Document_and_Entity_Informatio
Document and Entity Information (USD $) | 6 Months Ended | |
Nov. 30, 2014 | Jan. 12, 2015 | |
Document and Entity Information: | ||
Entity Registrant Name | ABAKAN, INC | |
Document Type | 10-Q | |
Document Period End Date | 30-Nov-14 | |
Amendment Flag | FALSE | |
Entity Central Index Key | 1400000 | |
Current Fiscal Year End Date | -26 | |
Entity Common Stock, Shares Outstanding | 79,501,088 | |
Entity Public Float | $0 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q2 |
ABAKAN_INC_CONSOLIDATED_BALANC
ABAKAN, INC. CONSOLIDATED BALANCE SHEETS NOVEMBER 30TH 2014 AND MAY 31ST 2014 (USD $) | Nov. 30, 2014 | 31-May-14 |
Assets, Current | ||
Cash and Cash Equivalents, at Carrying Value | $1,547,685 | $31,111 |
Accounts Receivable, Net, Current | 79,225 | 119,122 |
Inventory, Net | 34,560 | |
Prepaid Expense, Current | 147,434 | 185,770 |
Assets, Current | 1,808,904 | 336,003 |
Assets, Noncurrent | ||
Deferred finance fees, net | 14,070 | 14,070 |
Property, Plant and Equipment, Net (Note 4) | 5,370,341 | 5,539,549 |
Patents and licenses, net (Note 5) | 6,118,229 | 6,106,686 |
Assignment agreement Mesocoat (Note 6) | 151,318 | 171,055 |
Investment - Powdermet (Note 7) | 2,156,831 | 2,151,817 |
Goodwill | 364,384 | 364,384 |
Assets | 15,984,077 | 14,683,564 |
Liabilities, Current | ||
Accounts Payable, Current | 1,083,467 | 1,552,402 |
Accounts Payable related parties (Note 11) | 270,188 | 675,041 |
Capital Lease Obligations, Current | 31,701 | 31,465 |
Loans Payable, net of discounts of $171,615 and $456,164 Current (Note 8) | 5,407,276 | 4,820,816 |
Loan payable - related parties (Note 11) | 359,468 | 224,799 |
Accrued interest -loans payable (Note 8) | 524,613 | 306,160 |
Accrued interest -related parties (Note 11) | 8,543 | 480 |
Accrued Liabilities, Current | 676,704 | 652,212 |
Liabilities, Current | 8,361,960 | 8,263,375 |
Liabilities, Noncurrent | ||
Loans Payable, net of discounts of $444,881 and $601,940 (Note 8), Noncurrent | 978,372 | 1,056,106 |
Capital Lease Obligations, Noncurrent | 50,464 | 54,040 |
Liabilities | 9,390,796 | 9,373,521 |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest (Note 9) | ||
Common Stock, Value, Issued | 7,952 | 6,840 |
Additional Paid in Capital, Common Stock | 28,848,450 | 24,530,074 |
Subscription receivable | -30,000 | -28,000 |
Contributed Capital | 5,050 | 5,050 |
Accumulated Deficit during the development stage | -22,399,312 | -19,502,097 |
Stockholders' Equity Attributable to Noncontrolling Interest | 161,141 | 298,176 |
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | 6,593,281 | 5,310,043 |
Liabilities and Equity | $15,984,077 | $14,683,564 |
Statement_of_Financial_Positio
Statement of Financial Position - Parenthetical Abakan, Inc. November 30, 2014 and May 31, 2014 (USD $) | Nov. 30, 2014 | 31-May-14 |
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 | 79,501,088 | 68,374,815 |
Common Stock, Shares Outstanding | 79,501,088 | 68,374,815 |
Common Stock, Value, Outstanding | $7,952 | $6,840 |
ABAKAN_INC_CONSOLIDATED_STATEM
ABAKAN, INC, CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30TH 2014 AND 2013 (USD $) | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2014 | Nov. 30, 2013 | Nov. 30, 2014 | Nov. 30, 2013 | |
Revenues | ||||
Sales Revenue, Goods, Net | $69,493 | $112,140 | $155,239 | $137,387 |
Contract and Grants | 81,777 | 71,625 | 322,927 | 135,028 |
Other Revenue, Net | 10,094 | 10,094 | ||
Revenues | 151,270 | 193,859 | 478,166 | 282,509 |
Cost of Revenue | ||||
Cost of Revenue | 105,438 | 106,640 | 212,108 | 187,172 |
Gross Profit | 45,832 | 87,219 | 266,058 | 95,337 |
Operating Expenses | ||||
General and Administrative Expense | 321,919 | 192,750 | 522,160 | 379,110 |
Professional Fees | 251,429 | 139,213 | 355,848 | 459,535 |
Professional fees - related parties | 15,000 | 15,000 | 30,000 | 33,028 |
Consulting | 166,197 | 245,658 | 403,034 | 519,467 |
