Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 09, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | HPEV, INC. | |
Entity Central Index Key | 1,399,352 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
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 | 67,514,653 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash | $ 25,174 | $ 171,871 |
Prepaid expenses | 68,730 | 57,018 |
Total current assets | 93,904 | 228,889 |
Intangible | 147,572 | 139,800 |
Equipment, net | 104,084 | 118,453 |
Total assets | 345,560 | 487,142 |
Current liabilities | ||
Accounts payable | 1,335,489 | 529,736 |
Accrued liabilities - related party | 611,093 | 489,535 |
Customer deposits - related party | 400,000 | 400,000 |
Accrued payroll taxes | 29,269 | 14,167 |
Debt, current portion | 292,581 | $ 40,235 |
Derivative liability | 73,326 | |
Total current liabilities | 2,741,758 | $ 1,473,673 |
Debt, long-term portion, net of debt discount | 63,374 | 77,076 |
Total liabilities | $ 2,805,132 | $ 1,550,749 |
Commitments and contingencies (Note 5) | ||
Stockholders' equity (deficit): | ||
Preferred stock, $.001 par value; 15,000,000 shares authorized;136 and 140 shares issued and outstanding at September 30, 2015 and December 31, 2014, Respectively | ||
Common stock, $.001 par value; 140,000,000 shares authorized; 66,464,653 and 61,439,134 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | $ 65,793 | $ 60,767 |
Additional paid-in capital | 35,023,099 | 30,864,669 |
Common stock issuable | 95,000 | 435,930 |
Common stock held in escrow | 8,441 | 8,441 |
Accumulated deficit | (37,626,928) | (32,421,145) |
Total deficit | (2,434,595) | (1,051,338) |
Noncontrolling interest in subsidiary | (24,977) | (12,269) |
Total stockholders' deficit | (2,459,572) | (1,063,607) |
Total liabilities and stockholders' equity | $ 345,560 | $ 487,142 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Stockholders' Equity (Deficit): | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 15,000,000 | 15,000,000 |
Preferred stock shares issued | 136 | 140 |
Preferred stock shares outstanding | 136 | 140 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 140,000,000 | 140,000,000 |
Common stock shares issued | 66,464,653 | 61,439,134 |
Common stock shares outstanding | 66,464,653 | 61,439,134 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Condensed Consolidated Statements Of Operations | ||||
Revenue | ||||
Cost of revenues | ||||
Gross profit | ||||
Operating expenses | ||||
Payroll and related expenses | $ 198,787 | $ 278,425 | $ 612,325 | $ 765,786 |
Consulting | 48,203 | 879,633 | 814,856 | 8,124,783 |
Professional fees | 88,488 | 231,540 | 503,165 | 548,511 |
Research and development | 150,398 | 500,808 | 717,988 | 936,221 |
General and administrative | 490,056 | 809,006 | 1,441,376 | 11,198,714 |
Total operating expenses | 975,932 | 2,699,412 | 4,089,710 | 21,574,015 |
Operating loss | (975,932) | (2,699,412) | (4,089,710) | (21,574,015) |
Other income (expense): | ||||
Interest expense, net | (7,080) | $ (2,403) | (11,655) | $ (11,652) |
Change in fair value of derivative liability | $ 2,324 | 2,324 | ||
Legal settlement - replacement warrants | (1,119,450) | |||
Net loss | $ (980,688) | $ (2,701,815) | (5,218,491) | $ (21,585,667) |
Less: Noncontrolling interest in net loss | (3,345) | (5,718) | (12,708) | (7,263) |
Net loss to shareholders | $ (977,343) | $ (2,696,097) | $ (5,205,783) | $ (21,578,404) |
Net loss per common share: Basic and diluted | $ (0.01) | $ (0.05) | $ (0.08) | $ (0.39) |
Weighted average common shares outstanding: Basic and diluted | 66,089,776 | 59,636,423 | 63,938,744 | 55,190,022 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Operating Activities: | ||
Net loss | $ (5,218,491) | $ (21,585,667) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock issued for services | 571,207 | 596,750 |
Warrants issued for services | 55,849 | $ 7,240,930 |
Legal settlement - replacement warrants | 1,119,450 | |
Employee stock options | 981,000 | $ 9,944,000 |
Change in fair value of derivative liability | (2,324) | |
Amortization of debt discount | 2,189 | |
Depreciation expense | 19,369 | $ 0 |
Changes in operating assets and liabilities: | ||
Prepaid expenses | (11,712) | (92,932) |
Accounts payable | 805,753 | (131,842) |
Accrued liabilities - related party | $ 121,558 | 661,966 |
Customer deposits | 400,000 | |
Accrued payroll liabilities | $ 15,102 | 3,739 |
Net cash used in operating activities | (1,541,050) | (2,963,056) |
Investing Activities: | ||
Intangible assets | (7,772) | $ (24,921) |
Equipment purchase | (5,000) | |
Net cash used in investing activities | (12,772) | $ (24,921) |
Financing Activities: | ||
Proceeds from sale of common stock | 1,095,020 | $ 3,426,652 |
Proceeds from debt | 325,000 | |
Payments on debt | (12,895) | |
Net cash provided by financing activities | 1,407,125 | $ 3,426,652 |
Net (decrease) increase in cash | (146,697) | 438,675 |
Cash, beginning of period | 171,871 | 477,549 |
Cash, end of period | 25,174 | $ 916,224 |
Cash paid for: Interest | $ 5,219 | |
Cash paid for: Income taxes | ||
Non-cash transactions: | ||
