Document_and_Entity_Informatio
Document and Entity Information (USD $) | 3 Months Ended | |
Aug. 31, 2013 | Oct. 15, 2013 | |
Document and Entity Information: | ||
Entity Registrant Name | ABAKAN, INC | |
Document Type | 10-Q | |
Document Period End Date | 31-Aug-13 | |
Amendment Flag | FALSE | |
Entity Central Index Key | 1400000 | |
Current Fiscal Year End Date | -26 | |
Entity Common Stock, Shares Outstanding | 64,284,855 | |
Entity Public Float | $0 | |
Entity Filer Category | Accelerated Filer | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2014 | |
Document Fiscal Period Focus | Q1 |
ABAKAN_INC_CONSOLIDATED_BALANC
ABAKAN, INC. CONSOLIDATED BALANCE SHEETS AUGUST 31ST 2013 and MAY 31ST 2013 (USD $) | Aug. 31, 2013 | 31-May-13 |
Assets, Current | ||
Cash and Cash Equivalents, at Carrying Value | $26,782 | $233,040 |
Accounts Receivable, Net, Current | 85,334 | 105,523 |
Due from Related Parties, Current | 4,500 | 4,500 |
Prepaid Expense, Current | 99,112 | 117,028 |
Deferred finance fees, net | 12,060 | 15,799 |
Assets, Current | 227,788 | 475,890 |
Assets, Noncurrent | ||
Property, Plant and Equipment, Net (Note 4) | 5,713,273 | 5,595,007 |
Patents and licenses, net (Note 5) | 6,203,665 | 7,545,163 |
Assignment agreement Mesocoat (Note 6) | 200,660 | 210,528 |
Investment - Powdermet (Note 7) | 2,304,480 | 2,449,312 |
Goodwill | 364,384 | 364,384 |
Assets | 15,014,250 | 16,640,284 |
Liabilities, Current | ||
Accounts Payable, Current | 1,431,905 | 890,791 |
Accounts Payable related parties (Note 11) | 471,101 | 251,004 |
Accrued Liabilities, Current | 1,066,635 | 377,392 |
Loans Payable, net of discounts of $171,615 and $456,164 Current (Note 8) | 1,338,338 | 965,555 |
Loan payable - related parties (Note 11) | 30,000 | 30,000 |
Accrued interest -loans payable (Note 8) | 140,801 | 153,825 |
Accrued interest -related parties (Note 11) | 2,600 | 1,987 |
Capital Lease Obligations, Current | 28,006 | 28,006 |
Liabilities, Current | 4,509,386 | 2,698,560 |
Liabilities, Noncurrent | ||
Loans Payable, net of discounts of $444,881 and $601,940 (Note 8), Noncurrent | 3,141,360 | 4,241,278 |
Capital Lease Obligations, Noncurrent | 62,331 | 63,875 |
Liabilities | 7,713,077 | 7,003,713 |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest (Note 9) | ||
Common Stock, Value, Issued | 6,430 | 6,430 |
Additional Paid in Capital, Common Stock | 21,134,653 | 20,833,426 |
Subscription receivable | -76,244 | |
Contributed Capital | 5,050 | 5,050 |
Accumulated Deficit during the development stage | -15,684,591 | -13,545,788 |
Stockholders' Equity Attributable to Noncontrolling Interest | 1,839,631 | 2,413,697 |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | 7,301,173 | 9,636,571 |
Liabilities and Equity | $15,014,250 | $16,640,284 |
Statement_of_Financial_Positio
Statement of Financial Position - Parenthetical Abakan, Inc. August 31, 2013 and May 31, 2013 (USD $) | Aug. 31, 2013 | 31-May-13 |
Condensed Consolidated Balance Sheets Parenthetical | ||
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Par Value | $0.00 | $0.00 |
Common Stock, Shares Authorized | 2,500,000,000 | 2,500,000,000 |
Common Stock, Shares Issued | 64,284,855 | 64,284,855 |
Common Stock, Shares Outstanding | 64,284,855 | 64,284,855 |
Common Stock, Value, Outstanding | $6,430 | $6,430 |
ABAKAN_INC_CONSOLIDATED_STATEM
ABAKAN, INC, CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED AUGUST 2013, 2012 AND CUMULATIVE (USD $) | 3 Months Ended | 86 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | |
Revenues | |||
Sales Revenue, Goods, Net | $25,247 | $19,300 | $293,000 |
Contract and Grants | 63,403 | 547,327 | 3,818,657 |
Other Revenue, Net | 268,756 | 764,879 | |
Revenues | 88,650 | 835,383 | 4,876,536 |
Cost of Revenue | |||
Cost of Revenue | 80,532 | 336,774 | 1,868,803 |
Gross Profit | 8,118 | 498,609 | 3,007,733 |
Operating Expenses | |||
General and Administrative Expense | 186,360 | 161,687 | 1,913,014 |
Professional Fees | 320,322 | 120,304 | 1,403,191 |
Professional fees - related parties | 18,028 | 15,000 | 243,028 |
Consulting | 273,809 | 363,932 | 3,360,588 |
Consulting - related parties | 78,500 | 99,427 | 1,759,730 |
Payroll and benefits expense | 533,985 | 182,976 | 2,381,088 |
Depreciation, Nonproduction | 198,419 | 85,500 | 947,575 |
Research and Development Expense | 488,617 | 293,608 | 2,573,123 |
Impairment of asset | 180,000 | ||
Stock expense on note conversion | 730,097 | ||
Stock options expense | 318,480 | 459,784 | 4,734,760 |
Operating Expenses | 2,416,520 | 1,782,218 | 20,226,194 |
Operating Income (Loss) | -2,408,402 | -1,283,609 | -17,218,461 |
