Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 5-May-14 | |
Document and Entity Information: | ' | ' |
Entity Registrant Name | 'BioSolar Inc | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0001371128 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Common Stock, Shares Outstanding | ' | 10,187,280 |
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 | ' |
Date of Incorporation | 24-Apr-06 | ' |
CONDENSED_BALANCE_SHEETS_Unaud
CONDENSED BALANCE SHEETS (Unaudited) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
CURRENT ASSETS | ' | ' |
Cash | $94,634 | $158,350 |
Prepaid expenses | 13,518 | 8,303 |
TOTAL CURRENT ASSETS | 108,152 | 166,653 |
PROPERTY AND EQUIPMENT | ' | ' |
Machinery and equipment | 81,791 | 81,791 |
Less accumulated depreciation | -44,822 | -42,996 |
NET PROPERTY AND EQUIPMENT | 36,969 | 38,795 |
OTHER ASSETS | ' | ' |
Patents | 52,572 | 47,098 |
Deposit | 770 | 770 |
TOTAL OTHER ASSETS | 53,342 | 47,868 |
TOTAL ASSETS | 198,463 | 253,316 |
CURRENT LIABILITIES | ' | ' |
Accounts payable | 4,965 | 665 |
Accrued expenses | 128,465 | 50,148 |
Derivative liability | 316,166 | 361,170 |
Convertible promissory notes less debt discount of $95,215 and $152,928 respectively | 176,785 | 194,072 |
TOTAL CURRENT LIABILITIES | 626,381 | 606,055 |
SHAREHOLDERS' DEFICIT | ' | ' |
Preferred stock, $0.0001 par value; 10,000,000 authorized common shares | ' | ' |
Common stock, $0.0001 par value; 500,000,000 authorized common shares 10,187,280 and 9,041,281 shares issued and outstanding, respectively | 1,018 | 904 |
Additional paid in capital | 6,725,905 | 6,625,212 |
Deficit accumulated during the development stage | -7,154,841 | -6,978,855 |
TOTAL SHAREHOLDERS' DEFICIT | -427,918 | -352,739 |
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $198,463 | $253,316 |
CONDENSED_BALANCE_SHEETS_Paren
CONDENSED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position | ' | ' |
Preferred Stock, par or stated value | $0.00 | $0.00 |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Common Stock, par or stated value | $0.00 | $0.00 |
Common Stock, shares authorized | 500,000,000 | 500,000,000 |
Common Stock, shares issued | 10,187,280 | 9,041,281 |
Common Stock, shares outstanding | 10,187,280 | 9,041,281 |
Convertible Promissory Notes, Debt discount | $95,215 | $152,928 |
CONDENSED_STATEMENTS_OF_OPERAT
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | 95 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Income Statement | ' | ' | ' |
REVENUE | ' | ' | ' |
OPERATING EXPENSES | ' | ' | ' |
General and administrative expenses | 156,045 | 182,966 | 5,711,211 |
Research and development | ' | 1,315 | 842,310 |
Depreciation and amortization | 1,826 | 2,051 | 44,822 |
TOTAL OPERATING EXPENSES | 157,871 | 186,332 | 6,598,343 |
LOSS FROM OPERATIONS BEFORE OTHER INCOME | -157,871 | -186,332 | -6,598,343 |
TOTAL OTHER INCOME/(EXPENSES) | ' | ' | ' |
Interest income | 12 | 1 | 87,373 |
Penalties | ' | ' | -180 |
Loss on patent impairment | ' | ' | -107,704 |
Gain/(Loss) on change in derivative liability | 45,004 | -207,742 | -143,257 |
Interest expense | -63,131 | -35,151 | -392,730 |
TOTAL OTHER INCOME/(EXPENSES) | -18,115 | -242,892 | -556,498 |
NET LOSS | ($175,986) | ($429,224) | ($7,154,841) |
BASIC AND DILUTED LOSS PER SHARE | ($0.02) | ($0.07) | ' |
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED | 9,580,053 | 6,491,009 | ' |
CONDENSED_STATEMENTS_SHAREHOLD
CONDENSED STATEMENTS SHAREHOLDERS' DEFICIT (USD $) | Common Stock | Additional Paid-in Capital | Deficit Accumulated during the Development Stage | Total |
Shareholders' Equity, beginning of period, Value at Dec. 31, 2013 | $904 | $6,625,212 | ($6,978,855) | ($352,739) |
Shareholders' Equity, beginning of period, Shares at Dec. 31, 2013 | 9,041,281 | ' | ' | ' |
Issuance of common shares for converted promissory notes, Value | 114 | 78,129 | ' | 78,243 |
Issuance of common shares for converted promissory notes, Shares | 1,145,999 | ' | ' | ' |
Stock based compensation | ' | 22,564 | ' | 22,564 |
Net loss | ' | ' | -175,986 | -175,986 |
Shareholders' Equity, end of period, Value at Mar. 31, 2014 | $1,018 | $6,725,905 | ($7,154,841) | ($427,918) |
Shareholders' Equity, end of period, Shares at Mar. 31, 2014 | 10,187,280 | ' | ' | ' |
CONDENSED_STATEMENTS_OF_CASH_F
CONDENSED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | 95 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' | ' |
Net loss | ($175,986) | ($429,224) | ($7,154,841) |
Depreciation and amortization expense | 1,826 | 2,051 | 44,822 |
Issuance of stock for services | ' | ' | 325,260 |
Stock based compensation | 22,564 | 46,444 | 864,638 |
Beneficial conversion feature | ' | -4,584 | ' |
Loss on patent impairment | ' | ' | 107,704 |
Gain on change in derivative liability | -45,004 | 207,742 | 143,257 |
Amortization of debt discount recognized as interest expense | 57,713 | 37,712 | 365,155 |
Prepaid expenses | -5,215 | -18,170 | -13,518 |
Deposits | ' | ' | -770 |
Accounts payable | 4,300 | 5,848 | 4,965 |
Accrued expenses | 81,560 | 67,719 | 380,204 |
NET CASH USED IN OPERATING ACTIVITIES | -58,242 | -84,462 | -4,933,124 |
