Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Aug. 22, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | US Highland, Inc. | |
Entity Central Index Key | 1,381,871 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 58,104,336 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Current Assets | ||
Cash and cash equivalents | $ 11,065 | $ 13,563 |
Prepaid expenses | 2,500 | 93,029 |
Deposit on Highlon acquisition | 150,000 | |
Loans receivable | 83,657 | |
Total Current Assets | 97,222 | 256,592 |
Deposits | 4,664 | 4,664 |
Property and equipment, net | 2,456 | 4,708 |
Total Assets | 104,342 | 265,964 |
Current Liabilities | ||
Accounts payable | 634,209 | 626,883 |
Accrued liabilities ($313,905 and $267,596 related parties, respectively) | 628,402 | 615,324 |
Advances from Highlon | 26,000 | |
Convertible debentures ($69,954 and $nil related parties, respectively), net | 117,812 | 52,333 |
Derivative liabilities | 656,365 | 16,886,192 |
Loans payable ($220,000 and $220,000 related parties, respectively) | 412,000 | 367,000 |
Total Liabilities | 2,448,788 | 18,573,732 |
Commitments | ||
Stockholder's Deficit | ||
Preferred stock, 40,000 shares authorized, par value $0.01; no shares issued and outstanding | ||
Common stock, 500,000,000 shares authorized, $0.01 par value; 58,162,669 shares issued and 58,104,336 shares outstanding | 581,627 | 581,627 |
Common stock reserved for future issuance; 354,500 and 316,500 shares, respectively | 201,519 | 197,865 |
Treasury stock, at cost 58,333 shares | (773,500) | (773,500) |
Additional Paid-in capital | 69,697,929 | 69,697,929 |
Accumulated deficit | (72,085,886) | (88,045,554) |
Total Stockholder's Deficit | (2,344,446) | (18,307,768) |
Total Liabilities and Stockholder's Deficit | 104,342 | 265,964 |
Series A Preferred Stock [Member] | ||
Stockholder's Deficit | ||
Preferred stock, 40,000 shares authorized, par value $0.01; no shares issued and outstanding | 33,815 | 33,815 |
Series B Preferred Stock [Member] | ||
Stockholder's Deficit | ||
Preferred stock, 40,000 shares authorized, par value $0.01; no shares issued and outstanding | $ 50 | $ 50 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Current Liabilities | ||
Accrued liabilities - related parties | $ 313,905 | $ 267,596 |
Convertible debentures | 69,954 | 0 |
Loans payable - related parties current | $ 220,000 | $ 220,000 |
Stockholders' Deficiency | ||
Preferred Stock, shares authorized | 40,000 | 40,000 |
Preferred Stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Common Stock, shares authorized | 500,000,000 | 500,000,000 |
Common Stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares issued | 58,162,669 | 58,162,669 |
Common Stock, shares outstanding | 58,104,336 | 58,104,336 |
Common stock reserved for future issuance | 354,500 | 316,500 |
Treasury Stock - shares | 58,333 | 58,333 |
Series A Preferred Stock [Member] | ||
Stockholders' Deficiency | ||
Preferred Stock, shares authorized | 3,500,000 | 3,500,000 |
Preferred Stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Preferred Stock, shares issued | 3,381,520 | 3,381,520 |
Preferred Stock, shares outstanding | 3,381,520 | 3,381,520 |
Series B Preferred Stock [Member] | ||
Stockholders' Deficiency | ||
Preferred Stock, shares authorized | 10,000 | 10,000 |
Preferred Stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Preferred Stock, shares issued | 5,000 | 5,000 |
Preferred Stock, shares outstanding | 5,000 | 5,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Consolidated Statements Of Operations | ||||
Revenue | ||||
Operating Expenses | ||||
Depreciation | 1,126 | 1,547 | 2,252 | 3,301 |
General and administrative | 29,923 | 80,191 | 168,178 | 187,776 |
Professional fees | 53,099 | 31,768 | 117,989 | 54,920 |
Total Operating Expenses | 84,148 | 113,506 | 288,419 | 245,997 |
Operating Loss | (84,148) | (113,506) | (288,419) | (245,997) |
Other Income (Expense) | ||||
Interest expense | (188,241) | (145,992) | (249,821) | (256,281) |
Change in fair value of derivatives | 3,711,355 | (35,777,246) | 16,633,366 | (43,806,560) |
Loss on settlement with Highlon | (118,115) | |||
Equity in the net loss of joint venture | (19,654) | (19,654) | ||
Other income | 1,789 | 2,311 | 25 | |
Total Other Income (Expense) | 3,505,249 | (35,923,238) | 16,248,087 | (44,062,816) |
Net (Loss) Income | $ 3,421,101 | $ (36,036,744) | $ 15,959,668 | $ (44,308,813) |
Net (Loss) Per Common Share - Basic | $ 0.06 | $ (0.46) | $ 0.27 | $ (0.57) |
Net (Loss) Per Common Share - Diluted | $ 0.01 | $ (0.46) | $ 0.06 | $ (0.57) |
Basic weighted average common shares outstanding | 58,163,000 | 77,728,000 | 58,163,000 | 77,728,000 |
Diluted weighted average common shares outstanding | 282,000,000 | 77,728,000 | 282,003,000 | 77,728,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Operating Activities | ||
Net income (loss) | $ 15,959,668 | $ (44,308,813) |
Adjustments to reconcile net income (loss) to cash used in operating activities: | ||
Depreciation expense | 2,252 | 3,301 |
Accretion expense | 79,551 | 121,798 |
Amortization of deferred financing costs | 428 | |
Change in fair value of derivatives | (16,633,366) | 43,806,560 |
Equity in the net loss of joint venture | 19,654 | |
Interest expense related to derivative liability in excess of debt | 103,539 | |
Loss on settlement with Highlon | 118,115 | |
Shares issuable for interest expense | 3,654 | 26,614 |
Changes in operating assets and liabilities: | ||
Accrued interest on loans receivable | 2,311 | |
Prepaid expenses and deposits | 90,529 | 5,219 |
Accounts payable and accrued liabilities | (20,018) | 51,115 |
Accrued liabilities related parties | 46,307 | 88,606 |
Net Cash Used in Operating Activities | (231,998) | (205,600) |
Investing Activities | ||
Issuance of loans receivable - Lahva | (101,000) | |
Net Cash Used in Investing Activities | (101,000) | |
Financing Activities | ||
Proceeds from convertible debentures | 285,500 | |
Proceeds from loans payable | 45,000 | 189,000 |
Proceeds from loans payable related parties | 30,200 | |
Repayment of loans | (8,500) | |
Repayment of loans – related parties | (13,200) | |
Net Cash Provided by Financing Activities | 330,500 | 197,500 |
Decrease In Cash | (2,498) | (8,100) |
Cash - Beginning of Period | 13,563 | 14,035 |
Cash - End of Period | 11,065 | 5,935 |
Supplemental Cash Flows Information: | ||
Cash paid for income taxes | ||
Cash paid for interest | ||
Non-cash Investing and Financing Activities | ||
Derivative liabilities recorded on convertible debentures | 403,539 | |
Series A Preferred shares issued for settlement of debt | 12,849,776 | |
Series B Preferred shares issued for cancellation of common shares | 200,000 | |
Gain on settlement of related party debts | $ 1,928,307 |
Summary of Business and Basis o
Summary of Business and Basis of Presentation | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