Interest and Debt Expense | |||
Interest Expense loans | -27,800 | -103,768 | -575,679 |
Interest Expense related parties | -613 | -7,946 | |
Liquidated damages | -250,000 | ||
Amortization of discount on debt | -148,479 | -181,128 | -1,599,632 |
Interest and Debt Expense | -176,892 | -284,896 | -2,433,257 |
Interest Income, Net | 3 | 3,693 | 8,168 |
Creditor Fee | -241,051 | ||
Gain on debt settlement | 274,967 | ||
Gain (Loss) on Disposition of Assets | 428,796 | ||
Unrealized gain on MesoCoat acquisition | 1,764,345 | ||
Equity in Powdermet income/ (loss) | -144,832 | 41,175 | 654,480 |
Equity in MesoCoat loss | -586,020 | ||
Investment Income, Nonoperating | -321,721 | -240,028 | -129,572 |
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest | -2,730,123 | -1,523,637 | -17,348,033 |
Noncontrolling interest in MesoCoat Loss | 591,320 | 116,254 | 1,663,442 |
Net Income (Loss) Attributable to Abakan Inc | -2,138,803 | -1,407,383 | -15,684,591 |
Net Income (Loss) Attributable to Parent | ($2,138,803) | ($1,407,383) | ($15,684,591) |
Earnings Per Share | |||
Earnings Per Share, Basic | ($0.03) | ($0.02) | |
Earnings Per Share, Diluted | ($0.03) | ($0.02) | |
Weighted Average Number of Shares Outstanding, Basic | 64,284,855 | 61,615,065 | |
Weighted Average Number of Shares Outstanding, Diluted | 64,284,855 | 61,615,065 |
ABAKAN_INC_CONSOLIDATED_STATEM1
ABAKAN INC CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED AUGUST 31ST 2013 AND 2012 AND CUMULATIVE (USD $) | 3 Months Ended | 86 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | |
Net Cash Provided by (Used in) Operating Activities | |||
Net Cash Provided by (Used in) Operating Activities | ($572,281) | ($466,972) | ($6,471,598) |
Net Cash Provided by (Used in) Investing Activities | |||
Payments to Acquire Property, Plant, and Equipment | -297,209 | -282,082 | -4,079,411 |
Payments to Acquire Powdermet minority Interest, Net of Cash Acquired | -2,390,266 | ||
Assignment Agreement MesoCoat Investing | -100,000 | ||
Proceeds from sale of capital assets | 470,921 | ||
Investment in MesoCoat Activity | -750,070 | ||
Powdermet minority interest | -1,650,000 | ||
Capitalized patents and licenses | -4,738 | -11,358 | -148,006 |
Payments for (Proceeds from) Waste to Energy Group Inc and Interest in Affiliates | -180,000 | ||
Net Cash Provided by (Used in) Investing Activities | -301,947 | -293,440 | -8,826,832 |
Net Cash Provided by (Used in) Financing Activities | |||
Proceeds from Issuance of Common Stock | 76,244 | 525,000 | 9,300,514 |
Proceeds from (Repayments of) Notes Payable | 593,270 | -66,028 | 5,968,382 |
Proceeds from (Repayments of) Related Party Debt | 59,947 | 130,743 | |
Proceeds from (Repayments of) Long-term Debt and Capital Securities | -1,544 | -9,255 | -79,477 |
Proceeds from Contributed Capital | 5,050 | ||
Net Cash Provided by (Used in) Financing Activities | 667,970 | 509,664 | 15,325,212 |
Cash and Cash Equivalents, Period Increase (Decrease) | -206,258 | -250,748 | 26,782 |
Cash Beginning Period | 233,040 | 859,566 | |
Cash End Period | $26,782 | $608,818 | $26,782 |
1_Summary_of_Significant_Accou
1. Summary of Significant Accounting Policies | 3 Months Ended |
Aug. 31, 2013 | |
Notes | |
1. Summary of Significant Accounting Policies | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation | |
In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q. 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 (consisting of normal recurring accruals) considered necessary for a fair presentation of Abakan’s financial position as of August 31, 2013, and the results of its operations and cash flows for the three months ended August 31, 2013, have been made. Operating results for the three months ended August 31, 2013 are not necessarily indicative of the results for the year. | |
These condensed consolidated financial statements should be read in conjunction with the financial statements and notes for the year ended May 31, 2013 contained in Abakan’s Form 10-K. | |
Consolidation Policy | |
The accompanying August 31, 2013 financial statements include Abakan’s accounts and the accounts of its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Abakan’s ownership of its subsidiaries as of August 31, 2013 is as follows: | |
Name of Subsidiary Percentage of Ownership | |
AMP SEZC (Cayman) 100.0% | |
AMP Distributors (Florida) 100.0% | |
MesoCoat, Inc. 52.5% | |
MesoCoat, Inc. (“MesoCoat”) formed a wholly-owned subsidiary, MesoCoat Coating Services, Inc. on June 13, 2013. There was no financial activity during the quarter ending August 31, 2013. | |