Consulting - related parties | 61,500 | 40,500 | 128,000 | 119,000 |
Payroll and benefits expense | 135,225 | 306,051 | 278,385 | 840,036 |
Depreciation, Nonproduction | 204,841 | 193,646 | 403,661 | 392,065 |
Research and Development Expense | 161,508 | 341,331 | 341,165 | 829,948 |
Stock expense on note conversion | 76,500 | 76,500 | ||
Stock options expense | 201,504 | 301,185 | 524,376 | 619,665 |
Operating Expenses | 1,595,623 | 1,775,334 | 3,063,129 | 4,191,854 |
Operating Income (Loss) | -1,549,791 | -1,688,115 | -2,797,071 | -4,096,517 |
Interest and Debt Expense | ||||
Interest Expense loans | -128,049 | -60,365 | -261,354 | -99,280 |
Interest Expense related parties | -1,707 | -500 | -6,476 | -1,113 |
Amortization of discount on debt | -137,364 | |||
Interest and Debt Expense | -129,756 | -60,865 | -267,830 | -237,757 |
Interest Income, Net | 4 | 4 | 4 | 7 |
Loss on debt settlement | -2,651 | -2,651 | ||
Equity in Powdermet income/ (loss) | 23,747 | -77,738 | 5,014 | -222,570 |
Other Operating Income | -108,656 | -138,599 | -265,463 | -460,320 |
Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest | -1,658,447 | -1,826,714 | -3,062,534 | -4,556,837 |
Noncontrolling interest in MesoCoat Loss | 97,004 | 403,073 | 165,319 | 994,393 |
Net Income (Loss) Attributable to Abakan Inc | -1,561,443 | -1,423,641 | -2,897,215 | -3,562,444 |
Net Income (Loss) Attributable to Parent | ($1,561,443) | ($1,423,641) | ($2,897,215) | ($3,562,444) |
Earnings Per Share | ||||
Earnings Per Share, Basic | ($0.02) | ($0.02) | ($0.04) | ($0.06) |
Earnings Per Share, Diluted | ($0.02) | ($0.02) | ($0.04) | ($0.06) |
Weighted Average Number of Shares Outstanding, Basic | 71,868,049 | 64,332,583 | 70,119,307 | 64,308,589 |
Weighted Average Number of Shares Outstanding, Diluted | 71,868,049 | 64,332,583 | 70,119,307 | 64,308,589 |
ABAKAN_INC_CONSOLIDATED_STATEM1
ABAKAN INC CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED NOVEMBER 30TH 2014 AND 2013 (USD $) | 6 Months Ended | |
Nov. 30, 2014 | Nov. 30, 2013 | |
Net Cash Provided by (Used in) Operating Activities | ||
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | ($2,365,652) | ($1,349,762) |
Net Cash Provided by (Used in) Investing Activities | ||
Payments to Acquire Property, Plant, and Equipment | -205,068 | -434,087 |
Capitalized patents and licenses | -21,191 | -20,200 |
Net Cash Provided by (Used in) Investing Activities | -226,259 | -454,287 |
Net Cash Provided by (Used in) Financing Activities | ||
Proceeds from Issuance of Common Stock | 3,505,798 | 76,244 |
Proceeds from (Repayments of) Notes Payable | 641,526 | 1,589,248 |
Proceeds from (Repayments of) Related Party Debt | -63,499 | |
Proceeds from (Repayments of) Long-term Debt and Capital Securities | -3,340 | -3,115 |
Proceeds from Contributed Capital | 28,000 | |
Net Cash Provided by (Used in) Financing Activities | 4,108,485 | 1,662,377 |
Cash and Cash Equivalents, Period Increase (Decrease) | 1,516,574 | -141,672 |
Cash Beginning Period | 31,111 | 233,040 |
Cash End Period | $1,547,685 | $91,368 |
Note_2_Going_Concern
Note: 2. Going Concern | 6 Months Ended |
Nov. 30, 2014 | |
Notes | |
Note: 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 period ended November 30, 2014, of $22,399,312 and a working capital deficit of $6,553,056. 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. Management’s plan is to aggressively pursue its present business plan. Since inception we have funded our operations through the issuance of common stock, debt financing, and related party loans and advances, and we will seek additional debt or equity financing as required. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Note_3_Investment_in_Noncontro
Note: 3. Investment in Non-controlling Interest | 6 Months Ended | |||||
Nov. 30, 2014 | ||||||
Notes | ||||||
Note: 3. Investment in Non-controlling Interest | ||||||
3. INVESTMENT IN NON-CONTROLLING INTEREST | ||||||
Powdermet, Inc. | ||||||