Purchase of equipment | ' | ' | -81,791 |
Patent expenditures | -5,474 | -455 | -160,276 |
NET CASH USED IN INVESTING ACTIVITIES | -5,474 | -455 | -242,067 |
Proceeds from convertible promissory notes | ' | 45,000 | 252,500 |
Proceeds from common stock subscription payable | ' | ' | 203,000 |
Proceeds from issuance of common stock, net of issuance cost | ' | 111,050 | 4,814,325 |
NET CASH PROVIDED IN FINANCING ACTIVITIES | ' | 156,050 | 5,269,825 |
NET INCREASE/(DECREASE) IN CASH | -63,716 | 71,133 | 94,634 |
CASH, BEGINNING OF PERIOD | 158,350 | 42,942 | ' |
CASH, END OF PERIOD | 94,634 | 114,075 | 94,634 |
Interest paid | ' | ' | 1,859 |
Taxes paid | ' | ' | ' |
Common stock issued for services | ' | ' | 5,867 |
Common stock issued for debt | $78,243 | ' | $515,116 |
1_Basis_of_Presentation
1. Basis of Presentation | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
1. Basis of Presentation | ' |
1. Basis of Presentation | |
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2013. | |
Going Concern | |
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has not generated significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company received a purchase order from a specialty PV manufacturer during 2013, and expect to receive additional orders during 2014. The Company has obtained funds from its shareholders since its inception through the period ended March 31, 2014. Management believes existing shareholders and prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business. There is no assurance that the Company will be able to continue raising the required capital for its operations. |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Notes | ' | ||||
2. Summary of Significant Accounting Policies | ' | ||||
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||
This summary of significant accounting policies of the Company are presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. | |||||
Development Stage Activities and Operations | |||||
The Company is in its initial stages of formation and has not had significant revenues. A development stage activity is one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant. | |||||
Revenue Recognition | |||||
The Company will recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. To date, the Company has not had significant revenues and is in the development stage. | |||||
Cash and Cash Equivalent | |||||
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. | |||||
Investments | |||||
Certificate of Deposits with banking institutions are short-term investments with initial maturities of more than 90 days. The carrying amount of these investments is a reasonable estimate of fair value due to their short-term nature. | |||||
Use of Estimates | |||||
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those estimates. | |||||
Intangible Assets | |||||
Intangible assets consist of patents that are initially measured at the lower of cost or fair value. The patents are deemed to have an indefinite life and are not amortized. The patents are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified. | |||||
Stock-Based Compensation | |||||
The Company measures the cost of employee services received in exchange for an equity award based on the grant-date fair value of the award. All grants under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which an employee is required to provide service in exchange for the award (the vesting period). | |||||
Compensation expense for options granted to non-employees is determined in accordance with the standard as the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. Compensation expense for awards granted to non-employees is re-measured each period. | |||||
Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and stock price volatility. The Company uses the Black-Scholes option-pricing model to value its stock option awards which incorporate the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. | |||||
Loss per Share Calculations | |||||
Loss per Share dictates the calculation of basic earnings per share and diluted earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. No shares for employee options or warrants were used in the calculation of the loss per share as they were all anti-dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the period ended March 31, 2014, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded 699,167 exercisable options and 245,000 warrants for the period ended March 31, 2014. | |||||
Fair Value of Financial Instruments | |||||
Fair Value of Financial Instruments, requires disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2014, the amounts reported for cash, inventory, prepaid expenses, accounts payable, and accrued expenses, approximate the fair value because of their short maturities. | |||||
We adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) for financial instruments measured as fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements. | |||||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: | |||||
· Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | |||||
· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |||||
· Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. | |||||
We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at March 31, 2014: | |||||
Total | (Level 1) | (Level 2) | (Level 3) | ||
Assets | $- | $- | $- | $- | |
Total assets measured at fair value | $- | $- | $- | $- | |
Liabilities | |||||
Derivative Liability | $316,166 | $- | $- | $316,166 | |
Total liabilities measured at fair value | $316,166 | $- | $- | $316,166 | |
The following is a reconciliation of the derivative liability for which Level 3 inputs were used in determining the approximate fair value: | |||||
Beginning balance as of January 1, 2014 | $361,170 | ||||
Fair value of derivative liabilities issued | -- | ||||
Extinguishment of derivative liability upon conversion of notes payable | (80,012) | ||||
Loss on change in derivative liability | 35,008 | ||||
Ending balance as of March 31, 2014 | $316,166 | ||||
Recently Issued Accounting Pronouncements | |||||
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements. |
3_Capital_Stock
3. Capital Stock | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
3. Capital Stock | ' |
3. CAPITAL STOCK | |
During the three months ended March 31, 2014, the Company issued 1,145,999 shares of common stock at prices ranging from $0.046 to $0.082, for conversion of $75,000 in convertible promissory notes, including $3,243 in accrued interest |
4_Stock_Options_and_Warrants
4. Stock Options and Warrants | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Notes | ' | |||
4. Stock Options and Warrants | ' | |||
4. STOCK OPTIONS AND WARRANTS | ||||
During the three months ended March 31, 2014, the Company did not grant any stock options. | ||||
Weighted | ||||
Number | average | |||
of | exercise | |||
Options | price | |||
Outstanding, January 1, 2014 | 836,667 | $1.43 | ||
Granted | - | - | ||
Exercised | - | - | ||
Expired | - | - | ||
Outstanding, March 31, 2014 | 836,667 | $1.43 | ||
Exercisable at March 31, 2014 | 699,167 | $1.64 | ||
Weighted | ||||
Average | ||||
Stock | Stock | Remaining | ||
Exercisable | Options | Options | Contractual | |
Prices | Outstanding | Exercisable | Life (years) | |
$4.05 | 236,667 | 236,667 | 1.98 | |
0.4 | 600,000 | 462,500 | 3.92 | |
Total | 836,667 | 699,167 | ||
The stock-based compensation expense recognized in the statement of operations during the three months ended March 31, 2014 and 2013, related to the granting of these options was $22,564 and 46,444, respectively. | ||||
Warrants | ||||
During the three months ended March 31, 2014, the Company did not grant any warrants. As of March 31, 2014, 245,000 warrants are outstanding. The warrant terms are 5 years with 95,000 warrants expiring in October 2016 and 150,000 warrants expiring in October 2017. | ||||
Weighted | ||||
Number | average | |||
of | exercise | |||
Warrants | price | |||
Outstanding, January 1, 2014 | 245,000 | $0.97 | ||
Granted | - | - | ||
Exercised | - | - | ||
Expired | - | - | ||
Outstanding, March 31, 2014 | 245,000 | $0.97 | ||
Exercisable at March 31, 2014 | 245,000 | $0.97 | ||
5_Convertible_Promissory_Notes
5. Convertible Promissory Notes | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
5. Convertible Promissory Notes | ' |
5. CONVERTIBLE PROMISSORY NOTES | |
On January 18, 2013, the Company entered into a securities purchase agreement for the sale of 10% convertible promissory note for the aggregate principal amount of $80,000, tobe advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received an advance of $10,000. On April 16, 2013, the Company received an additional advance of $25,000. The total advances received as of March 31, 2014 was $35,000, of which $10,000 in principal, and $687in accrued interest was converted into 106,877 shares of common stock at fair value of $0.43 per share on September 29, 2013. During the month of July 2013, the Company extended the maturity date of the note from six (6) months to eighteen (18) months from the effective date of each advance. The note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of a) $0.40 per share b) fifty percent (50%) of the lowest trading price of common stock recorded on any trade day after the effective date, or c) the lowest effective price per share granted after the effective date. The fair value of the notes has been determined by using Black-Scholes pricing model with an expected life of more than a year. The Company recorded debt discount of $35,000 related to the conversion feature of the notes, along with derivative liabilities at inception. As of March 31, 2014, total debt discount amortized, and recorded as interest expense was $29,735, resulting in a remaining net debt discount of $5,265 at March 31, 2014. | |