Non-Controlling Interest | |
Non-controlling interest represents the 47.5% minority shareholders’ proportionate share of the equity of MesoCoat. Abakan’s 52.5% controlling interest in MesoCoat requires that its operations be included in its consolidated financial statements. The equity interest of MesoCoat that is not owned by Abakan is shown as a non-controlling interest in the consolidated financial statements. | |
Abakan’s 41% minority interest share of Powdermet, Inc.’s (“Powdermet”) income or loss is shown as “Equity share of Powdermet income (loss)” in the statement of operations of the consolidated financial statements. On June 13, 2013, Powdermet formed a wholly owned subsidiary, Terves Inc. | |
Development Stage Enterprise | |
At August 31, 2013, Abakan’s business operations had not fully developed and are dependent upon funding and therefore Abakan is considered a development stage enterprise. | |
Accounts Receivable | |
Accounts receivable are stated at face value, less an allowance for doubtful accounts. Abakan provides an allowance for doubtful accounts based on management's periodic review of accounts, including the delinquency of account balances. Accounts are considered delinquent when payments have not been received within the agreed upon terms, and are written off when management determines that collection is not probable. As of August 31, 2013 management has determined that no allowance for doubtful accounts is required. | |
Subsequent Events | |
In accordance with ASC 855-10 “Subsequent Events”, Abakan has evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the date the financial statements were issued (Note 9). |
2_Going_Concern
2. Going Concern | 3 Months Ended |
Aug. 31, 2013 | |
Notes | |
2. Going Concern | 2. GOING CONCERN |
The accompanying financial statements have been prepared assuming that Abakan will continue as a going concern. Abakan had net losses for the period of June 27, 2006 (inception) to the year ended August 31, 2013, of $15,684,591 and a working capital deficit of $4,669,605. These conditions raise substantial doubt about Abakan’s ability to continue as a going concern. Abakan’s continuation as a going concern is dependent on its ability to develop additional sources of capital, and/or achieve profitable operations and positive cash flows. Since inception Abakan has funded its operations through the issuance of common stock, debt financing, related party loans and advances. Abakan is committed to aggressively pursuing its present business plan and, and will seek additional debt and or equity financing as required to meet its objectives. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
3_Investment_in_Noncontrolling
3. Investment in Non-controlling Interest | 3 Months Ended | |||||
Aug. 31, 2013 | ||||||
Notes | ||||||
3. Investment in Non-controlling Interest | 3. INVESTMENT IN NON-CONTROLLING INTEREST | |||||
Powdermet, Inc. | ||||||
Abakan owns a forty one percent (41%) interest in Powdermet. Powdermet owns 47.5% of MesoCoat as of August 31, 2013. Abakan’s 41% ownership of Powdermet, results in indirect ownership of the shares of MesoCoat that Powdermet owns. On June 13, 2013, Powdermet formed a wholly owned subsidiary, Terves Inc. There was no financial activity during the quarter ending August 31, 2013 for Terves. | ||||||
We have analyzed our investment in accordance of “Investments – Equity Method and Joint Ventures” (ASC 323), and concluded that the acquisition of our 41% minority interest gives us significant influence over Powdermet’s business actions, board of directors, and its management, and therefore we account for our investment using the Equity Method. The table below reconciles our investment amount and equity method amounts to the amount on the accompanying balance sheet. | ||||||
Investment balance, May 31, 2013 | $ | 2,449,312 | ||||
Equity in loss for three months ended August 31, 2013 | (144,832) | |||||
Investment balance, August 31, 2013 | $ | 2,304,480 | ||||
Powdermet Inc. | ||||||
For the three months ended | For the three months ended | |||||
31-Aug-13 | 31-Aug-12 | |||||
Equity Percentage | 41% | 41% | ||||
Condensed income statement information: | ||||||
Total revenues | $ | 446,811 | $ | 685,432 | ||
Total cost of revenues | 128,903 | 280,499 | ||||
Gross margin | 317,908 | 404,933 | ||||
Total expenses | (287,299) | (304,507) | ||||
Other income/ (expense) | (591,320) | - | ||||
Provision for income tax benefit | 207,463 | - | ||||
Net profit/ (loss) | $ | (353,248) | $ | 100,426 | ||
Abakan’s equity in net profit/(loss): 41% | $ | (144,832) | $ | 41,175 | ||