Abakan owns a 24.1% interest in Powdermet. Powdermet owns 11.08% of MesoCoat as of November 30, 2014. Abakan’s 24.1% ownership of Powdermet, results in indirect ownership of the shares of MesoCoat that Powdermet owns. Abakan’s ownership in Powdermet decreased at the beginning of June 2014 from 24.99% to 24.1% as result of Powdermet’s management exercising certain stock options resulting in a higher number of shares outstanding. On May 31, 2014, Powdermet’s ownership of MesoCoat changed from 48.00% to 11.08% and therefore Powdermet has begun to account for its investment using the cost method. | ||||||
We have analyzed our investment in accordance of “Investments – Equity Method and Joint Ventures” (ASC 323), and concluded that the 24.1% 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, 2014 | $ | 2,151,817 | ||||
Equity in loss for six months ended November 30, 2014 | 5,014 | |||||
Investment balance, November 30, 2014 | $ | 2,156,831 | ||||
Powdermet Inc. | ||||||
For the six months ended | For the six months ended | |||||
30-Nov-14 | 30-Nov-13 | |||||
Equity Percentage | 24.10% | 41% | ||||
Condensed income statement information: | ||||||
Total revenues | $ | 1,206,950 | $ | 1,017,706 | ||
Total cost of revenues | 533,518 | 291,113 | ||||
Gross margin | 673,432 | 726,593 | ||||
Total expenses | (641,910) | (593,871) | ||||
Other income/ (expense) | - | (994,394) | ||||
Provision for income tax benefit | -10,718 | 318,818 | ||||
Net profit/ (loss) | $ | 20,804 | $ | (542,854) | ||
Abakan’s equity in net profit/(loss): | $ | 5,014 | $ | (222,570) | ||
Condensed balance sheet information: | 30-Nov-14 | 31-May-14 | ||||
Total current assets | $ | 1,175,339 | $ | 822,467 | ||
Total non-current assets | 3,108,066 | 3,088,733 | ||||
Total assets | $ | 4,283,405 | $ | 3,911,200 | ||
Total current liabilities | $ | 687,917 | $ | 424,085 | ||
Total non-current liabilities | 1,011,855 | 924,286 | ||||
Total equity | 2,583,633 | 2,562,829 | ||||
Total liabilities and equity | $ | 4,283,405 | $ | 3,911,200 | ||
Below is a table with summary financial results of operations and financial position of Powdermet. | ||||||
Note_4_Loans_Payable
Note: 4. Loans Payable | 6 Months Ended | |||
Nov. 30, 2014 | ||||
Notes | ||||
Note: 4. Loans Payable | ||||
4. LOANS PAYABLE | ||||
As of November 30, 2014 and May 31, 2014, the loans payable balance comprised of: | ||||
Description | 30-Nov-14 | 31-May-14 | ||
Convertible demand note to an unrelated entity bearing 5% interest per annum which matured on September 15, 2014. | $ 1,500,000 | $ | 1,500,000 | |
Convertible demand note to an unrelated entity bearing 5% interest per annum which matured on September 15, 2014. | 200,000 | 200,000 | ||
Convertible demand note to an unrelated entity bearing 5% interest per annum which matured on July 14, 2014. | 500,000 | 500,000 | ||
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 | 50,000 | 50,000 | ||
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 note to a related entity bearing 8% interest per annum | - | 65,000 | ||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 15,000 | 15,000 | ||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 43,600 | 43,600 | ||
Uncollateralized demand note to a related entity bearing 8% interest per annum | 26,685 | 26,685 | ||
Uncollateralized demand note to a related entity bearing 8% interest per annum | 80,994 | 79,494 | ||
Uncollateralized demand note to an unrelated entity bearing 5% interest per annum | - | 50,000 | ||
Uncollateralized demand note to an unrelated entity bearing 6% interest per annum | 20,000 | 20,000 | ||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 30,867 | 30,867 | ||
Uncollateralized demand note to an unrelated entity bearing 5% interest per annum | 250,000 | 250,000 | ||
Uncollateralized demand note to an unrelated entity bearing 5% interest per annum | 668,426 | 130,000 | ||
Collateralized demand note to an unrelated entity bearing 5% imputed interest per annum | 1,341,963 | 1,341,963 | ||