On March 1, 2013, the Company entered into a securities purchase agreement, providing for the sale by the Company of a 10% unsecured Convertible Note in the aggregate principal amount of $100,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received an advance of$10,000. On March 20, 2013, the Company received an additional advance of $25,000. The total advances received as of March 31, 2014 was $35,000. The note was amended and extended for six (6) months. The note matures on August 28, 2014. The note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.20 per share or fifty percent (50%) of the lowest trading price recorded on any trade day after the effective date. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of less than a year. The Company recorded debt discount of $35,000 related to the conversion feature of the note, along with derivative liability at inception. As of March 31, 2014, the total debt discount amortized, and recorded as interest expense was $33,867, resulting in a remaining net debt discount of $1,133 at March 31, 2014. | |
On June 5, 2013, the Company issued two 5% convertible promissory notes in exchange for services rendered by the Company’s Chief Executive Officer ($114,000) and Chief Technology Officer ($128,000) in the aggregate amount of $242,000. On March 5, 2014, the Company issued 694,191 shares of common stock upon partial conversion of principal in the amount of $55,000, plus accrued interest of $2,063, leaving a remaining balance of $187,000. The notes are convertible into shares of common stock of the Company at a conversion price equal to the lesser of $0.24 per share or the closing price per share of common stock recorded on the trading day immediately preceding the date of conversion. The notes mature two (2) years from their effective dates. The fair value of the notes has been determined by using the Black-Scholes pricing model with an expected life of two (2) years. The Company recorded a debt discount of $160,479 related to the conversion feature of the note, along with a derivative liability at inception. As of March 31, 2014, the total debt discount amortized, and recorded as interest expense was $79,675, resulting in a remaining net debt discount of $80,804 at March 31, 2014. | |
On June 21, 2013, the Company entered into a securities purchase agreement for the sale of a 10% convertible promissory note in the aggregate principal amount of $100,000, to be advanced in amounts at the lender’s discretion. Upon execution of the securities purchase agreement, the Company received an advance of $25,000. On July 26, 2013, the Company received an additional advance of $25,000. The total advances received on the note as of March 31, 2014 was $50,000. During the month of January 2014, the Company issued 451,808 shares of common stock upon partial conversion of principal in the amount of $20,000 , plus accrued interest of $1,180, leaving a remaining balance of $25,000. The note matures one (1) year from the effective date of each advance. On December 5, 2013, the Company amended the note and replaced the conversion price to the lesser of $0.40 per share and substituted the 50% of the lowest trade price recorded prior to conversion, to 50% of the average three (3) lowest trade prices recorded during the twenty-five (25) previous trading days. The modification was analyzed under ASC 470-50, to determine if the change in fair value of the conversion feature was greater than 10% of the carrying value of the debt. As a result, in accordance with ASC 470-50, the Company deemed the terms of the amendment not be substantially different and treated the convertible note as a modification rather than an extinguishment. The fair value of the note has been determined by using the Black-Scholes pricing model with an expected life of one (1) year. The Company recorded a debt discount of $50,000 related to the conversion feature of the note, along with a derivative liability at inception. As of March 31, 2014, the debt discount was amortized, and recorded as interest expense in the amount of $41,986, resulting in a remaining net debt discount of $8,014 at March 31, 2014. | |
We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory note was not afforded the exemption for conventional convertible instruments due to its variable conversion rate. The note has no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting standards for equity classification. The Company elected to recognize the note under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the note in its entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically according to the stock price fluctuations. |
6_Derivative_Liabilities
6. Derivative Liabilities | 3 Months Ended | |
Mar. 31, 2014 | ||
Notes | ' | |
6. Derivative Liabilities | ' | |
6. DERIVATIVE LIABILITIES | ||
The convertible notes issued and described in Note 5 do not have fixed settlement provisions because their conversion prices are not fixed. The conversion feature has been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations. At December, 31, 2013, the outstanding fair value of the convertible notes accounted as derivative liabilities amounted to $361,170. | ||
During the three months ended March 31, 2014, approximately $75,000 convertible notes were converted. As a result of the conversion of these notes, the Company recorded a reduction of $80,012 due to the extinguishment of the corresponding derivative liability. In addition, during the three months ended March 31, 2014, the Company recognized a loss of $35,008 to account for the change in fair value of the derivative liabilities. At March 31, 2014, the fair value of the derivative liability was $316,166. | ||