Condensed balance sheet information: | 31-Aug-13 | 31-May-13 | ||||
Total current assets | $ | 569,523 | $ | 536,111 | ||
Total non-current assets | 2,463,544 | 3,077,305 | ||||
Total assets | $ | 3,033,067 | $ | 3,613,416 | ||
Total current liabilities | $ | 211,256 | $ | 260,897 | ||
Total non-current liabilities | 1,499,003 | 1,676,463 | ||||
Total equity | 1,322,808 | 1,676,056 | ||||
Total liabilities and equity | $ | 3,033,067 | $ | 3,613,416 | ||
Below is a table with summary financial results of operations and financial position of Powdermet: | ||||||
4_Loans_Payable
4. Loans Payable | 3 Months Ended | ||||
Aug. 31, 2013 | |||||
Notes | |||||
4. Loans Payable | 4. LOANS PAYABLE | ||||
As of August 31, 2013 and May 31, 2013, the loans payable balance comprised of: | |||||
Description | 31-Aug-13 | 31-May-13 | |||
Convertible demand note to an unrelated entity bearing 5% interest per annum which matures on September 15, 2014. The note is shown net of a discount of $-0- and $-0-, respectively, attributable to the beneficial conversion feature, and an effective interest rate of 31% due the attached warrants. | $ | 1,500,000 | $ | 1,500,000 | |
Convertible demand note to an unrelated entity bearing 5% interest per annum which matures on September 15, 2014. The note is shown net of a discount of $-0- and $24,837, respectively, attributable to the beneficial conversion feature, and an effective interest rate of 176% due to the attached warrants. | 200,000 | 175,163 | |||
Convertible demand note to an unrelated entity bearing 5% interest per annum which matures on July 14, 2014. The note is shown net of a discount of $-0- and $112,527, respectively, attributable to the beneficial conversion feature, and an effective interest rate of 143% due to the attached warrants. | 500,000 | 387,473 | |||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 70,000 | 70,000 | |||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 3,850 | 3,850 | |||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 19,350 | 19,350 | |||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 20,000 | 20,000 | |||
Uncollateralized demand notes to an unrelated entity bearing 6% interest per annum | 500,000 | - | |||
Uncollateralized demand notes to an unrelated entity bearing 5% interest per annum | 50,000 | - | |||
Uncollateralized demand notes to an unrelated entity bearing 5% interest per annum | 70,000 | - | |||
Collateralized note to an unrelated entity bearing 1% interest for the first year and then 7% per annum for years two – seven. | 1,000,000 | 1,000,000 | |||
Uncollateralized demand note to a related entity bearing 8% interest per annum | 30,000 | 30,000 | |||
Convertible demand note to an unrelated entity bearing 7.5% imputed interest per annum which matures on July 10, 2018. | 46,231 | 48,228 | |||
Uncollateralized notes to an unrelated entity bearing 8% interest per annum, matures on September 15, 2014 | 405,000 | 405,877 | |||
Capital leases payable to various vendors expiring in various years through September 2016; collateralized by certain equipment with a cost of $205,157. | 90,337 | 91,881 | |||
Collateralized 5 year term note to an unrelated entity bearing 5.15% interest | 95,267 | - | |||
Uncollateralized demand note to an unrelated entity for royalties shown net of discount of $23,108 | - | 1,576,892 | |||
4,600,035 | $ | 5,328,714 | |||
Less current liabilities | 1,396,344 | 1,023,561 | |||
Total long term liabilities | $ | 3,203,691 | $ | 4,305,153 | |
Intangible assets of $1,336,281 and a liability of $1,576,892 related to the 2011 Exclusivity Agreement with Mattson Technology Inc. have been removed from the August 31, 2013 financial statements based on the matters discussed on page 20 in the Management Discussion section. | |||||
5_Stockholders_Equity
5. Stockholders' Equity | 3 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
Notes | |||||||||||||
5. Stockholders' Equity | 5. STOCKHOLDERS' EQUITY | ||||||||||||
Common Stock Issuances | |||||||||||||
For the three months ended August 31, 2013, we did not issue any shares for private placements, conversion of debt to shares, or share based compensation. | |||||||||||||
A summary of the common stock warrants granted, forfeited or expired during the three months ended August 31, 2013 and the year ended May 31, 2013 is presented below: | |||||||||||||
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Terms (In Years) | |||||||||||
Balance at June 1, 2012 | 2,066,296 | $ | 1.64 | 2.0 years | |||||||||
Granted | 1,186,934 | 2.35 | |||||||||||
Exercised | -270,233 | 1.5 | |||||||||||
Forfeited or expired | -140,005 | 1.5 | |||||||||||