1. Summary of Business and Basis of Presentation | Organization and Business US Highland, Inc. was originally formed as a limited liability company on February 5, 1999 under the name The Powerhouse, L.L.C. pursuant to the laws of the State of Oklahoma. On November 9, 2006, Powerhouse Productions, L.L.C. filed Articles of Conversion changing the entity from a limited liability company to a corporation under the name Harcom Productions, Inc. On January 25, 2010, Articles of Merger were filed with the State of Oklahoma merging U.S. Highland, Inc., an Oklahoma corporation into Harcom Productions, Inc. and the name of the corporation was changed to US Highland, Inc. US Highland, Inc. (the "Company") is a recreational power sports Original Equipment Manufacturer ("OEM"), developing motorcycles, quads, single cylinder engines, and v-twin engines under its own brand and for other OEMs. On September 23, 2015, the Company incorporated two wholly-owned subsidiaries, USH Distribution Corp., a Nevada corporation, and Powersports Brand Alliance, Inc., a Nevada corporation. The subsidiaries were formed to provide sales, marketing and distribution services of their power sport products and accessories. On September 25, 2015, the Company entered into a Joint Venture Agreement with M&M Sourcing Sdn. Bhd., a Malaysian entity ("M&M") and jointly formed Lahva, Inc., a Nevada corporation ("Lahva"). The Company's and M&M's equity stake in Lahva is 40% and 60%, respectively. Basis of Presentation The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, US Highlands Electric Inc., USH Distribution Corp., and Powersports Brand Alliance, Inc. All significant intercompany transactions and balances have been eliminated. The unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and reflect all adjustments (consisting of normal recurring adjustments unless otherwise indicated) which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Certain prior year amounts have been reclassified to conform to current year presentation. Certain information in footnote disclosures normally included in the financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and have been condensed or omitted pursuant to such principles and the financial results for the periods presented may not be indicative of the full year's results. The Company believes the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's audited financial statements and the notes thereto for the fiscal year ended December 31, 2015 included in the Company's Annual Report on Form 10-K filed on April 15, 2016 (the "2015 Annual Report"). Investments in Unconsolidated Affiliates The investment in, and the operating results of, 50%-or-less-owned entities not required to be consolidated are included in the consolidated financial statements on the basis of the equity method of accounting. The Company's only investment qualifying for the equity method of accounting is the Company's investment in Lahva. The Company reviews investments in unconsolidated affiliates for impairment whenever events or changes in business circumstances indicate that the carrying amount of the investments may not be fully recoverable. Evidence of a loss in value that is other than temporary includes, but is not limited to, the absence of an ability to recover the carrying amount of the investment, the inability of the investee to sustain an earnings capacity which would justify the carrying amount of the investment, or, where applicable, estimated sales proceeds which are insufficient to recover the carrying amount of the investment. If the fair value of the investment is determined to be less than the carrying value and the decline in value is considered to be other than temporary, an appropriate write-down is recorded based on the excess of the carrying value over the best estimate of fair value of the investment. Significant Accounting Policies There have been no material changes in the Company's significant accounting policies to those previously disclosed in the 2015 Annual Report other than as noted below. During the six months ended June 30, 2016, the Company adopted guidance codified in ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs. Going Concern The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going-concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses from operations, and as of June 30, 2016, current liabilities exceed current assets by $2,351,566, and the Company has an accumulated deficit of $72,085,886. The Company's ability to continue as a going concern depends upon its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes raising the necessary funds to finance the Company's development, marketing and manufacturing efforts. |
Deposit on Highlon Distribution
Deposit on Highlon Distribution Inc. Acquisition | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
2. Deposit on Highlon Distribution Inc. Acquisition | On December 30, 2014, the Company entered into a share exchange agreement with Highlon Distribution, Inc. (Highlon). Per the agreement, the Company will exchange 100 shares of the Company's common stock for 100% of the Highlon shares. In addition, the Company will transfer $150,000 to Highlon within five days from the execution of the agreement. Highlon is a distribution management business focusing on marketing existing product in logistics area. During the six months ended June 30, 2016, the Company wrote-off the deposit of $150,000 pursuant to a subsequent settlement agreement with Highlon and the former President of the Company. Pursuant to the settlement agreement, the Company also agreed to pay the former President of the Company an additional $20,185, offset by advances from Highlon of $26,000 and accounts payable to the former President of the Company of $5,885, resulting in a loss on settlement of debt of $118,115. Refer to Note 11(g). |
Investment in Joint Venture
Investment in Joint Venture | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
3.Investment in Joint Venture | On September 25, 2015, the Company entered into a joint venture agreement and formed Lahva, Inc. The Company's 40% ownership interest in the joint venture was recorded at cost and the Company's proportionate share of net loss under the equity method of accounting is recorded within results of continuing operations. During the six months ended June 30, 2016 the Company received the following notes from Lahva, Inc.: a) On February 26, 2016, the Company entered into a promissory note with Lahva, Inc. for $70,000. The note receivable bears interest at 8% per annum and is due on February 26, 2017. b) On March 30, 2016, the Company entered into a promissory note with Lahva, Inc. for $12,500. The note receivable bears interest at 8% per annum and is due on March 30, 2017. c) On May 23, 2016, the Company entered into a promissory note with Lahva, Inc. for $11,750. The note receivable bears interest at 8% per annum and is due on May 23, 2017. d) On June 1, 2016, the Company entered into a promissory note with Lahva, Inc. for $6,750. The note receivable bears interest at 8% per annum and is due on June 1, 2017. The Company recognized $19,654 and $0 as its proportional share of Lahva, Inc.'s net loss during the six months ended June 30, 2016 and 2015, respectively. The total carrying value of the equity method investment in Lahva, Inc. was $0 at June 30, 2016. As the Company's share of net losses was greater than its investment in Lahva Inc., the Company has reduced the balance of interest and loans receivable from Lahva, Inc. to $83,657. Selected financial results for Lahva for the six months ended June 30, 2016 are as follows: Six Months Ended June 30, 2016 Revenues $ Expenses 49,134 Net Loss $ (49,134 ) Total Assets $ 153,350 Total Liabilities $ 202,384 Total Partners Capital (49,034 ) Total Liabilities and Partners Capital $ 153,350 |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
