50% of the average of the lowest three trading prices for the Common Stock during the fifteen trading day period ending on the trading day prior to the conversion date. In the event the Company (a) makes a public announcement that it intends to consolidate or merge with any other corporation or sell or transfer all or substantially all of the assets of the Company or (b) any person, group or entity publicly announces a tender offer to purchase 50% or more of the Company’s Common Stock, then the conversion price shall be equal to the lower of the conversion price which would have been applicable for a conversion occurring on the announcement date and the conversion price that would otherwise be in effect. The conversion feature has been accounted for at fair value as a derivative in accordance with ASC 815 which requires it to be accounted for a liability. | |
The value of the Note at March 31, 2014 was $84,625, which represented the face value of $36,750 plus the fair value of the liability for the conversion features of $47,875. The fair value of the derivative liability was determined utilizing a Black-Scholes valuation model and the following range of assumptions during 2014: expected life – three to four months; volatility (265.48%); risk-free rate (0.07%); dividends (none). The Company recognized a loss of $19,211 for the quarter ended March 31, 2014 from the change in fair value of the underlying conversion feature for the period. |
Note_7_Commitments_and_Conting
Note 7 - Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 7 - Commitments and Contingencies | ' |
NOTE 7 COMMITMENTS AND CONTINGENCIES | |
Effective September 30, 2012, the Company entered into a license agreement with FLUX Photon Corporation (“Licensor”), pursuant to which Licensor granted the Company a non-exclusive license to use and practice the Licensor’s technologies in residential and commercial roof-top applications in North America. The license agreement requires the Company to build a commercial prototype based on the licensed technologies on or before June 30, 2014, and to commence commercial sales with the licensed technologies on or before December 31, 2015. The license agreement further provides for a royalty fee of 10% of the Company’s gross sales involving the licensed technologies, and requires the Company to pay Licensor a minimum of $25,000 in cash per calendar quarter commencing January 1, 2013 for research and development services conducted by Licensor’s staff (which amount is payable to Licensor, at its sole option, in the form of Company common stock or other securities). The Company accrued $25,000 in research costs due to the Licensor for the quarters ended March 31, 2014 and 2013. The Company and Licensor have entered into discussions regarding execution of an amended license agreement to provide for exclusivity and an expansion of the licensed rights. | |
On January 1, 2014, the Company entered into a Master Professional Services Agreement (the “CSS Agreement”) with Core Strategic Services, LLC (“CSS”). Pursuant to the CSS Agreement, CSS shall provide the Company with administrative services, business planning and consulting, and corporate services. The CSS Agreement requires the Company to pay to CSS a fee of $45,000 per month in advance of each month. The CSS Agreement has a term of one (1) year and is automatically renewed unless cancelled prior. Jeffrey Hickman, who is the CEO and sole director of the Company, is an employee of CSS. |
Note_8_Subsequent_Events
Note 8 - Subsequent Events | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Note 8 - Subsequent Events | ' |
NOTE 8 SUBSEQUENT EVENTS | |
On April 1, 2014, 11235 Factor Fund LLC assigned a portion of its Convertible Debenture to Forge Capital LLC, an entity owned by a relative of Kevin Kreisler, who is a control person with respect to 11235 Factor Fund LLC, the majority shareholder of the Company. The total balance of the Convertible Debenture at March 31, 2014 was $222,554, including principal and interest, and the Convertible Debenture was in default. 11235 Factor Fund assigned $172,554 to Forge Capital LLC on April 1, 2014. The Company issued an amended and restated debenture to Forge Capital on April 1, 2014 with a principal balance of $172,554 and issued an amended and restated debenture to 11235 Factor Fund LLC with a principal balance of $50,000. Both amended and restated debentures have the same terms as the prior 11235 Factor Fund LLC convertible debenture, except that the maturity date on both has been extended to December 31, 2015. | |
On June 30, 2014, the Company issued a Debenture to Flux Carbon Starter Fund LLC (“Flux”) in the amount of $325,169 (the “June 2014 Debenture”) with a maturity date of December 31, 2015. The March 2014 Debenture accrues interest at a rate of 20% per annum through the maturity date. The holder of the June 2014 Debenture shall have the right to convert all or any part of the outstanding and unpaid principal amount into fully paid and non-assessable shares of Common Stock of the Company at a conversion price defined as the lowest volume weighted average closing market price for the Common Stock for the 90 trading days preceding conversion as posted on the OTCQB or on such US National Exchange upon which the Company may be listed. |
Note_3_Summary_of_Significant_1