Balance at May 31, 2013 | 2,842,992 | $ | 1.8 | 2.0 years | |||||||||
Granted | - | - | |||||||||||
Exercised | - | - | |||||||||||
Forfeited or expired | - | - | |||||||||||
Balance at August 31, 2013 | 2,842,992 | $ | 1.8 | 2.0 years | |||||||||
Exercisable at August 31, 2013 | 2,842,992 | $ | 1.8 | 2.0 years | |||||||||
Weighted average fair value of | $ | NA | |||||||||||
options granted during the three months ended August 31, 2013 | |||||||||||||
The following table summarizes information about the common stock warrants outstanding at August 31, 2013: | |||||||||||||
Warrants Exercisable | |||||||||||||
Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | ||||||||
$ | 1.25 | 1,306,595 | 2.00 Years | $ | 1.25 | $ | 1,306,595 | $ | 1.25 | ||||
$ | 1.5 | 250,000 | 2.00 Years | $ | 1.5 | $ | 250,000 | $ | 1.5 | ||||
$ | 2 | 574,463 | 2.00 Years | $ | 2 | $ | 574,463 | $ | 2 | ||||
$ | 2.7 | 576,272 | 2.00 Years | $ | 2.7 | $ | 576,272 | $ | 2.7 | ||||
$ | 3 | 135,662 | 2.00 Years | $ | 3 | $ | 135,662 | $ | 3 | ||||
2,842,992 | 2.00 Years | $ | 1.8 | $ | 2,842,992 | $ | 1.8 | ||||||
6_Earningspershare_Calculation
6. Earnings-per-share Calculation | 3 Months Ended | |||
Aug. 31, 2013 | ||||
Notes | ||||
6. Earnings-per-share Calculation | 6. EARNINGS-PER-SHARE CALCULATION | |||
Basic earnings per common share for the three months ended August 31, 2013 and 2012 are calculated by dividing net income by weighted-average common shares outstanding during the period. Diluted earnings per common share for the three months ended August 31, 2013 and 2012 are calculated by dividing net income by weighted-average common shares outstanding during the period plus dilutive potential common shares, which are determined as follows: | ||||
For the three months ended August 31, 2013 | For the three months ended August 31, 2012 | |||
Net earnings (loss) from operations | $ (2,138,803) | $ (1,407,383) | ||
Weighted-average common shares | 64,284,855 | 61,515,065 | ||
Effect of dilutive securities: | ||||
Warrants | - | - | ||
Options to purchase common stock | - | - | ||
Dilutive potential common shares | 64,284,855 | 61,515,065 | ||
Net earnings per share from operations: | ||||
Basic | $ (0.03) | $ (0.02) | ||
Diluted | $ (0.03) | $ (0.02) | ||
Dilutive potential common shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all warrants and options are used to repurchase common stock at market value. The amount of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities. The increasing number of warrants used in the calculation is a result of the increasing market value of Abakan’s common stock. | ||||
In periods where losses are reported the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. | ||||
These securities below were excluded from the calculations above because to include them would be anti-dilutive: | ||||
For the three months ended August 31, 2013 | For the three months ended August 31, 2012 | |||
Common Stock Equivalents: | ||||
Warrants | 2,842,992 | 2,216,296 | ||
Options to purchase common stock | 3,796,667 | 5,860,000 | ||
Total of Common Stock Equivalents: | 6,639,659 | 8,076,296 | ||
7_Stock_Based_Compensation
7. Stock - Based Compensation | 3 Months Ended | |||||||
Aug. 31, 2013 | ||||||||
Notes | ||||||||
7. Stock - Based Compensation | 7. STOCK – BASED COMPENSATION | |||||||
2009 Stock Option Plan – Abakan | ||||||||
Our board of directors adopted and approved our 2009 Stock option Plan (“Plan”) on December 14, 2009, as amended on June 14, 2012, which provides for the granting and issuance of up to 10 million shares of our common stock. | ||||||||
The total value of employee and non-employee stock options granted during the three months ended August 31, 2013 and 2012, was $234,271 and $1,315,619, respectively. | ||||||||
For the three months ended August 31, 2013, Abakan granted 80,000 stock options to an officer of MesoCoat on June 14, 2013. These options were issued at an exercise price of $2.94 per share, and these options will expire ten years from the grant date, and will vest in equal one third parts on the anniversary of the option grant date. | ||||||||
A summary of the options granted to employees and non-employees under the plan and changes during the three months ended August 31, 2013 year ending May 31, 2013 is presented below: | ||||||||
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Terms(In Years) | Aggregate Intrinsic Value | |||||
Balance at June 1, 2012 | 5,160,000 | $ | 0.77 | 9.00 years | $ | 185,000 | ||
Granted | 1,135,000 | 2.39 | ||||||
Exercised | - | - | ||||||