Collateralized term note to an unrelated entity bearing 5.15% interest per annum which matures on September 7, 2018. | 118,411 | 132,157 | ||
Uncollateralized demand note to a related entity bearing 8% interest per annum | 21,308 | 21,308 | ||
Uncollateralized demand note to a related entity bearing 7% interest per annum | 32,313 | 32,313 | ||
Uncollateralized demand note to an unrelated entity bearing 8% interest per annum | 33,201 | 35,000 | ||
Uncollateralized demand note to an unrelated entity bearing 7% interest per annum | - | 20,000 | ||
Uncollateralized term note to a related entity bearing 5% interest per annum which matures on February 28, 2015 | 198,168 | - | ||
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 6% interest per annum | 60,000 | - | ||
Convertible demand note to an unrelated entity bearing 7.5% imputed interest per annum which matures on July 10, 2018. | 35,980 | 40,134 | ||
Uncollateralized demand notes to an unrelated entity bearing 5% interest per annum | 405,000 | 405,000 | ||
Capital leases payable to various vendors expiring in various years through September 2016; collateralized by certain equipment with a cost of $205,157. | 82,165 | 85,505 | ||
6,827,281 | 6,187,226 | |||
Less current liabilities | 5,798,445 | 5,077,080 | ||
Total long term liabilities | $ 1,028,836 | $ | 1,110,146 | |
On July 14, 2014, Abakan defaulted on a convertible debt obligation in the principal amount of $500,000. The present default is in addition to a default on a promissory note due on September 15, 2014, in the principal amount of $50,000. On August 28, 2014, the note holder filed a complaint in the United States District Southern District of Florida. The complaint seeks $720,698.72 plus interest, penalties and legal fees. Abakan believes that it has mitigating defenses to the lawsuit. Court proceedings are in discovery. | ||||
On September 15, 2014, Abakan defaulted on convertible debt obligations and a debt obligation to Sonoro Invest, S.A. (“Sonoro”) in the principal aggregate amount of $2,105,000. Sonoro initiated legal proceedings against Abakan to recover amounts due plus penalties and interest on October 2, 2014. The complaint seeks $3,187,056.98 plus interest, penalties and legal fees. On November 6, 2014, Sonoro obtained a Temporary Restraining Order enjoining Abakan from undertaking certain actions pending the outcome of the legal proceedings. Abakan believes that it has mitigating defenses to the lawsuit. Court proceedings are in discovery. |
Note_5_Stockholders_Equity
Note: 5. Stockholders' Equity | 6 Months Ended | ||||||||||||
Nov. 30, 2014 | |||||||||||||
Notes | |||||||||||||
Note: 5. Stockholders' Equity | NOTE: 5. STOCKHOLDERS' EQUITY | ||||||||||||
Common Stock Issuances | |||||||||||||
For the six months ended November 30, 2014, Abakan issued the following shares for private placements and conversion of debt to shares: | |||||||||||||
On July 31, 2014, we issued 43,800 shares of our common stock for services to be performed valued at $31,098. In connection with this placement we had no offering costs. | |||||||||||||
On October 7, 2014, we issued 557,000 shares of our common stock for private placement valued at $222,800. Abakan also issued 512,500 shares of our common stock for subscription payable valued at $205,000. In connection with this placement we had no offering costs. | |||||||||||||
On October 7, 2014, we issued 1,792,973 restricted shares due to a downside protection provision and the placees agreed to cancel warrants to purchase 832,487 additional restricted share. Abakan offered downside stock price protection in two private placements that totaled 1,664,973 shares that closed in April 2014 and May 2014. The down-side protection offered additional shares if new private placements were offered within one year at a lower price. After receipt of these additional shares, the placees would hold the same quantity of shares as if they would have had participated in any subsequent lower priced private placement. Abakan is obligated to issue 88,775 additional shares if new private placements are issued below $.40 for every $.01 decrease through May 2015. Abakan cannot estimate if any additional shares will be issued in connection with this downside protection provision. | |||||||||||||