Reduction of stock issuable by issuing common stock | $ 410,950 | |
Derivative liability offset by debt discount | $ 75,650 |
Description of Business and Sum
Description of Business and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note 1 - Description of Business and Summary of Significant Accounting Policies | Description of Business Cool Technologies, Inc. and subsidiary, (we, us, our, the "Company" or "Cool Technologies") was incorporated in the State of Nevada in July 2002. In April 2014, we formed Ultimate Power Truck, LLC ("Ultimate Power Truck" or "UPT"), of which we own 95% and a shareholder of Cool Technologies owns 5%. We were formerly known as Bibb Corporation, as Z3 Enterprises, and as HPEV Inc. On August 20, 2015, we changed our name to Cool Technologies, Inc. We have developed and intend to commercialize thermal dispersion technologies in various product platforms and a parallel power input gearbox, around which we have designed a mobile generator system that can be retrofit onto new and existing trucks. In preparation, we have applied for trademarks for one of our technologies and its acronym. We currently have two trademarks: HPEV and TEHPC. We believe that our proprietary technologies, including our patent portfolio and trade secrets, can help increase the efficiency and positively affect manufacturing cost structure in several large industries beginning with motors/generators and fleet vehicles. The markets for products utilizing our technology include consumer, industrial and military markets, both in the U.S. and worldwide. Our technologies are divided into two distinct but complementary categories: heat dispersion technology and mobile electric power. As of September 30, 2015, we have five patents and seven patent applications pending in the area of composite heat structures, motors, and related structures, heat pipe architecture, applications (commonly referred to as "thermal" or "heat dispersion technology") and a parallel power vehicle platform. We intend to commercialize our patents by licensing our thermal technologies and applications to electric motor, pump and vehicle component manufacturers; and by licensing or selling a mobile electric power system powered by our proprietary gearing system to commercial vehicle and fleet owners. Basis of Presentation The accompanying condensed consolidated balance sheet as of December 31, 2014, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Noncontrolling interest represents the 5% third party ownership of our subsidiary, UPT. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The information included in this report should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014. Going Concern The accompanying condensed consolidated financial statements have been prepared assuming we will continue as a going concern. We have incurred net losses of $37,626,928 since inception and have not fully commenced operations, raising substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to generate revenue, achieve profitable operations and repay our obligations when they come due. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. As of the filing date of this Quarterly Report on Form 10-Q, management is negotiating additional funding arrangements to support completion of the initial phases of our business plan: to license its thermal technologies and applications, including submersible dry-pit applications; and to license and sell mobile generation retrofit kits (our Ultimate Power Truck business) driven by our proprietary gearing system. There can be no assurance, however, that we will be successful in raising additional financing and accomplishing these objectives. Accounting Policy Derivative financial instruments -- If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the derivative liability using the Black-Scholes Option Pricing Model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative liability is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the condensed consolidated statement of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreement are classified on the balance sheet as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the balance sheet date. Recently Issued Accounting Pronouncements We have evaluated the other recent accounting pronouncements through ASU 2015-16 and believe that none of them will have a material effect on our financial statements. |
Equipment
Equipment | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note 2 - Equipment | Equipment consists of the following: September 30, December 31, 2015 2014 Test vehicles $ 124,687 $ 124,687 Other 5,000 -- 129,687 124,687 Less: accumulated depreciation (25,603 ) (6,234 ) $ 104,084 $ 118,453 Depreciation expense for the nine months ended September 30, 2015 and 2014, respectively, was $19,369 and zero. |
Customer deposits - Related par