For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows: | ||
Risk free interest rate | 0.04% - 0.38 | |
Stock volatility factor | 65.07% - 274.85 | |
Weighted average expected option life | 6 months - 2 years | |
Expected dividend yield | None |
7_Subsequent_Event
7. Subsequent Event | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
7. Subsequent Event | ' |
7. SUBSEQUENT EVENT | |
Management has evaluated subsequent events according to the requirements of ASC TOPIC 855 and has determined that there are no subsequent events to report. | |
On May 2, 2014, the Company received $50,000 in consideration upon execution of a securities purchase agreement for the sale of a 10% convertible promissory note in the aggregate principal amount of $500,000, to be advanced in amounts at the lender’s discretion. |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Development Stage Activities and Operations | ' |
Development Stage Activities and Operations | |
The Company is in its initial stages of formation and has not had significant revenues. A development stage activity is one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant. | |
Revenue Recognition | ' |
Revenue Recognition | |
The Company will recognize revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. To date, the Company has not had significant revenues and is in the development stage. | |
Cash and Cash Equivalent | ' |
Cash and Cash Equivalent | |
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. | |
Investments | ' |
Investments | |
Certificate of Deposits with banking institutions are short-term investments with initial maturities of more than 90 days. The carrying amount of these investments is a reasonable estimate of fair value due to their short-term nature. | |
Use of Estimates | ' |
Use of Estimates | |
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the accompanying financial statements. Significant estimates made in preparing these financial statements include the estimate of useful lives of property and equipment, the deferred tax valuation allowance, derivative liabilities and the fair value of stock options. Actual results could differ from those estimates. | |
Intangible Assets | ' |
Intangible Assets | |
Intangible assets consist of patents that are initially measured at the lower of cost or fair value. The patents are deemed to have an indefinite life and are not amortized. The patents are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified. | |
Stock-based Compensation | ' |
Stock-Based Compensation | |
The Company measures the cost of employee services received in exchange for an equity award based on the grant-date fair value of the award. All grants under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which an employee is required to provide service in exchange for the award (the vesting period). | |
Compensation expense for options granted to non-employees is determined in accordance with the standard as the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. Compensation expense for awards granted to non-employees is re-measured each period. | |
Determining the appropriate fair value of the stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based payment and stock price volatility. The Company uses the Black-Scholes option-pricing model to value its stock option awards which incorporate the Company’s stock price, volatility, U.S. risk-free rate, dividend rate, and estimated life. | |
Loss Per Share Calculations | ' |
Loss per Share Calculations | |
Loss per Share dictates the calculation of basic earnings per share and diluted earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. No shares for employee options or warrants were used in the calculation of the loss per share as they were all anti-dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the period ended March 31, 2014, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The Company has excluded 699,167 exercisable options and 245,000 warrants for the period ended March 31, 2014. | |
Recently Issued Accounting Pronouncements | ' |
Recently Issued Accounting Pronouncements | |
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements. |
2_Summary_of_Significant_Accou2
2. Summary of Significant Accounting Policies: 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 | ' | ||||
Total | (Level 1) | (Level 2) | (Level 3) | ||
Assets | $- | $- | $- | $- | |
Total assets measured at fair value | $- | $- | $- | $- | |
Liabilities | |||||
Derivative Liability | $316,166 | $- | $- | $316,166 | |
Total liabilities measured at fair value | $316,166 | $- | $- | $316,166 |
2_Summary_of_Significant_Accou3
2. Summary of Significant Accounting Policies: Schedule of Derivative Liabilities at Fair Value (Tables) | 3 Months Ended | |
Mar. 31, 2014 | ||
Tables/Schedules | ' | |
Schedule of Derivative Liabilities at Fair Value | ' | |