On November 11, 2014, we issued 7,500,000 shares of our common stock for private placement valued at $3,000,000. In connection with this placement we had no offering costs. | |||||||||||||
On November 26, 2014, we issued 270,000 shares of our common stock for private placement valued at $108,000. In connection with this placement we had no offering costs. | |||||||||||||
On November 26, 2014, we converted a debt obligation of $140,000, for 350,000 shares of our restricted common stock. In connection with this placement we incurred stock expense on conversion of $59,500. | |||||||||||||
On November 26, 2014, we converted accounts payable obligation for $40,000, or 100,000 shares of our restricted common stock. In connection with this placement we incurred stock expense on conversion of $17,000. | |||||||||||||
Common Stock Warrants | |||||||||||||
A summary of the common stock warrants granted, forfeited or expired during the six months ended November 30, 2014 and the year ended May 31, 2014 is presented below: | |||||||||||||
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Terms (In Years) | |||||||||||
Balance at June 1, 2013 | 2,842,992 | $ | 1.8 | 1.00 years | |||||||||
Granted | 877,634 | 1.41 | |||||||||||
Exercised | - | - | |||||||||||
Forfeited or expired | -1,681,058 | 1.89 | |||||||||||
Balance at May 31, 2014 | 2,039,568 | $ | 1.89 | 1.15 years | |||||||||
Granted | - | - | |||||||||||
Exercised | - | - | |||||||||||
Forfeited or expired | -1,190,134 | 1.53 | |||||||||||
Balance at November 30, 2014 | 849,434 | $ | 2.39 | 0.29 years | |||||||||
Exercisable at November 30, 2014 | 849,434 | $ | 2.39 | 0.29 years | |||||||||
Weighted average fair value of | $ | NA | |||||||||||
warranted granted during the three months ended November 30, 2014 | |||||||||||||
The following table summarizes information about the common stock warrants outstanding at November 30, 2014: | |||||||||||||
Warrants Exercisable | |||||||||||||
Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | ||||||||
$ | 1.5 | 250,000 | .38 Years | $ | 1.5 | $ | 250,000 | $ | 1.5 | ||||
$ | 2.7 | 463,772 | .20 Years | $ | 2.7 | $ | 463,772 | $ | 2.7 | ||||
$ | 3 | 135,662 | .42 Years | $ | 3 | $ | 135,662 | $ | 3 | ||||
849,434 | .29 Years | $ | 2.39 | $ | 849,434 | $ | 2.39 | ||||||
Note_6_Earningspershare_Calcul
Note: 6. Earnings-per-share Calculation | 6 Months Ended | ||
Nov. 30, 2014 | |||
Notes | |||
Note: 6. Earnings-per-share Calculation | |||
6. EARNINGS-PER-SHARE CALCULATION | |||
Basic earnings per common share for the three and six months ended November 30, 2014 and 2013 are calculated by dividing net income by weighted-average common shares outstanding during the period. Diluted earnings per common share for the three and six months ended November 30, 2014 and 2013 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 November 30, 2014 | For the three months ended November 30, 2013 | ||
Net earnings (loss) from operations | $ (1,561,443) | $ (1,423,641) | |
Weighted-average common shares | 71,868,049 | 64,332,583 | |
Effect of dilutive securities: | |||
Warrants | - | - | |
Options to purchase common stock | - | - | |
Dilutive potential common shares | 71,868,049 | 64,332,583 | |
Net earnings per share from operations: | |||
Basic | $ (0.02) | $ (0.02) | |
Diluted | $ (0.02) | $ (0.02) | |
For the six months ended November 30, 2014 | For the six months ended November 30, 2013 | ||
Net earnings (loss) from operations | $ (2,897,215) | $ (3,562,444) | |
Weighted-average common shares | 70,119,307 | 64,308,589 | |
Effect of dilutive securities: | |||