Forfeited or expired | -2,495,000 | $ | 0.69 | |||||
Balance at May 31, 2013 | 3,800,000 | $ | 1.26 | 7.78 years | $ | 108,750 | ||
Granted | 80,000 | 2.94 | ||||||
Exercised | - | - | ||||||
Forfeited or expired | -83,333 | $ | 1.3 | |||||
Balance at August 31, 2013 | 3,796,667 | $ | 1.26 | 7.52 years | $ | 108,750 | ||
Exercisable at August 31, 2013 | 2,513,329 | $ | 0.9 | 7.52 years | $ | -- | ||
Weighted average fair value of | $ | 2.94 | ||||||
options granted during the 3 months ending August 31, 2013 | ||||||||
8_Commitments
8. Commitments | 3 Months Ended |
Aug. 31, 2013 | |
Notes | |
8. Commitments | 8. COMMITMENTS |
There were no new commitments for the three months period ending August 31, 2013. | |
9_Subsequent_Events
9. Subsequent Events | 3 Months Ended |
Aug. 31, 2013 | |
Notes | |
9. Subsequent Events | 9. SUBSEQUENT EVENTS |
Management has evaluated subsequent events after the balance sheet date, through the issuance of the financial statements, for appropriate accounting and disclosure. Abakan has determined that there were no such events that warrant disclosure or recognition in the financial statements, except for the following: | |
Other Business | |
In September, Petrobras made the final payment for balance of “Phase Two” payments of the original Cooperation Agreement. |
1_Summary_of_Significant_Accou1
1. Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 3 Months Ended |
Aug. 31, 2013 | |
Policies | |
Basis of Presentation | Basis of Presentation |
In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q. 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 (consisting of normal recurring accruals) considered necessary for a fair presentation of Abakan’s financial position as of August 31, 2013, and the results of its operations and cash flows for the three months ended August 31, 2013, have been made. Operating results for the three months ended August 31, 2013 are not necessarily indicative of the results for the year. | |
These condensed consolidated financial statements should be read in conjunction with the financial statements and notes for the year ended May 31, 2013 contained in Abakan’s Form 10-K. |
1_Summary_of_Significant_Accou2
1. Summary of Significant Accounting Policies: Consolidation Policy (Policies) | 3 Months Ended |
Aug. 31, 2013 | |
Policies | |
Consolidation Policy | Consolidation Policy |
The accompanying August 31, 2013 financial statements include Abakan’s accounts and the accounts of its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Abakan’s ownership of its subsidiaries as of August 31, 2013 is as follows: | |
Name of Subsidiary Percentage of Ownership | |
AMP SEZC (Cayman) 100.0% | |
AMP Distributors (Florida) 100.0% | |
MesoCoat, Inc. 52.5% | |
MesoCoat, Inc. (“MesoCoat”) formed a wholly-owned subsidiary, MesoCoat Coating Services, Inc. on June 13, 2013. There was no financial activity during the quarter ending August 31, 2013. |
1_Summary_of_Significant_Accou3
1. Summary of Significant Accounting Policies: Development Stage Enterprise (Policies) | 3 Months Ended |
Aug. 31, 2013 | |
Policies | |
Development Stage Enterprise | Development Stage Enterprise |
At August 31, 2013, Abakan’s business operations had not fully developed and are dependent upon funding and therefore Abakan is considered a development stage enterprise. |
1_Summary_of_Significant_Accou4
1. Summary of Significant Accounting Policies: Accounts Receivable (Policies) | 3 Months Ended |
Aug. 31, 2013 | |
Policies | |
Accounts Receivable | Accounts Receivable |
Accounts receivable are stated at face value, less an allowance for doubtful accounts. Abakan provides an allowance for doubtful accounts based on management's periodic review of accounts, including the delinquency of account balances. Accounts are considered delinquent when payments have not been received within the agreed upon terms, and are written off when management determines that collection is not probable. As of August 31, 2013 management has determined that no allowance for doubtful accounts is required. |
3_Investment_in_Noncontrolling1
3. Investment in Non-controlling Interest: Powdermet, Inc. (Policies) | 3 Months Ended | |||||
Aug. 31, 2013 | ||||||
Policies | ||||||
Powdermet, Inc. | Powdermet, Inc. | |||||
Abakan owns a forty one percent (41%) interest in Powdermet. Powdermet owns 47.5% of MesoCoat as of August 31, 2013. Abakan’s 41% ownership of Powdermet, results in indirect ownership of the shares of MesoCoat that Powdermet owns. On June 13, 2013, Powdermet formed a wholly owned subsidiary, Terves Inc. There was no financial activity during the quarter ending August 31, 2013 for Terves. | ||||||