Customer deposits - Related party | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note 3 - Customer deposits - Related party | These represent advance payments of $400,000 received on orders that have not yet been fulfilled, with companies controlled by the individual who is the 5% owner of UPT and a shareholder. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note 4 - Debt | Debt consists of the following: September 30, December 31, 2015 2014 Note payable officer $ 22,910 $ 22,910 Note payable UPT minority owner 250,000 -- Test vehicle financing 81,506 94,401 Convertible debt 75,000 -- 429,416 117,311 Debt discount (73,461 ) -- 355,955 117,311 Less: current portion 292,581 40,235 Long-term portion $ 63,374 $ 77,076 The note payable officer is non-interest bearing and is due on demand, payable to the Secretary of Cool Technologies. The note payable UPT minority owner is with the 5% owner of UPT. The terms of the note have not been finalized. In October 2014, we entered into financing agreements for the purchase of test vehicles, bearing interest at 5.99% payable monthly over five years, collateralized by the vehicles. On September 15, 2015, we entered into a convertible debt agreement (the "Convertible Debt") with an unrelated individual, bearing interest at 10%, with principal and interest payable on September 15, 2017. We may borrow up to $250,000 under the Convertible Debt. At the Convertible Debt holder's option, a portion or all of the unpaid principal and interest may be converted into shares of our common stock at the lesser of $0.305 per share or 65% of the volume weighted average price during the five consecutive trading days immediately preceding the applicable conversion date. We determined that the conversion feature meets the requirements for derivative treatment and have recorded a Derivative liability and a corresponding debt discount on the condensed consolidated balance sheet. We estimated the fair value of the Derivative liability of $75,650 and $73,326, respectively, on September 15, 2015 and September 30, 2015. The following summarizes the Black-Scholes assumptions used to estimate the fair value of the derivative liability at the date of issuance and the revaluation date: September 15, 2015 September 30, 2015 Volatility 112 % 112 % Risk-free interest rate 0.8 % 0.6 % Expected life (years) 2.0 2.0 Dividend yield -- -- Future contractual maturities of debt are as follows: Year ending December 31, 2015 $ 277,340 2016 18,410 2017 94,563 2018 20,788 2019 18,315 $ 429,416 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note 5 - Commitments and Contingencies | On December 12, 2012, we concluded negotiations on a debt settlement agreement by and among the Company, Phoenix Productions and Entertainment Group ("PPEG"), Action Media Group, LLC ("Action Media") and Spirit Bear Limited ("Spirit Bear") (PPEG and Action Media collectively, the "Debt Holders"). The Debt Holders were to return to escrow a total of 4,676,000 shares of our common stock. 3,676,000 of these shares were returned and cancelled on January 14, 2013, following our filing a registration statement with the SEC on January 11, 2013. The remaining 1,000,000 shares will be purchased by the Company or a nominee of the Company at $0.40 per share (or $400,000) at the rate of $10,000 per month commencing within 90 days of the Company achieving $1,000,000 in gross revenues for products or services from business operations. PPEG and Action Media will divide the $400,000 on a pro rata basis, based on each company's respective amount of debt forgiven. The historical cost of the shares held in escrow are reflected in equity on the balance sheets as common stock held in escrow. Effective June 1, 2015, we executed a First Amendment to Settlement Agreement (the "Amendment") with Spirit Bear and the parties identified as the assignees of Spirit Bear who are signatories to the Amendment, which amends certain provisions of our original Settlement Agreement with Spirit Bear. In accordance with the terms of the Amendment, Jay Palmer, Carrie Dwyer and Donica Holt, the Spirit Bear holdover directors, tendered their resignation from the Board of Directors of the Company. Spirit Bear also agreed that it will no longer have any rights to appoint nominees to the Board of Directors. Pursuant to the Amendment, the Company agreed to file a registration statement on Form S-1 covering an aggregate of 14,028,385 shares of common stock, preferred stock and warrants on behalf of Spirit Bear and its assignees no later than July 15, 2015, which was filed with the SEC on July 15, 2015. A representative of Spirit Bear agreed that the obligation to register the shares on a Form S-1 need only include shares of common stock and shares of common stock issuable upon conversion of the Preferred Stock and exercise of the warrants held by Spirit Bear and its assignees. The Company agreed to issue replacement warrants for certain previously-issued warrants, which will be canceled in connection with the replacement issuance. Within 10 business days of June 1, 2015, the parties agreed to dismiss all of the pending litigation between and among them. On August 28, 2015, the parties filed a stipulation to dismiss the direct claims of the Company against Spirit Bear and of Spirit Bear against the Company in the Nevada Lawsuit. By order dated September 1, 2015, and filed September 2, 2015, the court ordered dismissal of all direct claims in the Nevada Lawsuit. Additionally, on February 20, 2015, the