Warrants | - | - | |
Options to purchase common stock | - | - | |
Dilutive potential common shares | 70,119,307 | 64,308,589 | |
Net earnings per share from operations: | |||
Basic | $ (0.04) | $ (0.06) | |
Diluted | $ (0.04) | $ (0.06) | |
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 November 30, 2014 | For the three months ended November 30, 2013 | ||
Common Stock Equivalents: | |||
Warrants | 849,434 | 2,842,992 | |
Options to purchase common stock | 2,978,332 | 3,716,667 | |
Total of Common Stock Equivalents: | 3,827,766 | 6,559,659 | |
For the six months ended November 30, 2014 | For the six months ended November 30, 2013 | ||
Common Stock Equivalents: | |||
Warrants | 849,434 | 2,842,992 | |
Options to purchase common stock | 2,978,332 | 3,716,667 | |
Total of Common Stock Equivalents: | 3,827,766 | 6,559,659 | |
Note_7_Stock_Based_Compensatio
Note: 7. Stock - Based Compensation | 6 Months Ended | |||||||
Nov. 30, 2014 | ||||||||
Notes | ||||||||
Note: 7. Stock - Based Compensation | NOTE: 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 six months ended November 30, 2014 and 2013, was $-0- and $234,271, respectively. | ||||||||
A summary of the options granted to employees and non-employees under the plan and changes during the six months ended November 30, 2014 year ending May 31, 2014 is presented below: | ||||||||
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Terms(In Years) | Aggregate Intrinsic Value | |||||
Balance at June 1, 2013 | 3,800,000 | $ | 1.26 | 7.78 years | $ | 108,750 | ||
Granted | 850,000 | 1.35 | ||||||
Exercised | - | - | ||||||
Forfeited or expired | -1,230,006 | $ | 1.35 | |||||
Balance at May 31, 2014 | 3,419,994 | $ | 1.36 | 7.90 years | $ | 126,750 | ||
Granted | - | - | ||||||
Exercised | -50,000 | 0.65 | ||||||
Forfeited or expired | -391,662 | $ | 1.87 | |||||
Balance at November 30, 2014 | 2,978,332 | $ | 1.38 | 7.34 years | $ | 104,500 | ||
Exercisable at November 30, 2014 | 2,060,001 | $ | 1.3 | 7.34 years | $ | -- | ||
Weighted average fair value of | $ | N/A | ||||||
options granted during the six months ending November 30, 2014 | ||||||||
Note_8_Commitments
Note: 8. Commitments | 6 Months Ended |
Nov. 30, 2014 | |
Notes | |
Note: 8. Commitments | |
8. COMMITMENTS | |
There were no new commitments for the six month period ending November 30, 2014. |
Note_9_Subsequent_Events
Note: 9. Subsequent Events | 6 Months Ended |
Nov. 30, 2014 | |
Notes | |
Note: 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: | |
Employment agreement | |
On December 20, 2014, we entered into an employment agreement effective January 1, 2015 with a related individual to perform duties as the Chief Operating Officer of Abakan and to continue to serve as the Chief Executive Officer of Abakan’s subsidiary, MesoCoat under this agreement. The individual also serves as a director of Abakan and MesoCoat. The employee retains previously granted stock options for his service as a director. The terms of the employment agreement include a $20,000 per month salary of which a portion is deferred, and granted 1,000,000 stock options with an exercise price of $0.60 per share that will expire ten years from the option grant date that vest in equal parts on May 31, 2015 and May 31, 2016. The employment agreement will end on December 31, 2016 and which time it can be renewed for 2 one year periods. In the event that this agreement is terminated early, the employee may be eligible for a severance payment. | |
Stock Options | |
On December 11, 2014, we granted 100,000 stock options to a consultant of Abakan with an exercise price of $0.65 per share that will expire ten years from the grant date, and vest in equal one third parts commencing on the date of grant and on each anniversary of the option grant date. | |
Consolidation_Policy_Policies
Consolidation Policy (Policies) | 6 Months Ended |
Nov. 30, 2014 | |
Policies | |
Consolidation Policy | |