4. Property and Equipment | Property and equipment is recorded at cost and is comprised of: Useful Life June 30, 2016 December 31, 2015 Computers and office equipment 3 years $ 15,930 $ 15,930 Manufacturing equipment 5 - 10 years 19,513 19,513 35,443 35,443 Accumulated depreciation (32,987 ) (30,735 ) Property and equipment, net $ 2,456 $ 4,708 Depreciation expense amounted to $2,252 and $3,301 for the six months ended June 30, 2016 and 2015, respectively. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
5. Related Party Transactions | a) During the six months ended June 30, 2016, the Company incurred salary and wages of $nil (2015 $58,131) and $24,000 (2015 $40,965) to the former President of the Company and the interim Chief Financial Officer ("interim CFO") of the Company, respectively. At June 30, 2016, the Company owes the former President of the Company and the interim CFO $nil (December 31, 2015 $5,885) and $3,000 (December 31, 2015 $12,000), respectively, which have been included in accounts payable. b) During the six months ended June 30, 2016, the Company incurred management fees of $2,000 to the President of the Company. c) At June 30, 2016, the Company owed significant shareholders of the Company an aggregate of $190,000 (December 31, 2015 $190,000) pursuant to unsecured, non-guaranteed loan agreements and $500,000 (December 31, 2015 $500,000) pursuant to convertible debenture agreements. In addition, the Company owed the significant shareholders of the Company a total of $312,969 (December 31, 2015 $266,816) in accrued interest. d) At June 30, 2016, the Company owed a former director of the Company $27,000 (December 31, 2015 $27,000) pursuant to unsecured, non-guaranteed loan agreements. In addition, the Company owes the former director of the Company accrued interest of $795 (December 31, 2015 $658), which has been included in accrued liabilities. Refer to Note 8(c). e) At June 30, 2016, the Company owed the President of the Company $3,000 (December 31, 2015 $3,000) pursuant to unsecured, non-guaranteed loan agreements. In addition, the Company owes the President of the Company accrued interest of $139 (December 31, 2015 $122), which has been included in accrued liabilities. Refer to Note 8(d). f) On December 30, 2014, the Company entered into a share exchange agreement with a company whose Chief Executive Officer is the former President of the Company. Refer to Note 2. |
Convertible Debentures
Convertible Debentures | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
6. Convertible Debentures | a) Effective January 25, 2010, the Company issued a convertible note for $225,000. Pursuant to the terms of the agreement, the loan was unsecured, non-interest bearing, and was due on December 21, 2010. The note was convertible into shares of the Company's common stock at any time at a variable conversion price equal to 65% of the average of the closing bid prices of the common stock during the 28 trading days prior to the date of the conversion notice and was subject to adjustment upon the issuance of certain dilutive instruments. Due to these provisions, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging On June 2, 2010, the Company issued 6,386 restricted shares of common stock upon the conversion of the principal amount of $166,667. The fair value of the derivative liability at June 2, 2010, was $266,425 and $197,352 was reclassified to additional paid-in capital upon conversion. During the year ended December 31, 2013, the Company repaid $2,000 of the note, during the year ended December 31, 2014, the Company repaid an additional $3,000, and during the year ended December 31, 2015, the Company repaid $1,000. At June 30, 2016 and December 31, 2015, the carrying value of the note was $52,333 and $52,333, respectively. The note is in default at June 30, 2016. b) On July 25, 2013, the Company issued a convertible note for up to $500,000 and warrants to purchase 12,500,000 underlying shares of the Company's common stock. The warrants are exercisable into 10,000,000 common shares of the Company at $0.05 per share and 2,500,000 shares at an exercise price of $0.10 per share until July 31, 2014. During the year ended December 31, 2013, the Company received proceeds of $500,000 under the note. The note bears interest at 8% per annum compounded monthly, and principal and interest are due on July 31, 2014. In addition, so long as any amounts are due hereunder, the Company is obligated to remit to the lender 100% of all revenues, payments and receivables from the sale of the first 50 engines sold by the Company. The note is secured against substantially all of the assets of the Company. The note may be prepaid by the Company without penalty with 30 days prior notice. The note is convertible into shares of the Company's common stock at any time at a conversion price equal to $0.02 per share and is subject to adjustment upon the issuance of certain dilutive instruments and other events. The conversion price was subsequently reduced to $0.01 per share upon the failure to file various reports with the SEC within 120 days of the issuance of the note. Due to the potential adjustments to the conversion feature and the inability to conclude that the Company has enough unissued-authorized common shares to settle the warrants, the embedded conversion option and the warrants qualify for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging On July 24, 2014, the Company and the note holder agreed to extend the maturity date to December 31, 2014, and increase the interest rate to 12% starting on August 1, 2014. The Company accounted for the modification in accordance with ASC 405-20 and ASC 470-50-40. As the present value of the future cash flows was more than 10% different than the cash flows of the original debt, it was determined that the original and new debt instruments are substantially different and the Company treated the original convertible note extinguished and exchanged for a new convertible note. The Company recorded a loss on extinguishment of debt of $474,668. The Company also recognized the fair value of the embedded conversion feature of $24,501,757 as a derivative liability and reduced the value of the convertible loan to $nil. On December 31, 2014, the Company and the note holder agreed to extend the maturity date to December 31, 2015. Interest shall accrue at 12% per annum but may be reduced to 8% for any period of time in which the interest is paid in cash and not accrued. The Company accounted for the modification in accordance with ASC 405-20 and ASC 470-50-40. As the present value of the future cash flows was more than 10% different