We have analyzed our investment in accordance of “Investments – Equity Method and Joint Ventures” (ASC 323), and concluded that the acquisition of our 41% minority interest gives us significant influence over Powdermet’s business actions, board of directors, and its management, and therefore we account for our investment using the Equity Method. The table below reconciles our investment amount and equity method amounts to the amount on the accompanying balance sheet. | ||||||
Investment balance, May 31, 2013 | $ | 2,449,312 | ||||
Equity in loss for three months ended August 31, 2013 | (144,832) | |||||
Investment balance, August 31, 2013 | $ | 2,304,480 | ||||
Powdermet Inc. | ||||||
For the three months ended | For the three months ended | |||||
31-Aug-13 | 31-Aug-12 | |||||
Equity Percentage | 41% | 41% | ||||
Condensed income statement information: | ||||||
Total revenues | $ | 446,811 | $ | 685,432 | ||
Total cost of revenues | 128,903 | 280,499 | ||||
Gross margin | 317,908 | 404,933 | ||||
Total expenses | (287,299) | (304,507) | ||||
Other income/ (expense) | (591,320) | - | ||||
Provision for income tax benefit | 207,463 | - | ||||
Net profit/ (loss) | $ | (353,248) | $ | 100,426 | ||
Abakan’s equity in net profit/(loss): 41% | $ | (144,832) | $ | 41,175 | ||
Condensed balance sheet information: | 31-Aug-13 | 31-May-13 | ||||
Total current assets | $ | 569,523 | $ | 536,111 | ||
Total non-current assets | 2,463,544 | 3,077,305 | ||||
Total assets | $ | 3,033,067 | $ | 3,613,416 | ||
Total current liabilities | $ | 211,256 | $ | 260,897 | ||
Total non-current liabilities | 1,499,003 | 1,676,463 | ||||
Total equity | 1,322,808 | 1,676,056 | ||||
Total liabilities and equity | $ | 3,033,067 | $ | 3,613,416 | ||
Below is a table with summary financial results of operations and financial position of Powdermet: | ||||||
4_Loans_Payable_Loans_Payable_
4. Loans Payable: Loans Payable Balance (Policies) | 3 Months Ended | ||||
Aug. 31, 2013 | |||||
Policies | |||||
Loans Payable Balance | As of August 31, 2013 and May 31, 2013, the loans payable balance comprised of: | ||||
Description | 31-Aug-13 | 31-May-13 | |||
Convertible demand note to an unrelated entity bearing 5% interest per annum which matures on September 15, 2014. The note is shown net of a discount of $-0- and $-0-, respectively, attributable to the beneficial conversion feature, and an effective interest rate of 31% due the attached warrants. | $ | 1,500,000 | $ | 1,500,000 | |
Convertible demand note to an unrelated entity bearing 5% interest per annum which matures on September 15, 2014. The note is shown net of a discount of $-0- and $24,837, respectively, attributable to the beneficial conversion feature, and an effective interest rate of 176% due to the attached warrants. | 200,000 | 175,163 | |||
Convertible demand note to an unrelated entity bearing 5% interest per annum which matures on July 14, 2014. The note is shown net of a discount of $-0- and $112,527, respectively, attributable to the beneficial conversion feature, and an effective interest rate of 143% due to the attached warrants. | 500,000 | 387,473 | |||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 70,000 | 70,000 | |||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 3,850 | 3,850 | |||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 19,350 | 19,350 | |||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 20,000 | 20,000 | |||
Uncollateralized demand notes to an unrelated entity bearing 6% interest per annum | 500,000 | - | |||
Uncollateralized demand notes to an unrelated entity bearing 5% interest per annum | 50,000 | - | |||
Uncollateralized demand notes to an unrelated entity bearing 5% interest per annum | 70,000 | - | |||
Collateralized note to an unrelated entity bearing 1% interest for the first year and then 7% per annum for years two – seven. | 1,000,000 | 1,000,000 | |||
Uncollateralized demand note to a related entity bearing 8% interest per annum | 30,000 | 30,000 | |||
Convertible demand note to an unrelated entity bearing 7.5% imputed interest per annum which matures on July 10, 2018. | 46,231 | 48,228 | |||
Uncollateralized notes to an unrelated entity bearing 8% interest per annum, matures on September 15, 2014 | 405,000 | 405,877 | |||
Capital leases payable to various vendors expiring in various years through September 2016; collateralized by certain equipment with a cost of $205,157. | 90,337 | 91,881 | |||
Collateralized 5 year term note to an unrelated entity bearing 5.15% interest | 95,267 | - | |||