Consolidation Policy | |
The accompanying November 30, 2014 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 November 30, 2014 is as follows: | |
Name of Subsidiary Percentage of Ownership | |
AMP SEZC (Cayman) 100.00% | |
AMP Distributors (Florida) 100.00% | |
MesoCoat, Inc. 88.08% | |
MesoCoat’s ownership of its subsidiaries as of November 30, 2014, is as follows: | |
Name of Subsidiary Percentage of Ownership | |
MesoCoat Technologies (Canada) 100.00% | |
MesoCoat Coating Services, Inc. (Nevada) 100.00% | |
PT MesoCoat Indonesia 100.00% |
Noncontrolling_Interest_Polici
Non-controlling Interest (Policies) | 6 Months Ended |
Nov. 30, 2014 | |
Policies | |
Non-controlling Interest | |
Non-Controlling Interest | |
Non-controlling interest represents the minority members’ proportionate share of the equity of MesoCoat, Inc. Abakan’s controlling interest in MesoCoat requires that its operations be included in the consolidated financial statements. The equity interest of MesoCoat that is not owned by Abakan is shown as non-controlling interest in the consolidated financial statements. | |
Development_Stage_Enterprise_P
Development Stage Enterprise (Policies) | 6 Months Ended |
Nov. 30, 2014 | |
Policies | |
Development Stage Enterprise | |
Development Stage Enterprise | |
At November 30, 2014, Abakan’s business operations had not fully developed and are dependent upon funding and therefore Abakan is considered a development stage enterprise. Abakan has adopted FASB ASU 2014-10 concerning our development stage enterprise financial statement presentation. | |
Accounts_Receivable_Policies
Accounts Receivable (Policies) | 6 Months Ended |
Nov. 30, 2014 | |
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 November 30, 2014 management has determined that no allowance for doubtful accounts is required. |
Note_3_Investment_in_Noncontro1
Note: 3. Investment in Non-controlling Interest: Powdermet, Inc. (Policies) | 6 Months Ended | |||||
Nov. 30, 2014 | ||||||
Policies | ||||||
Powdermet, Inc. | ||||||
Powdermet, Inc. | ||||||
Abakan owns a 24.1% interest in Powdermet. Powdermet owns 11.08% of MesoCoat as of November 30, 2014. Abakan’s 24.1% ownership of Powdermet, results in indirect ownership of the shares of MesoCoat that Powdermet owns. Abakan’s ownership in Powdermet decreased at the beginning of June 2014 from 24.99% to 24.1% as result of Powdermet’s management exercising certain stock options resulting in a higher number of shares outstanding. On May 31, 2014, Powdermet’s ownership of MesoCoat changed from 48.00% to 11.08% and therefore Powdermet has begun to account for its investment using the cost method. | ||||||
We have analyzed our investment in accordance of “Investments – Equity Method and Joint Ventures” (ASC 323), and concluded that the 24.1% 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, 2014 | $ | 2,151,817 | ||||
Equity in loss for six months ended November 30, 2014 | 5,014 | |||||
Investment balance, November 30, 2014 | $ | 2,156,831 | ||||
Powdermet Inc. | ||||||
For the six months ended | For the six months ended | |||||
30-Nov-14 | 30-Nov-13 | |||||
Equity Percentage | 24.10% | 41% | ||||
Condensed income statement information: | ||||||
Total revenues | $ | 1,206,950 | $ | 1,017,706 | ||
Total cost of revenues | 533,518 | 291,113 | ||||
Gross margin | 673,432 | 726,593 | ||||
Total expenses | (641,910) | (593,871) | ||||
Other income/ (expense) | - | (994,394) | ||||
Provision for income tax benefit | -10,718 | 318,818 | ||||
Net profit/ (loss) | $ | 20,804 | $ | (542,854) | ||
Abakan’s equity in net profit/(loss): | $ | 5,014 | $ | (222,570) | ||
Condensed balance sheet information: | 30-Nov-14 | 31-May-14 | ||||
Total current assets | $ | 1,175,339 | $ | 822,467 | ||
Total non-current assets | 3,108,066 | 3,088,733 | ||||
Total assets | $ | 4,283,405 | $ | 3,911,200 | ||
Total current liabilities | $ | 687,917 | $ | 424,085 | ||
Total non-current liabilities | 1,011,855 | 924,286 | ||||
