| Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed financial
statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP)
for interim financial information and with the instructions to Form 10-Q and applicable sections of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of
management, all adjustments necessary to make the financial statements not misleading have been included. The condensed balance
sheet as of June 30, 2015 was derived from the audited financial statements filed in Form 10-K on September 28, 2015. Operating
results for the six months ended December 31, 2015 are not necessarily indicative of the results that may be expected for the year
ending June 30, 2016. For further information, refer to our Annual Report on Form 10-K for the year ended June 30, 2015. Use of Estimates The accompanying financial statements are prepared
in conformity with GAAP and require management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. The use of estimates
may also affect the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management
include among others, fair value of derivative liabilities, realization of capitalized assets, valuation of equity instruments,
and deferred income tax asset valuation allowances. Actual results could differ from those estimates. Revenue Recognition The Company recognizes revenue when all four
of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services
has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. The Company does
not grant customers the right to return the products after such products have been accepted. Amounts billed for shipping and handling
are recorded as a component of net sales and the cost incurred for freight is included as a component of operating expenses in
the statements of operations. Cash and Cash Equivalents The Company considers demand deposits, U.S.
treasury securities and highly-liquid debt investments purchased with original maturities of three months or less to be cash equivalents.
The Company did not have any cash equivalents as of December 31, 2015 and June 30, 2015. The Company maintains its cash in major banks.
From time to time, the Companys cash balances exceed the Federal Deposit Insurance Corporation limit. The Company has not
experienced and does not anticipate any losses relating to these amounts. Inventory Inventory consists primarily of manufactured
nano materials and is comprised of raw materials, labor and manufacturing overhead. Inventory is stated at the lower of cost, determined
on a first-in, first-out basis, or market. The Company did not have an excess and obsolete reserve at December 31, 2015 and June
30, 2015. An inventory reserve is created when potentially slow-moving or obsolete inventories are identified in order to reflect
the appropriate inventory value. Changes in economic conditions, production requirements, and lower than expected customer demand
could result in additional obsolete or slow-moving inventory that cannot be sold or must be sold at reduced prices and could result
in additional reserve provisions. Property and Equipment Property and equipment is stated at cost, less
accumulated depreciation. Repairs and maintenance of equipment are charged to expense as incurred. Expenditures for major renewals
and betterments that extend the useful lives of property and equipment are capitalized. Gains or losses on dispositions of property
and equipment are included in the results of operations when realized. Depreciation is computed using the straight-line method
over the estimated useful lives of the related assets, ranging from three to seven years. Leasehold improvements are amortized
over the shorter of terms of the leases or their estimated useful lives. Depreciation expense on assets acquired under capital
leases is included in depreciation expense. Patents Costs incurred in applying for patents relating
to the Companys process for production of nanopowders have been capitalized. Patents are amortized to reflect the pattern
of economic benefits consumed, on a straight-line basis, over the estimated periods benefited. As of December 31, 2015, nine patents
have been issued and one patent application is pending approval. Amortization relating to issued patents was not significant during
the periods presented. Additional significant costs may be required for the continued development of end-use applications for the
Companys technology. Patents costs are reviewed periodically as to if any patents are no longer being pursued and associated
costs should be written off. Impairment of Long-Lived Assets Long-lived assets and intangible assets to
be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. The Company evaluates potential impairment by comparing the carrying amount of the assets with the
estimated undiscounted future cash flows associated with them. Should the review indicate that an asset is not recoverable, the
Companys carrying value of the asset would be reduced by the estimated shortfall to fair value. Fair Value of Financial Instruments and
Certain Other Assets and Liabilities The Company follows the guidance of GAAP with
respect to assets and liabilities that are measured at fair value. GAAP establishes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value as follows:
● Level 1: Observable inputs such as quoted prices in active markets;
● Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
● Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions The Companys financial instruments consist
of cash, accounts receivable, accounts payable and accrued expenses and debt. The carrying amount approximates fair value because
of the short-term nature of these items. Other than derivative liabilities, the Company
did not have any assets or liabilities that are measured at fair value on a recurring or nonrecurring basis during the six months
ended December 31, 2015 and December 31, 2014. Derivative Liabilities A derivative is an instrument whose value is
derived from an underlying instrument or index such as a future, forward, swap, option contract, or other financial
instrument with similar characteristics, including certain derivative instruments embedded in other contracts and for hedging activities.
As a matter of policy, we do not invest in separable financial derivatives or engage in hedging transactions. However, we have
entered into certain financing transactions that involve financial equity instruments containing certain features that have resulted
in the instruments being deemed derivatives. We may engage in other similar complex financing transactions in the future, but not
with the intention to enter into derivative instruments. Derivatives are measured at fair value using the Monte Carlo simulation
pricing model and marked to market through earnings. However, such new and/or complex instruments may have immature or limited
markets. As a result, the pricing models used for valuation of derivatives often incorporate significant estimates and assumptions.