than the cash flows of the original debt, it was determined that the original and new debt instruments are substantially different and the Company treated the original convertible note extinguished and exchanged for a new convertible note. The Company recorded a loss on extinguishment of debt of $411,820. The Company also recognized the fair value of the embedded conversion feature of $25,088,180 as a derivative liability and reduced the value of the convertible loan to $nil. On December 31, 2015, the Company and the note holder agreed to extend the maturity date to December 31, 2016. Interest shall accrue at 12% per annum but may be reduced to 8% for any period of time in which the interest is paid in cash and not accrued. The Company accounted for the modification in accordance with ASC 405-20 and ASC 470-50-40. As the present value of the future cash flows was more than 10% different than the cash flows of the original debt, it was determined that the original and new debt instruments are substantially different and the Company treated the original convertible note extinguished and exchanged for a new convertible note. The Company recorded a gain on extinguishment of debt of $492,585. The Company also recognized the fair value of the embedded conversion feature of $16,507,415 as a derivative liability and reduced the value of the convertible loan to $nil. During the six months ended June 30, 2016, the Company recorded total accretion of $69,954. At June 30, 2016, and December 31, 2015, the carrying value of the note was $69,954 and $nil with unamortized discount of $430,046 and $500,000, respectively. c) On February 11, 2016, the Company entered into two convertible promissory notes for a total of $275,000, pursuant to which the Company received proceeds of $237,500, net of an original issue discount of $25,000 and legal fees of $12,500. The notes are convertible at a price equal to 60% of the lowest trading price of the Company's common stock for the 20 prior trading days, bearing interest at 8% per annum and due on February 11, 2017. Due to these provisions, the embedded conversion options qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging During the six months ended June 30, 2016, the Company recorded total accretion of $8,704 and amortization of deferred financing cost of $396. At June 30, 2016, the carrying value of the notes was $8,704 with unamortized discount of $266,296 and deferred financing cost of $12,104. d) On May 17, 2016, the Company entered into a convertible promissory note for $55,000, pursuant to which the Company received proceeds of $48,000, net of an original issue discount of $5,000 and legal fees of $2,000. The notes are convertible at a price equal to 55% of the lowest trading price of the Company's common stock for the 20 prior trading days, bearing interest at 8% per annum and due on May 17, 2017. Due to these provisions, the embedded conversion options qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging During the six months ended June 30, 2016, the Company recorded total accretion of $893 and amortization of deferred financing cost of $32. At June 30, 2016, the carrying value of the notes was $893 with unamortized discount of $54,107 and deferred financing cost of $1,968. |
Derivative Liabilities
Derivative Liabilities | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
7. Derivative Liabilities | The embedded conversion options of the Company's convertible debentures described in Note 6 contain conversion features that qualify for embedded derivative classification. The warrants described in Notes 6 and 9 also qualify for derivative classification. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments. The table below sets forth a summary of changes in the fair value of the Company's Level 3 financial liabilities: June 30, 2016 December 31, 2015 Balance at the beginning of the period $ 16,886,192 $ 46,065,517 Addition of new derivative liabilities 403,539 Change in fair value of warrants (289,021 ) (763,397 ) Change in fair value of embedded conversion option (16,344,345 ) (13,840,491 ) Modification of embedded conversion options 7,415 Derecognize of derivative liabilities upon settlement of convertible notes (14,582,852 ) Balance at the end of the period $ 656,365 $ 16,886,192 The following table summarizes the change in fair value of derivatives for the six-month periods ended: June 30, 2016 June 30, 2015 Gain (loss) from change in fair value of derivative liabilities during the period $ 16,633,366 $ (43,806,560 ) The Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities and embedded conversion option liabilities as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions. The model incorporates the price of a share of the Company's common stock (as quoted on the Over the Counter Bulletin Board), volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations: Expected Volatility Risk-free Interest Rate Expected Dividend Yield Expected Life (in years) At December 31, 2015 134% - 216% 0.20% - 1.03% 0 % 0.25-2.50 At June 30, 2016 208% - 272% 0.36% - 0.71% 0 % 0.50-2.50 |
Loans Payable
Loans Payable | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
8. Loans Payable | Loans payable consist of the following: June 30, 2016 December 31, 2015 (a) Loans payable that are unsecured, non-guaranteed, past due and are non-interest bearing. $ 25,000 $ 25,000 (b) On January 15, 2011, the Company entered into 8 unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $56,000. If the loans were not repaid within 90 days they then bear interest at 1% per month. In addition, if the loan was not repaid within 90 days, the Company is required to issue 167 common shares every month until the loan is repaid in full. As at June 30, 2016, and December 31, 2015, the Company recognized the fair value of $136,082 and $135,365, respectively, of the 184,500 and 176,500 common shares issuable for interest expense as shares reserved for future issuance. The Company has not yet issued these common shares. As at June 30, 2016, the Company has also accrued interest expense of $36,680 (December 31, 2015 - $33,320). 56,000 56,000 (c) On May 30, 2013 and August 12, 2013, the Company received advances from a director for $2,000 and $25,000, respectively. On August 12, 2013, the Company entered into an unsecured, non-guaranteed, demand loan agreement with the director for $27,000. The loan bears interest at 1% per annum compounded monthly. In addition, the Company is required to issue 5,000 common shares every month until the loan is repaid in full. As at June 30, 2016, and December 31, 2015, the Company recognized the fair value of $65,437 and $62,500, respectively, of the 170,000 and 140,000 common shares issuable for interest expense as shares reserved for future issuance. The Company has not yet issued these common shares. As at June 30, 2016, the Company has also accrued interest expense of $795 (December 31, 2015 - $658). 27,000 27,000 (d) On February 27, 2014, and March 19, 2015, the Company received advances from a director of $6,000, and $10,200, respectively. During the year ended December 31, 2015, the Company repaid $13,200. The advances are unsecured, due on demand and bears interest at 1% per annum compounded and calculated monthly. 3,000 3,000 (e) On September 18, 2014, May 29, 2015, July 3, 2015, December 2, 2015, and January 4, 2016, the Company entered into unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $35,000, $4,000, $5,000, $22,000, and $45,000, respectively. The loans bear interest at 8% per annum compounded annually and are due 1 year after the date of issuance. 111,000 66,000 (f) On December 4, 2014, January 29, 2015, August 12, 2015, August 21, 2015, September 1, 2015, September 15, 2015, November 13, 2015, and December 23, 2015, the Company issued unsecured notes payable of $20,000, $20,000, $20,000, $25,000, $40,000, $25,000, $30,000 and $10,000, respectively, to a significant shareholder. The notes bear interest at an annual rate of 8% per annum, are uncollateralized, and due 1 year after the date of issuance. 190,000 190,000 Total $ 412,000 $ 367,000 Less Short-Term Portion (412,000 ) (367,000 Long-Term Loans Payable $ $ |