Court issued its preliminary approval to the derivative action settlement agreement (the "DASA'), which would lead to the ultimate dismissal of the derivative suit also filed by Spirit Bear in the same action. The Court has scheduled a fairness hearing for November 20, 2015, to consider giving its final approval to the DASA. No shareholder filed any objections to the DASA by April 30, 2015, which was the deadline established by the Court for filing objections. On October 22, 2015, however, Peak Finance, LLC ("Peak Finance") filed a Motion to Intervene in the action seeking, among other things, approval to file a new derivative Complaint in this matter. The Company has opposed this Motion. On August 31, 2015, the Company received notice of a summons in the matter styled Peak Finance, Derivatively on Behalf of Nominal Defendant, HPEV, Inc. v. Hassett, et al., No. 2:15-cv-01590-GMN-CWH, filed in the United States District Court for the District of Nevada (the "Peak Finance Claim"). Plaintiff Peak Finance, LLC ("Peak Finance") alleges that certain members of the Company's Board of Directors and officers caused a misleading proxy statement to issue and breached alleged fiduciary duties from and after June 18, 2013. Peak Finance further alleges that its claim is related to the Spirit Bear Lawsuit described above. The Company has not determined that there is any merit to the allegations, and has decided to submit the claims to an Independent Director Committee consisting of Directors Christopher McKee, Richard J. "Dick" Schul, and Donald Bowman for their review and consideration. Additionally, on September 28, 2015, the Company filed a motion to dismiss the initial Complaint filed by Peak Finance. On October 22, 2015, rather than oppose the motion to dismiss, Peak Finance filed an amended complaint in this case in addition to the Motion to Intervene in the pending Spirit Bear litigation set forth above. On November 9, 2015, the Company filed a new motion to dismiss the first amended complaint filed by Peak Finance on October 22, 2015. No hearing is presently scheduled on this matter. From time to time, we may be a party to other legal proceedings. Management currently believes that the ultimate resolution of these other matters, if any, and after consideration of amounts accrued, will not have a material adverse effect on our consolidated results of operations, financial position, or cash flow. |
Equity
Equity | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note 6 - Equity | Common Stock On August 19, 2015, the stockholders voted to increase the number of authorized shares of common stock from 100,000,000 shares to 140,000,000 shares. In the nine months ended September 30, 2015, we received $40,020 for shares of our common stock; however, the shares were not issued as of September 30, 2015, and are included in Common stock issuable within the equity section of the condensed consolidated balance sheet. In February, 2014, we entered into an agreement whereby we may sell up to $10,000,000 of our common stock to Lincoln Park Capital Fund LLC ("Lincoln Park") from time to time, subject to certain limitations, over a 36-month period, under a registration statement with respect to 4,671,785 shares of our common stock, which was declared effective by the SEC on July 3, 2014. The credit facility with Lincoln Park was mutually terminated as of April 23, 2015. |
Share-based payments
Share-based payments | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note 7 - Share-based payments | Amounts recognized as expense in the consolidated statements of operations related to share-based payments are as follows: Nine months ended September 30, 2015 2014 Nonemployee common stock $ 571,207 $ 596,750 Nonemployee warrants 55,849 7,240,930 Legal settlement replacement warrants 1,119,450 -- Employee stock options 981,000 9,944,000 Total share-based expense charged against income $ 2,727,506 $ 17,781,680 Impact on net loss per common share: Basic and diluted $ (0.04 ) $ (0.32 ) Nonemployee common stock UPT management agreement In July, 2014, we entered into an agreement with the company managing the operations of UPT, whereby we would issue common stock under the following conditions: Condition Number of Shares UPT recognizes $100 million of revenue or a change in control 500,000 UPT recognizes $100 million of revenue 150,000 650,000 As of September 30, 2015 and from the date of the agreement, meeting these conditions was not deemed probable, so no expense was recognized under this agreement and no common stock was issued. Investor relations agreement In June, 2014, we entered into an agreement with a company, which subsequently became a shareholder, to provide investor relations services. Under the terms of this agreement we agreed to issue 60,000 shares of common stock each quarter through May 2015, for a total of 240,000 shares. As of September 30, 2015, we have recognized the expense for all of the shares under the agreement. During the nine months ended September 30, 2015, we recorded expense at fair value of $61,200 for 120,000 shares. 