Note 3 - Summary of Significant Accounting Policies: Impairment or Disposal of Long-Lived Assets, Policy (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Impairment or Disposal of Long-Lived Assets, Policy | ' |
EVALUATION OF LONG LIVED ASSETS | |
Long-lived assets are assessed for recoverability on an ongoing basis. In evaluating the fair value and future benefits of long-lived assets, their carrying value would be reduced by the excess, if any, of the long-lived asset over management’s estimate of the anticipated undiscounted future net cash flows of the related long-lived asset. Acquired intangible assets with finite lives are amortized over the life of the underlying asset. |
Note_3_Summary_of_Significant_2
Note 3 - Summary of Significant Accounting Policies: Income Taxes (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Income Taxes | ' |
INCOME TAXES | |
The Company provides for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. |
Note_3_Summary_of_Significant_3
Note 3 - Summary of Significant Accounting Policies: Use of Estimates (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Use of Estimates | ' |
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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
Note_3_Summary_of_Significant_4
Note 3 - Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Fair Value of Financial Instruments | ' |
FAIR VALUE OF FINANCIAL INSTRUMENTS | |
The carrying amounts reported in the balance sheets as of March 31, 2014 and December 31, 2013 for cash equivalents and accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes payable, notes receivable, and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. |
Note_3_Summary_of_Significant_5
Note 3 - Summary of Significant Accounting Policies: Fair Value Measurements (Policies) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Policies | ' | ||||||
Fair Value Measurements | ' | ||||||
FAIR VALUE MEASUREMENTS | |||||||
The Company adopted ASC 820, Fair Value Measurements and Disclosures. This topic defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In January 2010, the FASB issued an update to ASC 820, which requires additional disclosures about inputs into valuation techniques, disclosures about significant transfers into or out of Levels 1 and 2, and disaggregation of purchases, sales, issuances, and settlements in the Level 3 rollforward disclosure. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: | |||||||
Level 1 | quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded securities and exchange-based derivatives | ||||||
Level 2 | inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, mutual funds, and fair-value hedges | ||||||
Level 3 | unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded, non-exchange-based derivatives and commingled investment funds, and are measured using present value pricing models | ||||||
The following table presents the embedded derivative, the Company’s only financial asset or liability measured and recorded at fair value on the Company’s Balance Sheet on a recurring basis and its level within the fair value hierarchy during the quarter ended March 31, 2014: | |||||||
Embedded conversion liabilities as of March 31, 2014: | |||||||
Level 1 | $ | - | |||||
Level 2 | - | ||||||
Level 3 | 1,345,821 | ||||||
Total | $ | 1,345,821 | |||||
The following table reconciles, for the quarter ended March 31, 2014 and the year ended December 31, 2013 the beginning and ending balances for financial instruments that are recognized at fair value in the consolidated financial statements: | |||||||
Balance of embedded conversion liability at December 31, 2012 | $ | 497,111 | |||||
Present value of beneficial conversion feature of new debentures | 56,259 | ||||||
Adjustments to fair value of conversion feature | 746,425 | ||||||
Reduction in fair value due to principal conversions | -14,425 | ||||||
Balance of embedded conversion liability at December 31, 2013 | 1,285,370 | ||||||
Present value of beneficial conversion feature of new debentures | 40,492 | ||||||
Adjustments to fair value of conversion feature | 19,959 | ||||||
Reduction in fair value due to principal conversions | - | ||||||
Balance at March 31, 2014 | $ | 1,345,821 | |||||
The fair value of the conversion features are calculated at the time of issuance and the Company records a conversion liability for the calculated value. The Company recognizes interest expense for the conversion liability which is added to the principal of the debenture. The Company also recognizes interest expense for accretion of the conversion liability to fair value over the term of the note. The Company has adopted ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in each debenture could result in the note principal being converted to a variable number of the Company’s common shares. | |||||||
The Company’s valuation measurements as noted above are Level 3 measurements. The unobservable inputs used by the Company included inputs to a Black-Scholes pricing model (estimated volatility, expected lives of conversion features), and an estimated valuation of the fully-diluted common stock per share (see Note 7, Convertible Debenture). These estimates of the common stock value are based on numerous factors, including the average closing price and the standard deviation of the closing price. Changes in the unobservable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments. The significant unobservable input used in the fair value measurement is the estimated valuation of a fully-diluted common share (see Note 7, Convertible Debenture). A significant increase (decrease) in the Company’s estimated valuation of the common stock would result in a higher (lower) fair value measurement. | |||||||