Beginning balance as of January 1, 2014 | $361,170 | |
Fair value of derivative liabilities issued | -- | |
Extinguishment of derivative liability upon conversion of notes payable | (80,012) | |
Loss on change in derivative liability | 35,008 | |
Ending balance as of March 31, 2014 | $316,166 |
4_Stock_Options_and_Warrants_S
4. Stock Options and Warrants: Schedule of Share-based Compensation, Stock Options, Activity (Tables) | 3 Months Ended | ||
Mar. 31, 2014 | |||
Tables/Schedules | ' | ||
Schedule of Share-based Compensation, Stock Options, Activity | ' | ||
Weighted | |||
Number | average | ||
of | exercise | ||
Options | price | ||
Outstanding, January 1, 2014 | 836,667 | $1.43 | |
Granted | - | - | |
Exercised | - | - | |
Expired | - | - | |
Outstanding, March 31, 2014 | 836,667 | $1.43 | |
Exercisable at March 31, 2014 | 699,167 | $1.64 | |
4_Stock_Options_and_Warrants_S1
4. Stock Options and Warrants: Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range (Tables) | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Tables/Schedules | ' | |||
Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range | ' | |||
Weighted | ||||
Average | ||||
Stock | Stock | Remaining | ||
Exercisable | Options | Options | Contractual | |
Prices | Outstanding | Exercisable | Life (years) | |
$4.05 | 236,667 | 236,667 | 1.98 | |
0.4 | 600,000 | 462,500 | 3.92 | |
Total | 836,667 | 699,167 |
4_Stock_Options_and_Warrants_S2
4. Stock Options and Warrants: Schedule of Stockholders' Equity Note, Warrants or Rights (Tables) | 3 Months Ended | ||
Mar. 31, 2014 | |||
Tables/Schedules | ' | ||
Schedule of Stockholders' Equity Note, Warrants or Rights | ' | ||
Weighted | |||
Number | average | ||
of | exercise | ||
Warrants | price | ||
Outstanding, January 1, 2014 | 245,000 | $0.97 | |
Granted | - | - | |
Exercised | - | - | |
Expired | - | - | |
Outstanding, March 31, 2014 | 245,000 | $0.97 | |
Exercisable at March 31, 2014 | 245,000 | $0.97 | |
6_Derivative_Liabilities_Sched
6. Derivative Liabilities: Schedule of Derivative Liabilities Valuation Assumptions (Tables) | 3 Months Ended | |
Mar. 31, 2014 | ||
Tables/Schedules | ' | |
Schedule of Derivative Liabilities Valuation Assumptions | ' | |
Risk free interest rate | 0.04% - 0.38 | |
Stock volatility factor | 65.07% - 274.85 | |
Weighted average expected option life | 6 months - 2 years | |
Expected dividend yield | None |
2_Summary_of_Significant_Accou4
2. Summary of Significant Accounting Policies: Loss Per Share Calculations (Details) | 3 Months Ended |
Mar. 31, 2014 | |
Warrant | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 245,000 |
Employee Stock Option | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 699,167 |
2_Summary_of_Significant_Accou5
2. Summary of Significant Accounting Policies: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) (USD $) | Mar. 31, 2014 |
Assets | $0 |
Total assets measured at fair value | 0 |
Liabilities | ' |
Derivative Liability | 316,166 |
Total liabilities measured at fair value | 316,166 |
Fair Value, Inputs, Level 1 | ' |
Assets | 0 |
Total assets measured at fair value | 0 |
Liabilities | ' |
Derivative Liability | 0 |
Total liabilities measured at fair value | 0 |
Fair Value, Inputs, Level 2 | ' |
Assets | 0 |
Total assets measured at fair value | 0 |
Liabilities | ' |
Derivative Liability | 0 |
Total liabilities measured at fair value | 0 |
Fair Value, Inputs, Level 3 | ' |
Assets | 0 |
Total assets measured at fair value | 0 |
Liabilities | ' |
Derivative Liability | 316,166 |
Total liabilities measured at fair value | $316,166 |
2_Summary_of_Significant_Accou6
2. Summary of Significant Accounting Policies: Schedule of Derivative Liabilities at Fair Value (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Details | ' |
Beginning balance | $361,170 |
Fair value of derivative liabilities issued | 0 |
Extinguishment of derivative liability upon conversion of notes payable | -80,012 |
Loss on change in derivative liability | 35,008 |
Ending balance | $316,166 |
3_Capital_Stock_Details
3. Capital Stock (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Convertible notes converted, Value | $78,243 |
Convertible Debt | ' |
Convertible notes converted, Value | 75,000 |
Common Stock | ' |
Issuance of common shares for converted promissory notes, Shares | 1,145,999 |
Convertible notes converted, Value | 114 |
Common Stock | Accrued Interest Converted | ' |
Convertible notes converted, Value | 3,243 |
Common Stock | Convertible Debt | ' |
Convertible notes converted, Value | $75,000 |
Common Stock | Minimum | ' |
Equity Issuance, Per Share Amount | $0.05 |
Common Stock | Maximum | ' |
Equity Issuance, Per Share Amount | $0.08 |
Common Stock | Purchase 1 | ' |
Issuance of common shares for converted promissory notes, Shares | 1,145,999 |
4_Stock_Options_and_Warrants_S3
4. Stock Options and Warrants: Schedule of Share-based Compensation, Stock Options, Activity (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Details | ' |
Options Outstanding, beginning of period | 836,667 |
Options Outstanding, Weighted average exercise price, beginning of period | $1.43 |