60,000 remained unissued as of September 30, 2015, and are included in Common stock issuable within the equity section of the condensed consolidated balance sheet. Financial advisory agreements During the quarter ended June 30, 2015, we entered into separate agreements with three companies, which subsequently became shareholders, to provide financial advisory services, including developing, studying and evaluating a financing plan, strategic and financial alternatives, and merger and acquisition proposals. Under the terms of the agreements, we agreed to issue an aggregate of 333,332 shares of common stock each month through June 2016, as services were delivered, for a total of 5,000,000 shares over the term of the agreements. These agreements may be canceled by either party with a 30 day notice. During the three months ended June 30, 2015, we recorded expense at fair value of $510,007 for the issuance of 1,000,013 shares. If the services are provided and the agreements are not canceled, an additional 3,999,987 shares remain to be issued. During the quarter ended September 30, 2015, however, at management's request no services were provided, and no stock was earned or issued under these agreements. Other During the quarter ended September 30, 2015, we issued no other shares of common stock in exchange for services. Nonemployee common stock warrants -- Fully-vested upon issuance In July 2015, we issued 69,333 fully-vested warrants, with an exercise price of $0.40 per share and a life of 5 years, in exchange for financing advisory services. In June 2015, we issued 25,000 fully-vested warrants, with an exercise price of $0.70 per share and a life of four years, in exchange for financing advisory services. Nonemployee common stock warrants -- Service and performance conditions UPT management agreement In July, 2014, we entered into a three year agreement with the company managing the operations of UPT, whereby we would issue common stock warrants under the following conditions: Number of Vesting Condition Category Warrants Fully vest upon UPT generating $1 million of revenue Performance 350,000 45,945 warrants for every $3 million of revenue generated by UPT up to $100 million Performance 1,530,000 60,000 warrants for every three months of completed service managing UPT Service 720,000 2,600,000 The common stock warrants have a three year life and an exercise price of $1.00 per share. The grant date fair value was $2,586,000. As of September 30, 2015 and since the date of the agreement, we have not deemed it probable that the performance conditions will be met, so no expense was recognized and no common stock warrants vested. During the nine months ended September 30, 2015, 180,000 of the common stock warrants under the service condition vested with the passage of time and we recognized expense of $48,868. Financing advisory services In March, 2014, we entered into an agreement with a company, which is also a shareholder, to provide financing advisory services, in return for 400,000 common stock warrants having a five year life and an exercise price of $2.50, with vesting in March, 2015 upon satisfactory performance under the agreement. As of December 31, 2014, we deemed it probable that the vesting conditions would be met. Accordingly, during the year ended December 31, 2014, we recognized estimated expense of $200,379. As of March 31, 2015, the service conditions were met and the award was re-valued at $179,964, resulting in a reduction in expense of $20,415 during the quarter ended March 31, 2015. Summary The following summarizes of the status of our nonvested common stock warrants with performance and service conditions as of September 30, 2015, and changes during the period then ended: Number of Weighted-average Grant Date Warrants Fair Value Nonvested, December 31, 2014 2,880,000 $ 0.98 Vested (580,000 ) 0.99 Nonvested, September 30, 2015 2,300,000 $ 0.99 The following summarizes the Black-Scholes assumptions used to estimate the fair value of warrants with performance and service conditions during the nine months ended September 30, 2015: Volatility 112 184% Risk-free interest rate 0.9 1.4 % Expected life (years) 3.0 5.0 Dividend yield -- Legal settlement Replacement warrants Under the First Amendment to Settlement Agreement (the "Amendment") with Spirit Bear, we agreed to issue replacement warrants for certain previously-issued warrants (see Note 5). The 7,000,000 previously-issued warrants were issued in 2012, had exercise prices ranging from $0.35 to $0.75 per warrant, and expiration dates from April 2015 to April 2017. All of the replacement warrants have an exercise price of $0.25, while 6,000,000 expire in January 2017 and 1,000,000 expire in December 2015. When a replacement equity instrument is issued, expense is recorded if the fair value of the new instruments is greater than the fair value of the original instruments. We recorded expense of $1,119,450 associated with the replacement warrants. The following summarizes the Black-Scholes assumptions used to estimate the fair value of the previously-issued warrants and the replacement warrants: Previously-issued Replacement Volatility 245 245% 173% Risk-free interest rate 0.6 0.3 % 0.1 0.7 % Expected life (years) 2.0 4.5 0.6 1.8 Dividend yield -- -- Employee stock options Fully-vested We granted no additional fully-vested options during the nine months ended September 30, 2015. Employee stock options Market-based We granted no additional options that vest upon the achievement of certain stock prices during the nine months ended September 30, 2015. No additional non-vested market-based options vested during the quarter ended September 30, 2015. |