LIMITATIONS | |||||||
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. |
Note_3_Summary_of_Significant_6
Note 3 - Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Cash and Cash Equivalents | ' |
CASH AND CASH EQUIVALENTS | |
For purposes of balance sheet classification and the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. |
Note_3_Summary_of_Significant_7
Note 3 - Summary of Significant Accounting Policies: Basic and Diluted Earnings Per Share ("eps") (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Basic and Diluted Earnings Per Share ("eps") | ' |
BASIC AND DILUTED EARNINGS PER SHARE (“EPS”) | |
Basic (loss) earnings per share is computed by dividing net income by the weighted average common shares outstanding during a period. Diluted (loss) earnings per share is based on the treasury stock method and includes the effect from potential issuance of common stock assuming the exercise of all stock options. Common share equivalents have been excluded where their inclusion would be anti-dilutive. Potentially future dilutive shares at March 31, 2014 are 28,142,518 shares from the conversions of outstanding common stock warrants, 1,590,000,000 shares (based on conversion price at March 31, 2014) from conversion of the convertible debenture issued by 11235 Factor Fund LLC (see Note 5, Convertible Debenture, below), 3,295,455 shares (based on conversion price at March 31, 2014) from conversions of the convertible promissory note issued on April 29, 2013 (see Note 6, Convertible Promissory Note, below) and 5,446,135 shares (based on conversion price at March 31, 2014) from conversion of the convertible debenture issued by Flux Carbon Starter Fund, LLC (see Note 5, Convertible Debenture, below). |
Note_3_Summary_of_Significant_8
Note 3 - Summary of Significant Accounting Policies: Stock Based Compensation (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Stock Based Compensation | ' |
STOCK BASED COMPENSATION | |
The Company accounts for stock based compensation in accordance with Financial Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation.” Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. The Company accounts for stock issued for services to non-employees by reference to the fair market value of the Company's stock on the date of issuance as it is the more readily determinable value. |
Note_3_Summary_of_Significant_9
Note 3 - Summary of Significant Accounting Policies: Deferred Charges, Policy (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Deferred Charges, Policy | ' |
DEFERRED FINANCING CHARGES AND DEBT DISCOUNTS | |
Deferred finance costs represent costs which may include direct costs incurred to third parties in order to obtain long-term financing and have been reflected as other assets. Costs incurred with parties who are providing the actual long-term financing, which generally include the value of warrants, or the intrinsic value of beneficial conversion features associated with the underlying debt, are reflected as a debt discount. These costs and discounts are generally amortized over the life of the related debt. During the quarters ended March 31, 2014 and 2013, the Company recorded amortization of the note discounts in the amount of $0 and $62,714, respectively. |
Recovered_Sheet1
Note 3 - Summary of Significant Accounting Policies: Fair Value Measurements: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Tables) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Tables/Schedules | ' | ||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | ' | ||||||
Embedded conversion liabilities as of March 31, 2014: | |||||||
Level 1 | $ | - | |||||
Level 2 | - | ||||||
Level 3 | 1,345,821 | ||||||
Total | $ | 1,345,821 |
Recovered_Sheet2
Note 3 - Summary of Significant Accounting Policies: Fair Value Measurements: Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation (Tables) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Tables/Schedules | ' | ||||||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | ' | ||||||
Balance of embedded conversion liability at December 31, 2012 | $ | 497,111 | |||||
Present value of beneficial conversion feature of new debentures | 56,259 | ||||||
Adjustments to fair value of conversion feature | 746,425 | ||||||
Reduction in fair value due to principal conversions | -14,425 | ||||||
Balance of embedded conversion liability at December 31, 2013 | 1,285,370 | ||||||
Present value of beneficial conversion feature of new debentures | 40,492 | ||||||
Adjustments to fair value of conversion feature | 19,959 | ||||||
Reduction in fair value due to principal conversions | - | ||||||
Balance at March 31, 2014 | $ | 1,345,821 | |||||
Note_4_Financing_Arrangements_
Note 4 - Financing Arrangements: Financing Arrangements (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Tables/Schedules | ' | |||||||
Financing Arrangements | ' | |||||||