Changes in these subjective assumptions can materially affect the estimate of the fair value of derivative liabilities and, consequently,
the related amount recognized as loss due to change in fair value of derivative liabilities on the consolidated statement of operations.
Furthermore, depending on the terms of a derivative, the valuation of derivatives may be removed from the financial statements
upon exercise or conversion of the underlying instrument into some other security. The classification of a derivative instrument
is reassessed at each balance sheet date. If the classification changes as a result of events during a reporting period, the instrument
is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract
may be reclassified. Research and Development Costs Research and development costs are expensed
as incurred. Costs incurred for research and development for new or improved processes to produce nanocatalysts as well as end
use applications for the nanocatalysts are expensed until the production process or applications have been determined to be commercially
viable. Costs incurred after the production process is viable and a working model of the equipment has been completed will be capitalized
as long-lived assets. Income Taxes Deferred income taxes are recognized for the
tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts
at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized. The provision for income taxes represents the tax payable for the period, if any, and the change during the period
in deferred tax assets and liabilities. The Company provides for tax contingencies,
if any, for federal, state and local exposures relating to audit results, tax planning initiatives and compliance responsibilities.
The development of these reserves requires judgments about tax issues, potential outcomes and timing. Although the outcome of such
matters is uncertain, in managements opinion adequate provisions for income taxes have been made for potential liabilities
emanating from these reviews. If actual outcomes differ materially from these estimates, they could have a material impact on the
Companys results. Loss Per Share The Company calculates basic loss per share
by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding. Diluted
loss per share is computed similar to basic loss per share, except that the denominator is increased to include the number of additional
common shares that would have been outstanding if such additional common shares had been issued and were dilutive. Potential common shares, consisting of options
and warrants, totaling 13,008,048 and 12,052,572, have been excluded from the computations of diluted net loss per share because
the effect would have been anti-dilutive for the three and six months ended December 31, 2015 and 2014, respectively. Stock-Based Compensation The Company measures all employee stock-based
compensation awards using the Black-Scholes-Merton valuation model and allocates the related expense over the requisite service
period. The expected volatility is based on the historical volatility of the Companys stock as determined by its private
placement offerings and recent market activity. The expected life of the award is based on the simplified method. The Company accounts for nonemployee stock-based
transactions using the fair value of the consideration received (i.e. the value of the goods or services) or the fair value of
the equity instruments issued, whichever is more reliably measurable. Reclassifications The Company has reclassified certain prior
period amounts to conform with current period presentation, in particular with regard to enhanced allocation of research and development
costs that were previously classified as cost of goods sold. Risks and Uncertainties The Company faces risks and uncertainties relating
to its ability to successfully implement and fulfill its strategy. Among other things, these risks include the ability to obtain
revenues; manage operations; competition; attract, retain and motivate qualified personnel; maintain and develop new strategic
relationships; and the ability to anticipate and adapt to the changing nanotechnology market and any changes in government regulations. Therefore, the Company may be subject to the
risks of delays in consummating contracts with customers and suppliers, raising sufficient capital to achieve its objectives and
other uncertainties, including financial, operational, technological, regulatory and other risks associated with an emerging business,
including the potential risks of business failure. Recent Accounting Pronouncements In August 2014, the FASB issued ASU 2014-15,
Presentation of Financial Statements-Going Concern (Subtopic 205-40). This ASU provides guidance to determine when
and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to assess an
entitys ability to continue as a going concern, and to provide related footnote disclosure in certain circumstances. ASU
2014-15 will be effective for all entities in the first annual period ending after December 15, 2016. Earlier adoption is permitted.
ASU 2014-15 will be effective for the Company beginning June 30, 2017. The Company does not believe that this pronouncement will
have an impact on its consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, as
amended by ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which is the new comprehensive revenue
recognition standard that will supersede all existing revenue recognition guidance under U.S. GAAP. The standards core principle
is that a company will recognize revenue when it transfers promised goods or services to a customer in an amount that reflects
the consideration to which the company expects to be entitled in exchange for those goods or services. In July 2015, the FASB issued
ASU 2015-14 to defer the effective date by one year to December 15, 2017 for interim and annual reporting periods beginning after
that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. The Company
is currently evaluating the impact of adopting this guidance. Going Concern The Company has experienced
recurring losses from operations from inception and has limited working capital. As of December 31, 2015, the Company had an accumulated
deficit of approximately $45.0 million. The Companys activities will necessitate significant uses of working capital beyond
the current quarter. Additionally, the Companys capital requirements will depend on many factors, including the competitiveness
of, and its success in commercializing, its products. The Company plans to continue financing its operations with cash received
from financing activities. Management is currently working to raise additional capital from financing activities to sustain operations
until the Company is able to generate sufficient cash flows from operations. There is no assurance that the Company will be able
to raise sufficient capital to continue operations and, if available, on terms satisfactory to the Company. |