Net Loss per Share
Net Loss per Share | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note 8 - Net Loss per Share | Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised. The following table presents a reconciliation of the denominators used in the computation of net loss per share basic and diluted: Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 Net loss available for stockholders $ (977,343 ) $ (2,696,097 ) $ (5,205,783 ) $ (21,578,404 ) Weighted average outstanding shares of common stock 66,089,776 59,636,423 63,938,744 55,190,022 Dilutive effect of stock options and warrants -- -- -- -- Common stock and equivalents 66,089,776 59,636,423 63,938,744 55,190,022 Net loss per share Basic and diluted $ (0.01 ) $ (0.05 ) $ (0.08 ) $ (0.39 ) Outstanding stock options and common stock warrants are considered anti-dilutive because we are in a net loss position. Management has agreed to not exercise their stock options until the number of authorized shares has been increased. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
Note 9 - Subsequent Events | On October 9, 2015, we entered into two promissory notes with unrelated individuals, with principal and interest payable of $400,000 on March 31, 2016. We received cash of $350,000, with the $50,000 representing an original issue discount, or interest. |
Description of Business and S15
Description of Business and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Description Of Business And Summary Of Significant Accounting Policies Policies | |
Description of Business | Cool Technologies, Inc. and subsidiary, (we, us, our, the "Company" or "Cool Technologies") was incorporated in the State of Nevada in July 2002. In April 2014, we formed Ultimate Power Truck, LLC ("Ultimate Power Truck" or "UPT"), of which we own 95% and a shareholder of Cool Technologies owns 5%. We were formerly known as Bibb Corporation, as Z3 Enterprises, and as HPEV Inc. On August 20, 2015, we changed our name to Cool Technologies, Inc. We have developed and intend to commercialize thermal dispersion technologies in various product platforms and a parallel power input gearbox, around which we have designed a mobile generator system that can be retrofit onto new and existing trucks. In preparation, we have applied for trademarks for one of our technologies and its acronym. We currently have two trademarks: HPEV and TEHPC. We believe that our proprietary technologies, including our patent portfolio and trade secrets, can help increase the efficiency and positively affect manufacturing cost structure in several large industries beginning with motors/generators and fleet vehicles. The markets for products utilizing our technology include consumer, industrial and military markets, both in the U.S. and worldwide. Our technologies are divided into two distinct but complementary categories: heat dispersion technology and mobile electric power. As of September 30, 2015, we have five patents and seven patent applications pending in the area of composite heat structures, motors, and related structures, heat pipe architecture, applications (commonly referred to as "thermal" or "heat dispersion technology") and a parallel power vehicle platform. We intend to commercialize our patents by licensing our thermal technologies and applications to electric motor, pump and vehicle component manufacturers; and by licensing or selling a mobile electric power system powered by our proprietary gearing system to commercial vehicle and fleet owners. |
Basis of Presentation | The accompanying condensed consolidated balance sheet as of December 31, 2014, has been derived from audited financial statements. The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements and in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. All intercompany transactions have been eliminated in consolidation. Noncontrolling interest represents the 5% third party ownership of our subsidiary, UPT. Operating results and cash flows for interim periods are not necessarily indicative of results that can be expected for the entire year. The information included in this report should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014. |
Going Concern | The accompanying condensed consolidated financial statements have been prepared assuming we will continue as a going concern. We have incurred net losses of $37,626,928 since inception and have not fully commenced operations, raising substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to generate revenue, achieve profitable operations and repay our obligations when they come due. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. As of the filing date of this Quarterly Report on Form 10-Q, management is negotiating additional funding arrangements to support completion of the initial phases of our business plan: to license its thermal technologies and applications, including submersible dry-pit applications; and to license and sell mobile generation retrofit kits (our Ultimate Power Truck business) driven by our proprietary gearing system. There can be no assurance, however, that we will be successful in raising additional financing and accomplishing these objectives. |