Stock Purchase Warrants
Stock Purchase Warrants | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
9. Stock Purchase Warrants | A summary of the changes in the Company's common share purchase warrants is presented below: Number Weighted Average Exercise Price Weighted Average Expected Life Balance December 31, 2015 855,000 $ 0.0005 0.48 years Expired (600,000 ) $ 0.0005 Balance June 30, 2016 255,000 $ 0.0005 0.50 years |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
10. Earnings (Loss) Per Share | A reconciliation of the components of basic and diluted net income per common share is presented in the tables below: For the Three Months Ended June 30, 2016 2015 Income (Loss) Weighted Average Common Shares Outstanding Per Share Income (Loss) Weighted Average Common Shares Outstanding Per Share Basic: Income (loss) attributable to common stock $ 3,421,101 58,163,000 $ 0.06 $ (36,036,744 ) 77,728,000 $ (0.46 ) Effective of Dilutive Securities: Share purchase warrants 250,000 Convertible notes 25,853 169,772,000 Preferred stock 53,815,000 Diluted: Income (loss) attributable to common stock, including assumed conversions $ 3,446,954 282,000,000 $ 0.01 $ (36,036,744 ) 77,728,000 $ (0.46 ) For the Six Months Ended June 30, 2016 2015 Income (Loss) Weighted Average Common Shares Outstanding Per Share Income (Loss) Weighted Average Common Shares Outstanding Per Share Basic: Income (loss) attributable to common stock $ 15,959,668 58,163,000 $ 0.27 $ (44,308,813 ) 77,728,000 $ (0.57 ) Effective of Dilutive Securities: Share purchase warrants 253,000 Convertible notes 47,946 169,772,000 Preferred stock 53,815,000 Diluted: Income (loss) attributable to common stock, including assumed conversions $ 16,007,614 282,003,000 $ 0.06 $ (44,308,813 ) 77,728,000 $ (0.57 ) |
Commitments
Commitments | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
11. Commitments | a) In 2012, the Company entered into two leases for the provision of office and warehouse space until April 30, 2015. In 2013, the Company entered into an amendment to the lease agreements. Pursuant to the amendment, one of the leases was terminated and the other was extended to June 30, 2019. During the six months ended June 30, 2016, the Company recognized $32,902 (2015 - $42,904) of rent expense. The Company's future minimum lease payments are as follows: Fiscal year ending Amount December 31, 2016 $ 33,068 December 31, 2017 67,963 December 31, 2018 69,956 December 31, 2019 17,863 Total $ 188,850 b) The Company issued a $500,000 convertible note on July 25, 2013, of which so long as any amounts are due hereunder, the Company is obligated to remit to the lender 100% of all revenues, payments and receivables from the sale of the first 50 engines sold by the Company. c) On June 17, 2014, the Company was informed that a debtor will be instituting legal proceedings against the Company for collection of the sum of $76,712. The Company believes it owes the debtor $9,986 which it has recorded as owing. Accordingly, the Company is currently defending these potential matters vigorously. d) On December 16, 2013, the Company was informed that a vendor will be instituting legal proceedings against the Company for collection of the sum of $12,455. The Company believes it does not owe the vendor anything. Accordingly, the Company is currently defending these potential matters vigorously. e) On July 8, 2014, the Company filed civil actions against John R. Fitzpatrick, III, its former Chief Executive Officer, President, Chief Financial Officer, and a former director of the Company and against Mr. Steven ("Posie") Pfaff, the Director of Manufacturing of the Company regarding an employment dispute. Mr. Fitzpatrick and Mr. Pfaff have answered the Petition and asserted various counterclaims against US Highland, Inc. and third party claims against directors of the Company and one of the Company's attorneys. Mr. Fitzpatrick and Mr. Pfaff also filed complaints with the Oklahoma Department of Labor. On March 3, 2015, the Oklahoma Department of Labor entered awards of $72,000 in favor of Mr. Fitzpatrick and $54,000 in favor of Mr. Pfaff. On February 22, 2016, the Company entered into a Release of Claims and Settlement Agreement with John R. Fitzpatrick, III, Steven Pfaff, and certain of the Company's officers and directors. Pursuant to the settlement agreement, the parties discharged each other from all claims actions, demands, costs, losses, damages, and expenses relating to Mr. Fitzpatrick's and Mr. Pfaff's previous employment with the Company in consideration for an aggregate settlement amount of $200,000 in two installments. The Company and the directors also agreed to execute and deliver a pocket judgement against them which shall not be filed unless the Company fails to make the scheduled payments under the settlement agreement. During the six months ended June 30, 2016, the Company paid $50,000 towards the settlement. f) On September 28, 2015, USH Distribution, Corp., a wholly owned subsidiary of the Company, ("USH Distribution") entered into a consignment agreement whereby USH Distribution will sell workwear apparel manufactured by the consignor in the United States. The agreement shall expire and terminate 18 months from the effective date of the agreement. g) On April 4, 2016, the Company entered into a Settlement Agreement (the "Settlement Agreement"), with Mr. Whitaker and Highlon Distribution, Inc. ("Highlon"), an Oklahoma corporation wholly-owned and operated by Mr. Whitaker. Pursuant to the Settlement Agreement, the parties acknowledged that the Company had paid Mr. Whitaker an aggregate of $174,000 in consideration for services rendered by Mr. Whitaker to the Company pursuant to his two employment agreements, dated May 28, 2014 and February 9, 2015, respectively, with the Company (the "Employment Agreements"); the Company agreed to pay an additional aggregate amount of $20,185 (the "Payment") to Mr. Whitaker for reimbursement of expenses incurred by him. Upon the receipt by Mr. Whitaker of the Payment, the parties agreed that all expenses incurred by Mr. Whitaker shall be deemed fully reimbursed; and the Company shall be released from its obligations to pay Mr. Whitaker $81,000 for services rendered by Mr. Whitaker to the Company under the Employment Agreements. The parties also represented and warranted that that certain Share Exchange Agreement, dated December 30, 2014, between the Company and Highlon, including a deposit of $150,000 made by the Company, pursuant to which the Company was to acquire 100% of Highlon, was terminated and neither party had any outstanding obligation to the other in connection with the Share Exchange Agreement. The Company recorded this settlement transaction as of March 31, 2016. |