Options Granted | 0 |
Options Granted, Weighted average exercise price | $0 |
Options Exercised | 0 |
Options Exercised, Weighted average exercise price | $0 |
Options Expired | 0 |
Options Expired, Weighted average exercise price | $0 |
Options Outstanding, end of period | 836,667 |
Options Outstanding, Weighted average exercise price, end of period | $1.43 |
Options Exercisable at the end of period | 699,167 |
Options Exercisable, Weighted average exercise price | $1.64 |
4_Stock_Options_and_Warrants_S4
4. Stock Options and Warrants: Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Stock Options Outstanding | 836,667 |
Stock Options Exercisable | 699,167 |
4.05 | ' |
Exercisable Prices, Upper Range Limit | $4.05 |
Stock Options Outstanding | 236,667 |
Stock Options Exercisable | 236,667 |
Weighted Average Remaining Contractual Life (years) | '1 year 11 months 23 days |
0.4 | ' |
Stock Options Outstanding | 600,000 |
Stock Options Exercisable | 462,500 |
Weighted Average Remaining Contractual Life (years) | '3 years 11 months 1 day |
Exercisable Prices, Lower Range Limit | $0.40 |
4_Stock_Options_and_Warrants_D
4. Stock Options and Warrants (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Warrants, Outstanding | 245,000 | ' |
Warrant Terms | '5 years | ' |
October 2016 Expiration Date | ' | ' |
Warrants, Outstanding | 95,000 | ' |
October 2017 Expiration Date | ' | ' |
Warrants, Outstanding | 150,000 | ' |
Employee Stock Option | ' | ' |
Stock-based Compensation Expense | $22,564 | $46,444 |
4_Stock_Options_and_Warrants_S5
4. Stock Options and Warrants: Schedule of Stockholders' Equity Note, Warrants or Rights (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Details | ' |
Warrants Outstanding, beginning of period | 245,000 |
Warrants Outstanding, Weighted average exercise price, beginning of period | $0.97 |
Warrants, Granted | 0 |
Warrants Granted, Weighted average exercise price | $0 |
Warrants, Exercised | 0 |
Warrants Exercised, Weighted average exercise price | $0 |
Warrants, Expired | 0 |
Warrants Expired, Weighted average exercise price | $0 |
Warrants Outstanding, end of period | 245,000 |
Warrants Outstanding, Weighted average exercise price, end of period | $0.97 |
Warrants, Exercisable | 245,000 |
Warrants Exercisable, Weighted average exercise price | $0.97 |
5_Convertible_Promissory_Notes1
5. Convertible Promissory Notes (Details) (USD $) | 3 Months Ended | 95 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | |||||||||||||||||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Jun. 30, 2013 | Jan. 18, 2013 | Mar. 31, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 01, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 05, 2014 | Jun. 05, 2013 | Jun. 05, 2013 | Jun. 05, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Jan. 31, 2014 | Jun. 21, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | |
Securities Purchase Agreements Unsecured Convertible Notes 1 | Securities Purchase Agreements Unsecured Convertible Notes 1 | Securities Purchase Agreements Unsecured Convertible Notes 1 | Securities Purchase Agreements Unsecured Convertible Notes 1 | Securities Purchase Agreements Unsecured Convertible Notes 1 | Securities Purchase Agreements Unsecured Convertible Notes 1 | Securities Purchase Agreements Unsecured Convertible Notes 1 | Securities Purchase Agreements Unsecured Convertible Notes 2 | Securities Purchase Agreements Unsecured Convertible Notes 2 | Securities Purchase Agreements Unsecured Convertible Notes 2 | Securities Purchase Agreements Unsecured Convertible Notes 2 | Securities Purchase Agreements Unsecured Convertible Notes 2 | Securities Purchase Agreements Unsecured Convertible Notes 3 | Securities Purchase Agreements Unsecured Convertible Notes 3 | Securities Purchase Agreements Unsecured Convertible Notes 3 | Securities Purchase Agreements Unsecured Convertible Notes 3 | Securities Purchase Agreements Unsecured Convertible Notes 3 | Securities Purchase Agreements Unsecured Convertible Notes 3 | Securities Purchase Agreements Unsecured Convertible Notes 3 | Securities Purchase Agreements Unsecured Convertible Notes 4 | Securities Purchase Agreements Unsecured Convertible Notes 4 | Securities Purchase Agreements Unsecured Convertible Notes 4 | Securities Purchase Agreements Unsecured Convertible Notes 4 | Securities Purchase Agreements Unsecured Convertible Notes 4 | Securities Purchase Agreements Unsecured Convertible Notes 4 | Securities Purchase Agreements Unsecured Convertible Notes 4 | |||||
Advance 1 | Advance 2 | Principal | Interest | Advance 1 | Advance 2 | Chief Executive Officer | Officer | Principal | Interest | Advance 1 | Advance 2 | Principal | Interest | |||||||||||||||||
Debt Instrument, Interest Rate, Stated Percentage | ' | ' | ' | ' | ' | ' | 10.00% | ' | ' | ' | ' | ' | ' | 10.00% | ' | ' | ' | ' | ' | 5.00% | 5.00% | ' | ' | ' | ' | 10.00% | ' | ' | ' | ' |
Debt Instrument, Face Amount | ' | ' | ' | ' | ' | ' | $80,000 | ' | ' | ' | ' | ' | ' | $100,000 | ' | ' | ' | ' | $242,000 | $114,000 | $128,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Proceeds from convertible promissory notes | ' | 45,000 | 252,500 | ' | ' | 35,000 | ' | 10,000 | 25,000 | ' | ' | ' | 35,000 | ' | 10,000 | 25,000 | ' | ' | ' | ' | ' | ' | ' | 50,000 | ' | ' | 25,000 | 25,000 | ' | ' |