Accounting Policy | Derivative financial instruments -- If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the derivative liability using the Black-Scholes Option Pricing Model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative liability is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the condensed consolidated statement of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreement are classified on the balance sheet as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the balance sheet date. |
Recently Issued Accounting Pronouncements | We have evaluated the other recent accounting pronouncements through ASU 2015-16 and believe that none of them will have a material effect on our financial statements. |
Equipment (Tables)
Equipment (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Equipment Tables | |
Equipment | September 30, December 31, 2015 2014 Test vehicles $ 124,687 $ 124,687 Other 5,000 -- 129,687 124,687 Less: accumulated depreciation (25,603 ) (6,234 ) $ 104,084 $ 118,453 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Tables | |
Summary of Debt | September 30, December 31, 2015 2014 Note payable officer $ 22,910 $ 22,910 Note payable UPT minority owner 250,000 -- Test vehicle financing 81,506 94,401 Convertible debt 75,000 -- 429,416 117,311 Debt discount (73,461 ) -- 355,955 117,311 Less: current portion 292,581 40,235 Long-term portion $ 63,374 $ 77,076 |
Fair value of the derivative liability | September 15, 2015 September 30, 2015 Volatility 112 % 112 % Risk-free interest rate 0.8 % 0.6 % Expected life (years) 2.0 2.0 Dividend yield -- -- |
Future contractual maturities of debt | Year ending December 31, 2015 $ 277,340 2016 18,410 2017 94,563 2018 20,788 2019 18,315 $ 429,416 |
Share-based payments (Tables)
Share-based payments (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Financial statements related to equity-based payments | Nine months ended September 30, 2015 2014 Nonemployee common stock $ 571,207 $ 596,750 Nonemployee warrants 55,849 7,240,930 Legal settlement replacement warrants 1,119,450 -- Employee stock options 981,000 9,944,000 Total share-based expense charged against income $ 2,727,506 $ 17,781,680 Impact on net loss per common share: Basic and diluted $ (0.04 ) $ (0.32 ) |
Common stock warrants performance and service conditions: | Number of Vesting Condition Category Warrants Fully vest upon UPT generating $1 million of revenue Performance 350,000 45,945 warrants for every $3 million of revenue generated by UPT up to $100 million Performance 1,530,000 60,000 warrants for every three months of completed service managing UPT Service 720,000 2,600,000 |
Nonvested stock options and warrant activity | Number of Weighted-average Grant Date Warrants Fair Value Nonvested, December 31, 2014 2,880,000 $ 0.98 Vested (580,000 ) 0.99 Nonvested, September 30, 2015 2,300,000 $ 0.99 |
Fair value of each option award | Volatility 112 184% Risk-free interest rate 0.9 1.4 % Expected life (years) 3.0 5.0 Dividend yield -- |
Fair value of the previously-issued warrants and the replacement warrants | Previously-issued Replacement Volatility 245 245% 173% Risk-free interest rate 0.6 0.3 % 0.1 0.7 % Expected life (years) 2.0 4.5 0.6 1.8 Dividend yield -- -- |
Nonemployee Common stock warrants - Service and performance conditions [Member] | |
Financial statements related to equity-based payments | Condition Number of Shares UPT recognizes $100 million of revenue or a change in control 500,000 UPT recognizes $100 million of revenue 150,000 650,000 |
Net Loss per Share (Tables)
Net Loss per Share (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Net Loss Per Share Tables | |
Reconciliation of the denominators used in the computation of net loss per share basic and diluted: | Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 Net loss available for stockholders $ (977,343 ) $ (2,696,097 ) $ (5,205,783 ) $ (21,578,404 ) Weighted average outstanding shares of common stock 66,089,776 59,636,423 63,938,744 55,190,022 Dilutive effect of stock options and warrants -- -- -- -- Common stock and equivalents 66,089,776 59,636,423 63,938,744 55,190,022 Net loss per share Basic and diluted $ (0.01 ) $ (0.05 ) $ (0.08 ) $ (0.39 ) |
2. Equipment (Details)
2. Equipment (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Equipment Details | ||
Test vehicles | $ 124,687 | $ 124,687 |
Other | 5,000 | |
Total | 129,687 | $ 124,687 |
Less: accumulated depreciation | (25,603) | (6,234) |
Equipment, net | $ 104,084 | $ 118,453 |
2. Equipment (Details Narrative
2. Equipment (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Notes to Financial Statements | ||
Depreciation expense | $ 19,369 | $ 0 |
4. Debt (Details)