3/31/14 | 12/31/13 | |||||||
Current portion of convertible debenture: | ||||||||
Current portion of convertible debenture to 11235 Factor Fund | $ | 189,000 | $ | 189,000 | ||||
Total current portion of convertible debenture | 189,000 | 189,000 | ||||||
Current portion of convertible promissory note: | ||||||||
Convertible promissory note to Asher Enterprises | 36,750 | 36,750 | ||||||
Total current portion of convertible promissory note | $ | 36,750 | $ | 36,750 | ||||
Long term portion of convertible debenture: | ||||||||
Convertible debenture to Flux Carbon Starter Fund | 172,200 | - | ||||||
Total long term portion of convertible debenture | $ | 172,200 | $ | - | ||||
Recovered_Sheet3
Note 3 - Summary of Significant Accounting Policies: Fair Value Measurements: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Convertible Debt, Fair Value Disclosures | $1,345,821 | $1,285,370 | $497,111 |
Fair Value, Inputs, Level 3 | ' | ' | ' |
Convertible Debt, Fair Value Disclosures | $1,345,821 | ' | ' |
Recovered_Sheet4
Note 3 - Summary of Significant Accounting Policies: Fair Value Measurements: Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation (Details) (USD $) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Details | ' | ' | ' |
Convertible Debt, Fair Value Disclosures | $1,345,821 | $1,285,370 | $497,111 |
Present value of beneficial conversion feature of new debentures | 40,492 | 56,259 | ' |
Adjustments to fair value of conversion feature | 19,959 | 746,425 | ' |
Reduction in fair value due to principal conversions | ' | ($14,425) | ' |
Recovered_Sheet5
Note 3 - Summary of Significant Accounting Policies: Basic and Diluted Earnings Per Share ("eps") (Details) | Mar. 31, 2014 |
Potential Future Dilutive Shares | 28,142,518 |
Shares From the Convertible Promissory Note | 5,446,135 |
11235 Factor Fund | ' |
Shares From the Convertible Debenture | 1,590,000,000 |
Asher | ' |
Shares From the Convertible Debenture | 3,295,455 |
Recovered_Sheet6
Note 3 - Summary of Significant Accounting Policies: Deferred Charges, Policy (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Details | ' | ' |
Amortization of debt discount | $0 | $62,714 |
Note_4_Financing_Arrangements_1
Note 4 - Financing Arrangements: Financing Arrangements (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Apr. 29, 2013 |
Convertible debenture-affiliate | $189,000 | $189,000 | ' |
Convertible note | 36,750 | 36,750 | ' |
Convertible debenture - long term | 172,200 | ' | ' |
11235 Factor Fund | ' | ' | ' |
Convertible debenture-affiliate | 189,000 | 189,000 | ' |
Asher | ' | ' | ' |
Convertible note | 36,750 | 36,750 | 32,500 |
Flux | ' | ' | ' |
Convertible debenture - long term | $172,200 | ' | ' |
Note_5_Convertible_Debenture_D
Note 5 - Convertible Debenture (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Convertible debenture-affiliate | $189,000 | ' | $189,000 |
Liability for derivative conversion feature - convertible note | 47,875 | ' | 28,664 |
(Loss) income from change in value of conversion feature - convertible debenture | 748 | -54,508 | ' |
Convertible debenture - long term | 172,200 | ' | ' |
Original Issue Discount - convertible debt | 86,100 | ' | ' |
Cost of conversion feature - convertible note | 40,492 | ' | ' |
11235 Factor Fund | ' | ' | ' |
Convertible debenture-affiliate | 189,000 | ' | 189,000 |
Convertible Notes Payable | 1,446,454 | ' | ' |
Liability for derivative conversion feature - convertible note | 1,257,454 | ' | ' |
(Loss) income from change in value of conversion feature - convertible debenture | 748 | ' | ' |
Flux | ' | ' | ' |
Convertible Notes Payable | 212,692 | ' | ' |
Liability for derivative conversion feature - convertible note | 40,492 | ' | ' |
Convertible debenture - long term | 172,200 | ' | ' |
Original Issue Discount - convertible debt | 86,100 | ' | ' |
Cost of conversion feature - convertible note | $40,492 | ' | ' |
Note_6_Convertible_Promissory_1
Note 6 - Convertible Promissory Note (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Dec. 31, 2013 | Apr. 29, 2013 | |
Convertible note | $36,750 | $36,750 | ' |
Liability for derivative conversion feature - convertible note | 47,875 | 28,664 | ' |
(Loss) from change in value of conversion feature - convertible notes | 19,211 | ' | ' |
Asher | ' | ' | ' |
Convertible note | 36,750 | 36,750 | 32,500 |
Convertible Notes Payable | 84,625 | ' | ' |
Liability for derivative conversion feature - convertible note | 47,875 | ' | ' |
(Loss) from change in value of conversion feature - convertible notes | $19,211 | ' | ' |
Note_7_Commitments_and_Conting1
Note 7 - Commitments and Contingencies (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Royalty Fee Percentage | 10.00% | ' |
Royalty Guarantees, Commitments, Amount | $25,000 | ' |
Accrued Research Costs Due Licensor | 25,000 | 25,000 |
Professional fees | 135,000 | 10,308 |
Monthly Fee | ' | ' |
Professional fees | $45,000 | ' |
Note_8_Subsequent_Events_Detai
Note 8 - Subsequent Events (Details) (USD $) | Jun. 30, 2014 | Apr. 01, 2014 | Mar. 31, 2014 |
Details | ' | ' | ' |
Total Balance of Convertible Debt, Principal and Interest | ' | ' | $222,554 |
Convertible Debt Assigned to Forge Capital LLC | ' | 172,554 | ' |
Amended and Restated Debenture to 11235 Factor Fund LLC | ' | 50,000 | ' |
Debenture Issued to Flux | $325,169 | ' | ' |