Summary of Business and Basis17
Summary of Business and Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2016 | |
Summary Of Business And Basis Of Presentation Policies | |
Organization and Business | US Highland, Inc. was originally formed as a limited liability company on February 5, 1999 under the name The Powerhouse, L.L.C. pursuant to the laws of the State of Oklahoma. On November 9, 2006, Powerhouse Productions, L.L.C. filed Articles of Conversion changing the entity from a limited liability company to a corporation under the name Harcom Productions, Inc. On January 25, 2010, Articles of Merger were filed with the State of Oklahoma merging U.S. Highland, Inc., an Oklahoma corporation into Harcom Productions, Inc. and the name of the corporation was changed to US Highland, Inc. US Highland, Inc. (the "Company") is a recreational power sports Original Equipment Manufacturer ("OEM"), developing motorcycles, quads, single cylinder engines, and v-twin engines under its own brand and for other OEMs. On September 23, 2015, the Company incorporated two wholly-owned subsidiaries, USH Distribution Corp., a Nevada corporation, and Powersports Brand Alliance, Inc., a Nevada corporation. The subsidiaries were formed to provide sales, marketing and distribution services of their power sport products and accessories. On September 25, 2015, the Company entered into a Joint Venture Agreement with M&M Sourcing Sdn. Bhd., a Malaysian entity ("M&M") and jointly formed Lahva, Inc., a Nevada corporation ("Lahva"). The Company's and M&M's equity stake in Lahva is 40% and 60%, respectively. |
Basis of Presentation | The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, US Highlands Electric Inc., USH Distribution Corp., and Powersports Brand Alliance, Inc. All significant intercompany transactions and balances have been eliminated. The unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and reflect all adjustments (consisting of normal recurring adjustments unless otherwise indicated) which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Certain prior year amounts have been reclassified to conform to current year presentation. Certain information in footnote disclosures normally included in the financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and have been condensed or omitted pursuant to such principles and the financial results for the periods presented may not be indicative of the full year's results. The Company believes the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's audited financial statements and the notes thereto for the fiscal year ended December 31, 2015 included in the Company's Annual Report on Form 10-K filed on April 15, 2016 (the "2015 Annual Report"). |
Investments in Unconsolidated Affiliates | The investment in, and the operating results of, 50%-or-less-owned entities not required to be consolidated are included in the consolidated financial statements on the basis of the equity method of accounting. The Company's only investment qualifying for the equity method of accounting is the Company's investment in Lahva. The Company reviews investments in unconsolidated affiliates for impairment whenever events or changes in business circumstances indicate that the carrying amount of the investments may not be fully recoverable. Evidence of a loss in value that is other than temporary includes, but is not limited to, the absence of an ability to recover the carrying amount of the investment, the inability of the investee to sustain an earnings capacity which would justify the carrying amount of the investment, or, where applicable, estimated sales proceeds which are insufficient to recover the carrying amount of the investment. If the fair value of the investment is determined to be less than the carrying value and the decline in value is considered to be other than temporary, an appropriate write-down is recorded based on the excess of the carrying value over the best estimate of fair value of the investment. |
Significant Accounting Policies | There have been no material changes in the Company's significant accounting policies to those previously disclosed in the 2015 Annual Report other than as noted below. During the six months ended June 30, 2016, the Company adopted guidance codified in ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation of Debt Issuance Costs. |
Going Concern | The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going-concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses from operations, and as of June 30, 2016, current liabilities exceed current assets by $2,351,566, and the Company has an accumulated deficit of $72,085,886. The Company's ability to continue as a going concern depends upon its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes raising the necessary funds to finance the Company's development, marketing and manufacturing efforts. |
Investment in Joint Venture (Ta
Investment in Joint Venture (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Investment In Joint Venture Tables | |
Schedule of financial results | Selected financial results for Lahva for the six months ended June 30, 2016 are as follows: Six Months Ended June 30, 2016 Revenues $ Expenses 49,134 Net Loss $ (49,134 ) Total Assets $ 153,350 Total Liabilities $ 202,384 Total Partners Capital (49,034 ) Total Liabilities and Partners Capital $ 153,350 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Property And Equipment Tables | |
Property, Plant and Equipment | Property and equipment is recorded at cost and is comprised of: Useful Life June 30, 2016 December 31, 2015 Computers and office equipment 3 years $ 15,930 $ 15,930 Manufacturing equipment 5 - 10 years 19,513 19,513 35,443 35,443 Accumulated depreciation (32,987 ) (30,735 ) Property and equipment, net $ 2,456 $ 4,708 |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Derivative Liabilities Tables | |
Summary of Changes in Fair Value of Financial Liabilities | The table below sets forth a summary of changes in the fair value of the Company's Level 3 financial liabilities: June 30, 2016 December 31, 2015 Balance at the beginning of the period $ 16,886,192 $ 46,065,517 Addition of new derivative liabilities 403,539 Change in fair value of warrants (289,021 ) (763,397 ) Change in fair value of embedded conversion option (16,344,345 ) (13,840,491 ) Modification of embedded conversion options 7,415 Derecognize of derivative liabilities upon settlement of convertible notes (14,582,852 ) Balance at the end of the period $ 656,365 $ 16,886,192 |