Debt Conversion, Original Debt, Amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10,000 | 687 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 55,000 | 2,063 | ' | ' | ' | ' | ' | 20,000 | 1,180 |
Debt Conversion, Converted Instrument, Shares Issued | ' | ' | ' | ' | ' | 106,877 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 694,191 | ' | ' | ' | ' | ' | ' | 451,808 | ' | ' | ' | ' | ' | ' |
Debt Instrument, Convertible, Conversion Price | ' | ' | ' | ' | ' | $0.43 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Description | ' | ' | ' | ' | 'During the month of July 2013, the Company extended the maturity date of the note from six (6) months to eighteen (18) months from the effective date of each advance. The note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of a) $0.40 per share b) fifty percent (50%) of the lowest trading price of common stock recorded on any trade day after the effective date, or c) the lowest effective price per share granted after the effective date. | ' | ' | ' | ' | ' | ' | 'The note was amended and extended for six (6) months. The note matures on August 28, 2014. The note is convertible into shares of common stock of the Company at a price equal to a variable conversion price of the lesser of $0.20 per share or fifty percent (50%) of the lowest trading price recorded on any trade day after the effective date | ' | ' | ' | ' | 'The notes are convertible into shares of common stock of the Company at a conversion price equal to the lesser of $0.24 per share or the closing price per share of common stock recorded on the trading day immediately preceding the date of conversion. The notes mature two (2) years from their effective dates. | ' | ' | ' | ' | ' | ' | 'The note matures one (1) year from the effective date of each advance. On December 5, 2013, the Company amended the note and replaced the conversion price to the lesser of $0.40 per share and substituted the 50% of the lowest trade price recorded prior to conversion, to 50% of the average three (3) lowest trade prices recorded during the twenty-five (25) previous trading days. The modification was analyzed under ASC 470-50, to determine if the change in fair value of the conversion feature was greater than 10% of the carrying value of the debt. As a result, in accordance with ASC 470-50, the Company deemed the terms of the amendment not be substantially different and treated the convertible note as a modification rather than an extinguishment | ' | ' | ' | ' | ' | ' |
Fair Value Assumptions, Expected Term, Simplified Method | ' | ' | ' | ' | 'expected life of more than a year | ' | ' | ' | ' | ' | ' | 'expected life of less than a year | ' | ' | ' | ' | 'expected life of two (2) years | ' | ' | ' | ' | ' | ' | 'expected life of one (1) year | ' | ' | ' | ' | ' | ' |
Convertible Promissory Notes, Debt discount | 95,215 | ' | 95,215 | 152,928 | 5,265 | ' | 35,000 | ' | ' | ' | ' | 1,133 | 35,000 | ' | ' | ' | 80,804 | ' | 160,479 | ' | ' | ' | ' | 8,014 | ' | 50,000 | ' | ' | ' | ' |
Amortization of debt discount recognized as interest expense | 57,713 | 37,712 | 365,155 | ' | 29,735 | ' | ' | ' | ' | ' | ' | 33,867 | ' | ' | ' | ' | 79,675 | ' | ' | ' | ' | ' | ' | 41,986 | ' | ' | ' | ' | ' | ' |
Long-term Debt, Gross | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 187,000 | ' | ' | ' | ' | ' | ' | 25,000 | ' | ' | ' | ' | ' |
Debt Instrument, Fair Value Disclosure | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $100,000 | ' | ' | ' | ' |
6_Derivative_Liabilities_Detai
6. Derivative Liabilities (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | |
Derivative liability | $316,166 | $361,170 |
Convertible notes converted, Value | 78,243 | ' |
Extinguishment of derivative liability upon conversion of notes payable | 80,012 | ' |
Loss on change in derivative liability | 35,008 | ' |
Fair value of derivative liability | 316,166 | 361,170 |
Convertible Debt | ' | ' |
Convertible notes converted, Value | $75,000 | ' |
6_Derivative_Liabilities_Sched1
6. Derivative Liabilities: Schedule of Derivative Liabilities Valuation Assumptions (Details) | 3 Months Ended |
Mar. 31, 2014 | |
Expected dividend yield | 0.00% |
Minimum | ' |
Risk free interest rate | 0.04% |
Stock volatility factor | 65.07% |
Weighted average expected option life | '6 months |
Maximum | ' |
Risk free interest rate | 0.38% |
Stock volatility factor | 274.85% |
Weighted average expected option life | '2 years |
7_Subsequent_Event_Details
7. Subsequent Event (Details) (USD $) | 3 Months Ended | 95 Months Ended | 3 Months Ended |
Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | |
Subsequent Event | |||
Securities Purchase Agreements Unsecured Convertible Notes 5 | |||
Proceeds from convertible promissory notes | $45,000 | $252,500 | $50,000 |
Debt Instrument, Interest Rate, Stated Percentage | ' | ' | 10.00% |
Debt Instrument, Face Amount | ' | ' | $500,000 |