Uncollateralized demand note to an unrelated entity for royalties shown net of discount of $23,108 | - | 1,576,892 | |||
4,600,035 | $ | 5,328,714 | |||
Less current liabilities | 1,396,344 | 1,023,561 | |||
Total long term liabilities | $ | 3,203,691 | $ | 4,305,153 | |
Intangible assets of $1,336,281 and a liability of $1,576,892 related to the 2011 Exclusivity Agreement with Mattson Technology Inc. have been removed from the August 31, 2013 financial statements based on the matters discussed on page 20 in the Management Discussion section. | |||||
5_Stockholders_Equity_Common_S
5. Stockholders' Equity: Common Stock Issuances (Policies) | 3 Months Ended | |||||
Aug. 31, 2013 | ||||||
Policies | ||||||
Common Stock Issuances | Common Stock Issuances | |||||
For the three months ended August 31, 2013, we did not issue any shares for private placements, conversion of debt to shares, or share based compensation. | ||||||
A summary of the common stock warrants granted, forfeited or expired during the three months ended August 31, 2013 and the year ended May 31, 2013 is presented below: | ||||||
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Terms (In Years) | ||||
Balance at June 1, 2012 | 2,066,296 | $ | 1.64 | 2.0 years | ||
Granted | 1,186,934 | 2.35 | ||||
Exercised | -270,233 | 1.5 | ||||
Forfeited or expired | -140,005 | 1.5 | ||||
Balance at May 31, 2013 | 2,842,992 | $ | 1.8 | 2.0 years | ||
Granted | - | - | ||||
Exercised | - | - | ||||
Forfeited or expired | - | - | ||||
Balance at August 31, 2013 | 2,842,992 | $ | 1.8 | 2.0 years | ||
Exercisable at August 31, 2013 | 2,842,992 | $ | 1.8 | 2.0 years | ||
Weighted average fair value of | $ | NA | ||||
options granted during the three months ended August 31, 2013 | ||||||
5_Stockholders_Equity_The_Foll
5. Stockholders' Equity: The Following Table Summarizes Information Common Stock Warrants (Policies) | 3 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
Policies | |||||||||||||
The Following Table Summarizes Information Common Stock Warrants | The following table summarizes information about the common stock warrants outstanding at August 31, 2013: | ||||||||||||
Warrants Exercisable | |||||||||||||
Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | ||||||||
$ | 1.25 | 1,306,595 | 2.00 Years | $ | 1.25 | $ | 1,306,595 | $ | 1.25 | ||||
$ | 1.5 | 250,000 | 2.00 Years | $ | 1.5 | $ | 250,000 | $ | 1.5 | ||||
$ | 2 | 574,463 | 2.00 Years | $ | 2 | $ | 574,463 | $ | 2 | ||||
$ | 2.7 | 576,272 | 2.00 Years | $ | 2.7 | $ | 576,272 | $ | 2.7 | ||||
$ | 3 | 135,662 | 2.00 Years | $ | 3 | $ | 135,662 | $ | 3 | ||||
2,842,992 | 2.00 Years | $ | 1.8 | $ | 2,842,992 | $ | 1.8 | ||||||
7_Stock_Based_Compensation_200
7. Stock - Based Compensation: 2009 Stock Option Plan - Abakan (Policies) | 3 Months Ended | |||||||
Aug. 31, 2013 | ||||||||
Policies | ||||||||
2009 Stock Option Plan - Abakan | 2009 Stock Option Plan – Abakan | |||||||
Our board of directors adopted and approved our 2009 Stock option Plan (“Plan”) on December 14, 2009, as amended on June 14, 2012, which provides for the granting and issuance of up to 10 million shares of our common stock. | ||||||||
The total value of employee and non-employee stock options granted during the three months ended August 31, 2013 and 2012, was $234,271 and $1,315,619, respectively. | ||||||||
For the three months ended August 31, 2013, Abakan granted 80,000 stock options to an officer of MesoCoat on June 14, 2013. These options were issued at an exercise price of $2.94 per share, and these options will expire ten years from the grant date, and will vest in equal one third parts on the anniversary of the option grant date. | ||||||||
A summary of the options granted to employees and non-employees under the plan and changes during the three months ended August 31, 2013 year ending May 31, 2013 is presented below: | ||||||||
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Terms(In Years) | Aggregate Intrinsic Value | |||||
Balance at June 1, 2012 | 5,160,000 | $ | 0.77 | 9.00 years | $ | 185,000 | ||
Granted | 1,135,000 | 2.39 | ||||||
Exercised | - | - | ||||||
Forfeited or expired | -2,495,000 | $ | 0.69 | |||||
Balance at May 31, 2013 | 3,800,000 | $ | 1.26 | 7.78 years | $ | 108,750 | ||
Granted | 80,000 | 2.94 | ||||||
Exercised | - | - | ||||||
Forfeited or expired | -83,333 | $ | 1.3 | |||||
Balance at August 31, 2013 | 3,796,667 | $ | 1.26 | 7.52 years | $ | 108,750 | ||
Exercisable at August 31, 2013 | 2,513,329 | $ | 0.9 | 7.52 years | $ | -- | ||
Weighted average fair value of | $ | 2.94 | ||||||
options granted during the 3 months ending August 31, 2013 | ||||||||