4. Debt (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Debt Details | ||
Note payable - officer | $ 22,910 | $ 22,910 |
Note payable - UPT minority owner | 250,000 | |
Test vehicle financing | 81,506 | $ 94,401 |
Convertible debt | 75,000 | |
Total | 429,416 | $ 117,311 |
Debt discount | (73,461) | |
Total | 355,955 | $ 117,311 |
Less: current portion | 292,581 | 40,235 |
Long-term portion | $ 63,374 | $ 77,076 |
Debt (Details 1)
Debt (Details 1) | 1 Months Ended | 9 Months Ended |
Sep. 15, 2015 | Sep. 30, 2015 | |
Debt Details 1 | ||
Volatility | 112.00% | 112.00% |
Risk-free interest rate | 0.80% | 0.60% |
Expected life (years) | 2 years | 2 years |
Dividend yield |
4. Debt (Details 2)
4. Debt (Details 2) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Debt Details 2 | ||
2,015 | $ 277,340 | |
2,016 | 18,410 | |
2,017 | 94,563 | |
2,018 | 20,788 | |
2,019 | 18,315 | |
Total | $ 429,416 | $ 117,311 |
Debt (Details Narrative)
Debt (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended |
Sep. 15, 2015 | Sep. 30, 2015 | |
Debt Details Narrative | ||
Fair value of the Derivative liability | $ 75,650 | $ 73,326 |
6. Equity (Details Narrative)
6. Equity (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Equity Details Narrative | |
Common stock received, amount | $ 40,020 |
7. Share-based payments (Detail
7. Share-based payments (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Share-based Payments Details | ||||
Nonemployee common stock | $ 571,207 | $ 596,750 | ||
Nonemployee warrants | 55,849 | $ 7,240,930 | ||
Legal settlement - replacement warrants | 1,119,450 | |||
Employee stock options | 981,000 | $ 9,944,000 | ||
Total share-based expense charged against income | $ 2,727,506 | $ 17,781,680 | ||
Impact on net loss per common share: Basic and diluted | $ (0.04) | $ (0.32) |
7. Share-based payments (Deta28
7. Share-based payments (Details 1) | Sep. 30, 2015shares |
Common stock shares issued | 650,000 |
Condition One [Member] | |
Common stock shares issued | 500,000 |
Condition Two [Member] | |
Common stock shares issued | 150,000 |
7. Share-based payments (Deta29
7. Share-based payments (Details 2) | 9 Months Ended |
Sep. 30, 2015shares | |
Common stock warrants issued | 2,600,000 |
Vesting Condition One [Member] | |
Common stock warrants issued | 350,000 |
Category | Performance |
Vesting Condition Two [Member] | |
Common stock warrants issued | 1,530,000 |
Category | Performance |
Vesting Condition Three [Member] | |
Common stock warrants issued | 720,000 |
Category | Service |
7. Share-based payments (Deta30
7. Share-based payments (Details 3) | 9 Months Ended |
Sep. 30, 2015$ / sharesshares | |
Number of Warrants | |
Nonvested, Ending | shares | 2,300,000 |
Weighted-average Grant Date Fair Value | |
Nonvested, Ending | $ 0.99 |
Nonemployee Common stock warrants - Service and performance conditions [Member] | |
Number of Warrants | |
Nonvested, Beginning | shares | 2,880,000 |
Vested | shares | (580,000) |
Weighted-average Grant Date Fair Value | |
Nonvested, Beginning | $ 0.98 |
Vested | $ 0.99 |
7. Share-based payments (Deta31
7. Share-based payments (Details 4) - Nonemployee Common stock warrants - Service and performance conditions [Member] | 9 Months Ended |
Sep. 30, 2015 | |
Dividend yield | 0.00% |
Minimum [Member] | |
Volatility | 112.00% |
Risk-free interest rate | 0.90% |
Expected life (years) | 3 years |
Maximum [Member] | |
Volatility | 184.00% |
Risk-free interest rate | 1.40% |
Expected life (years) | 5 years |
7. Share-based payments (Deta32
7. Share-based payments (Details 5) | 9 Months Ended |
Sep. 30, 2015 | |
Previously Issued [Member] | |
Dividend yield | 0.00% |
Previously Issued [Member] | Minimum [Member] | |
Volatility | 245.00% |
Risk-free interest rate | 0.60% |
Expected life (years) | 2 years |
Previously Issued [Member] | Maximum [Member] | |
Volatility | 245.00% |
Risk-free interest rate | 0.30% |
Expected life (years) | 4 years 6 months |
Replacement [Member] | |
Volatility | 173.00% |
Dividend yield | 0.00% |
Replacement [Member] | Minimum [Member] | |
Risk-free interest rate | 0.10% |
Expected life (years) | 7 months 6 days |
Replacement [Member] | Maximum [Member] | |
Risk-free interest rate | 0.70% |
Expected life (years) | 1 year 9 months 18 days |
7. Share-based payments (Deta33
7. Share-based payments (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($)shares | |
Common stock warrants under the service condition vested | shares | 180,000 |
Recognized expense | $ 48,868 |
Investor relations agreement [Member] | |
Issuance of common stock | shares | 120,000 |
Recorded expense | $ 61,200 |
8. Net Loss per Share (Details)
8. Net Loss per Share (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Net Loss Per Share Details | ||||
Net loss available for stockholders | $ (977,343) | $ (2,696,097) | $ (5,205,783) | $ (21,578,404) |
Weighted average outstanding shares of common stock | 66,089,776 | 59,636,423 | 63,938,744 | 55,190,022 |
Dilutive effect of stock options and warrants | ||||
Common stock and equivalents | 66,089,776 | 59,636,423 | 63,938,744 | 55,190,022 |
Net loss per share - Basic and diluted | $ (0.01) | $ (0.05) | $ (0.08) | $ (0.39) |