Fair Value, by Balance Sheet Grouping | The following table summarizes the change in fair value of derivatives for the six-month periods ended: June 30, 2016 June 30, 2015 Gain (loss) from change in fair value of derivative liabilities during the period $ 16,633,366 $ (43,806,560 ) |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The following table shows the assumptions used in the calculations: Expected Volatility Risk-free Interest Rate Expected Dividend Yield Expected Life (in years) At December 31, 2015 134% - 216% 0.20% - 1.03% 0 % 0.25-2.50 At June 30, 2016 208% - 272% 0.36% - 0.71% 0 % 0.50-2.50 |
Loans Payable (Tables)
Loans Payable (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Loans Payable Tables | |
Schedule of Debt | Loans payable consist of the following: June 30, 2016 December 31, 2015 (a) Loans payable that are unsecured, non-guaranteed, past due and are non-interest bearing. $ 25,000 $ 25,000 (b) On January 15, 2011, the Company entered into 8 unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $56,000. If the loans were not repaid within 90 days they then bear interest at 1% per month. In addition, if the loan was not repaid within 90 days, the Company is required to issue 167 common shares every month until the loan is repaid in full. As at June 30, 2016, and December 31, 2015, the Company recognized the fair value of $136,082 and $135,365, respectively, of the 184,500 and 176,500 common shares issuable for interest expense as shares reserved for future issuance. The Company has not yet issued these common shares. As at June 30, 2016, the Company has also accrued interest expense of $36,680 (December 31, 2015 - $33,320). 56,000 56,000 (c) On May 30, 2013 and August 12, 2013, the Company received advances from a director for $2,000 and $25,000, respectively. On August 12, 2013, the Company entered into an unsecured, non-guaranteed, demand loan agreement with the director for $27,000. The loan bears interest at 1% per annum compounded monthly. In addition, the Company is required to issue 5,000 common shares every month until the loan is repaid in full. As at June 30, 2016, and December 31, 2015, the Company recognized the fair value of $65,437 and $62,500, respectively, of the 170,000 and 140,000 common shares issuable for interest expense as shares reserved for future issuance. The Company has not yet issued these common shares. As at June 30, 2016, the Company has also accrued interest expense of $795 (December 31, 2015 - $658). 27,000 27,000 (d) On February 27, 2014, and March 19, 2015, the Company received advances from a director of $6,000, and $10,200, respectively. During the year ended December 31, 2015, the Company repaid $13,200. The advances are unsecured, due on demand and bears interest at 1% per annum compounded and calculated monthly. 3,000 3,000 (e) On September 18, 2014, May 29, 2015, July 3, 2015, December 2, 2015, and January 4, 2016, the Company entered into unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $35,000, $4,000, $5,000, $22,000, and $45,000, respectively. The loans bear interest at 8% per annum compounded annually and are due 1 year after the date of issuance. 111,000 66,000 (f) On December 4, 2014, January 29, 2015, August 12, 2015, August 21, 2015, September 1, 2015, September 15, 2015, November 13, 2015, and December 23, 2015, the Company issued unsecured notes payable of $20,000, $20,000, $20,000, $25,000, $40,000, $25,000, $30,000 and $10,000, respectively, to a significant shareholder. The notes bear interest at an annual rate of 8% per annum, are uncollateralized, and due 1 year after the date of issuance. 190,000 190,000 Total $ 412,000 $ 367,000 Less Short-Term Portion (412,000 ) (367,000 ) Long-Term Loans Payable $ $ |
Stock Purchase Warrants (Tables
Stock Purchase Warrants (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Stock Purchase Warrants Tables | |
Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity | A summary of the changes in the Company's common share purchase warrants is presented below: Number Weighted Average Exercise Price Weighted Average Expected Life Balance December 31, 2015 855,000 $ 0.0005 0.48 years Expired (600,000 ) $ 0.0005 Balance June 30, 2016 255,000 $ 0.0005 0.50 years |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Earnings Loss Per Share Tables | |
Earnings (Loss) Per Share | A reconciliation of the components of basic and diluted net income per common share is presented in the tables below: For the Three Months Ended June 30, 2016 2015 Income (Loss) Weighted Average Common Shares Outstanding Per Share Income (Loss) Weighted Average Common Shares Outstanding Per Share Basic: Income (loss) attributable to common stock $ 3,421,101 58,163,000 $ 0.06 $ (36,036,744 ) 77,728,000 $ (0.46 ) Effective of Dilutive Securities: Share purchase warrants 250,000 Convertible notes 25,853 169,772,000 Preferred stock 53,815,000 Diluted: Income (loss) attributable to common stock, including assumed conversions $ 3,446,954 282,000,000 $ 0.01 $ (36,036,744 ) 77,728,000 $ (0.46 ) For the Six Months Ended June 30, 2016 2015 Income (Loss) Weighted Average Common Shares Outstanding Per Share Income (Loss) Weighted Average Common Shares Outstanding Per Share Basic: Income (loss) attributable to common stock $ 15,959,668 58,163,000 $ 0.27 $ (44,308,813 ) 77,728,000 $ (0.57 ) Effective of Dilutive Securities: Share purchase warrants 253,000 Convertible notes 47,946 169,772,000 Preferred stock 53,815,000 Diluted: Income (loss) attributable to common stock, including assumed conversions $ 16,007,614 282,003,000 $ 0.06 $ (44,308,813 ) 77,728,000 $ (0.57 ) |
Commitments (Tables)
Commitments (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Commitments Tables | |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Fiscal year ending Amount December 31, 2016 $ 33,068 December 31, 2017 67,963 December 31, 2018 69,956 December 31, 2019 17,863 Total $ 188,850 |
Summary of Business and Basis25
Summary of Business and Basis of Presentation (Details Narrative) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Summary Of Business And Basis Of Presentation Details Narrative | ||
Current liabilities exceed current assets | $ 2,351,566 | |
Accumulated deficit | $ (72,085,886) | $ (88,045,554) |
Deposit on Highlon Distributi26
Deposit on Highlon Distribution Inc. Acquisition (Details Narrative) | 6 Months Ended |
Jun. 30, 2016USD ($) | |
Deposit On Highlon Distribution Inc. Acquisition Details Narrative | |
Wrote-off deposit | $ 150,000 |
Investment in Joint Venture (De
Investment in Joint Venture (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Revenues | |||||
Expenses | 84,148 | 113,506 | 288,419 | 245,997 | |
Net Loss | 3,421,101 | $ (36,036,744) | 15,959,668 | $ (44,308,813) | |
Total Assets | 104,342 | 104,342 | $ 265,964 | ||
Total Liabilities | 2,448,788 | 2,448,788 | 18,573,732 | ||
Total Liabilities and Partners Capital | 104,342 | 104,342 | $ 265,964 | ||
Corporate Joint Venture [Member] | |||||
Revenues | |||||
Expenses | 49,134 | ||||
Net Loss | (49,134) | ||||
Total Assets | 153,350 | 153,350 | |||
Total Liabilities | 202,384 | 202,384 | |||
Total Partners Capital | (49,034) | (49,034) | |||
Total Liabilities and Partners Capital | $ 153,350 | $ 153,350 |
Investment in Joint Venture (28
Investment in Joint Venture (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Corporate Joint Venture [Member] | ||
Net loss | $ 19,654 | $ 0 |
Carrying value | 0 | |
On February 26, 2016 [Member] | ||
Promissory note | $ 70,000 | |
Note receivable bears interest | 8.00% | |
On March 30, 2016 [Member] | ||
Promissory note | $ 12,500 | |
Note receivable bears interest | 8.00% | |
On May 23, 2016 [Member] | ||
Promissory note | $ 11,750 | |
Note receivable bears interest | 8.00% | |
On June 1, 2016 [Member] | ||
Promissory note | $ 6,750 | |
Note receivable bears interest | 8.00% |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | |
Computers and office equipment | $ 15,930 | $ 15,930 |
Manufacturing equipment | 19,513 | 19,513 |
Subtotal | 35,443 | 35,443 |
Accumulated depreciation | (32,987) | (30,735) |
Property and equipment, net | $ 2,456 | $ 4,708 |
Computers and office equipment | ||
Property, Plant and Equipment, Useful Life | 3 years | |
Manufacturing equipment [Member] | Minimum [Member] | ||
Property, Plant and Equipment, Useful Life | 5 years | |
Manufacturing equipment [Member] | Maximum [Member] | ||
Property, Plant and Equipment, Useful Life | 10 years |
Property and Equipment (Detai30
Property and Equipment (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $ 2,252 | $ 3,301 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Director [Member] | |||
Unsecured, non-guaranteed loan agreement | $ 27,000 | $ 27,000 | |
Accrued interest | 795 | 658 | |
Shareholder [Member] | |||
Unsecured, non-guaranteed loan agreement | 190,000 | 190,000 | |
Convertible debenture | 500,000 | 500,000 | |
Accrued interest | 312,969 | 266,816 | |
Former President | |||
Salary and wages | $ 58,131 | ||
Accounts payable | 5,885 | ||
Unsecured, non-guaranteed loan agreement | 3,000 | 3,000 | |
Accrued interest | 139 | 122 | |
Management fees | 2,000 | ||
Chief Financial Officer | |||
Salary and wages | 24,000 | $ 40,965 | |
Accounts payable | $ 3,000 | $ 12,000 |
Convertible Debentures (Details
Convertible Debentures (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | |
Conversion option warrants [Member] | ||
Carrying value | $ 52,333 | $ 52,333 |
Conversion option warrants one [Member] | ||
Carrying value | 69,954 | |
Unamortized discount | 430,046 | $ 500,000 |
Recorded accretion | 69,954 | |
Conversion option warrants two [Member] | ||
Carrying value | 8,704 | |
Unamortized discount | 266,296 | |
Recorded accretion | 2,154 | |
Amortization of deferred financing cost | 396 | |
Deferred financing cost | 12,104 | |
Conversion option warrants three [Member] | ||
Carrying value | 893 | |
Unamortized discount | 54,107 | |
Recorded accretion | 893 | |
Amortization of deferred financing cost | 32 | |
Deferred financing cost | $ 1,968 |
Derivative Liabilities (Details
Derivative Liabilities (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2016 | Dec. 31, 2015 | |
Derivative Liabilities Details | ||
Balance at the beginning of period | $ 16,886,192 | $ 46,065,517 |
Addition of new derivative liabilities (warrants) | 403,539 | |
Change in fair value of warrants | (289,021) | (763,397) |
Change in fair value of embedded conversion option | (16,344,345) | (13,840,491) |
Modification of embedded conversion options | 7,415 | |
Derecognize of derivative liabilities upon settlement of convertible notes | (14,582,852) | |
Balance at the end of the period | $ 656,365 | $ 16,886,192 |
Derivative Liabilities (Detai34
Derivative Liabilities (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Derivative Liabilities Details 1 | ||||
Gain (loss) from change in fair value of derivative liabilities during the period | $ 3,711,355 | $ (35,777,246) | $ 16,633,366 | $ (43,806,560) |
Derivative Liabilities (Detai35
Derivative Liabilities (Details 2) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2016 | Dec. 31, 2015 | |
Expected Dividend Yield | 0.00% | 0.00% |
Minimum [Member] | ||
Expected Volatility | 208.00% | 134.00% |
Risk-free Interest Rate | 0.36% | 0.20% |
Expected Life (in years) | 6 months | 3 months |
Maximum [Member] | ||
Expected Volatility | 272.00% | 216.00% |
Risk-free Interest Rate | 0.71% | 1.03% |
Expected Life (in years) | 2 years 6 months | 2 years 6 months |
Loans Payable (Details)
Loans Payable (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Loan Payable | $ 412,000 | $ 367,000 |
Less Short Term | (412,000) | (367,000) |
Long Term | ||
Loan 1 [Member] | ||
Loan Payable | 25,000 | 25,000 |
Loan 2 [Member] | ||
Loan Payable | 56,000 | 56,000 |
Loan 3 [Member] | ||
Loan Payable | 27,000 | 27,000 |
Loan 4 [Member] | ||
Loan Payable | 3,000 | 3,000 |
Loan 5 [Member] | ||
Loan Payable | 111,000 | 66,000 |
Loan 6 [Member] | ||
Loan Payable | $ 190,000 | $ 190,000 |
Stock Purchase Warrants (Detail
Stock Purchase Warrants (Details) | 6 Months Ended |
Jun. 30, 2016$ / sharesshares | |
Stock Purchase Warrants Details | |
Number Beginning Balance | shares | 855,000 |
Expired | shares | (600,000) |
Number Ending Balance | shares | 255,000 |
Weighted Average Exercise Price Beginning Balance | $ / shares | $ 0.0005 |
Expired | $ / shares | 0.0005 |
Weighted Average Exercise Price Ending Balance | $ / shares | $ 0.0005 |
Weighted Average Remaining Term Beginning Balance | 5 months 23 days |
Weighted Average Remaining Term Ending Balance | 6 months |
Earnings (Loss) Per Share (Deta
Earnings (Loss) Per Share (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Basic: | ||||
Income (loss) attributable to common stock | $ 3,421,101 | $ (36,036,744) | $ 15,959,668 | $ (44,308,813) |
Effective of Dilutive Securities: | ||||
Convertible notes | 25,853 | 47,946 | ||
Diluted: | ||||
Income (loss) attributable to common stock, including assumed conversions | $ 3,446,954 | $ (36,036,744) | $ 16,007,614 | $ (44,308,813) |
Weighted Average Common Shares Outstanding | ||||
Income (loss) attributable to common stock | 58,163,000 | 77,728,000 | 58,163,000 | 77,728,000 |
Effective of Dilutive Securities: | ||||
Share purchase warrants | 250,000 | 253,000 | ||
Convertible notes | 169,772,000 | 169,772,000 | ||
Preferred stock | 53,815,000 | 53,815,000 | ||
Diluted: | ||||
Income (loss) attributable to common stock, including assumed conversions | 282,000,000 | 77,728,000 | 282,003,000 | 77,728,000 |
Basic: | ||||
Income (loss) attributable to common stock | $ 0.06 | $ (0.46) | $ 0.27 | $ (0.57) |
Diluted: | ||||
Income (loss) attributable to common stock, including assumed conversions | $ 0.01 | $ (0.46) | $ 0.06 | $ (0.57) |
Commitments (Details)
Commitments (Details) | Jun. 30, 2016USD ($) |
Commitments Details | |
December 31, 2016 | $ 33,068 |
December 31, 2017 | 67,963 |
December 31, 2018 | 69,956 |
December 31, 2019 | 17,863 |
Total | $ 188,850 |
Commitments (Details Narrative)
Commitments (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Commitments Details Narrative | ||
Rent expense | $ 32,902 | $ 42,904 |
Paid amount for settlement | $ 50,000 |