Total equity | 2,583,633 | 2,562,829 | ||||
Total liabilities and equity | $ | 4,283,405 | $ | 3,911,200 | ||
Below is a table with summary financial results of operations and financial position of Powdermet. | ||||||
Note_5_Stockholders_Equity_Com
Note: 5. Stockholders' Equity: Common Stock Issuances (Policies) | 6 Months Ended |
Nov. 30, 2014 | |
Policies | |
Common Stock Issuances | Common Stock Issuances |
For the six months ended November 30, 2014, Abakan issued the following shares for private placements and conversion of debt to shares: | |
On July 31, 2014, we issued 43,800 shares of our common stock for services to be performed valued at $31,098. In connection with this placement we had no offering costs. | |
On October 7, 2014, we issued 557,000 shares of our common stock for private placement valued at $222,800. Abakan also issued 512,500 shares of our common stock for subscription payable valued at $205,000. In connection with this placement we had no offering costs. | |
On October 7, 2014, we issued 1,792,973 restricted shares due to a downside protection provision and the placees agreed to cancel warrants to purchase 832,487 additional restricted share. Abakan offered downside stock price protection in two private placements that totaled 1,664,973 shares that closed in April 2014 and May 2014. The down-side protection offered additional shares if new private placements were offered within one year at a lower price. After receipt of these additional shares, the placees would hold the same quantity of shares as if they would have had participated in any subsequent lower priced private placement. Abakan is obligated to issue 88,775 additional shares if new private placements are issued below $.40 for every $.01 decrease through May 2015. Abakan cannot estimate if any additional shares will be issued in connection with this downside protection provision. | |
On November 11, 2014, we issued 7,500,000 shares of our common stock for private placement valued at $3,000,000. In connection with this placement we had no offering costs. | |
On November 26, 2014, we issued 270,000 shares of our common stock for private placement valued at $108,000. In connection with this placement we had no offering costs. | |
On November 26, 2014, we converted a debt obligation of $140,000, for 350,000 shares of our restricted common stock. In connection with this placement we incurred stock expense on conversion of $59,500. | |
On November 26, 2014, we converted accounts payable obligation for $40,000, or 100,000 shares of our restricted common stock. In connection with this placement we incurred stock expense on conversion of $17,000. |
Note_5_Stockholders_Equity_Com1
Note: 5. Stockholders' Equity: Common Stock Warrants (Policies) | 6 Months Ended | ||||||||||||
Nov. 30, 2014 | |||||||||||||
Policies | |||||||||||||
Common Stock Warrants | |||||||||||||
Common Stock Warrants | |||||||||||||
A summary of the common stock warrants granted, forfeited or expired during the six months ended November 30, 2014 and the year ended May 31, 2014 is presented below: | |||||||||||||
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Terms (In Years) | |||||||||||
Balance at June 1, 2013 | 2,842,992 | $ | 1.8 | 1.00 years | |||||||||
Granted | 877,634 | 1.41 | |||||||||||
Exercised | - | - | |||||||||||
Forfeited or expired | -1,681,058 | 1.89 | |||||||||||
Balance at May 31, 2014 | 2,039,568 | $ | 1.89 | 1.15 years | |||||||||
Granted | - | - | |||||||||||
Exercised | - | - | |||||||||||
Forfeited or expired | -1,190,134 | 1.53 | |||||||||||
Balance at November 30, 2014 | 849,434 | $ | 2.39 | 0.29 years | |||||||||
Exercisable at November 30, 2014 | 849,434 | $ | 2.39 | 0.29 years | |||||||||
Weighted average fair value of | $ | NA | |||||||||||
warranted granted during the three months ended November 30, 2014 | |||||||||||||
The following table summarizes information about the common stock warrants outstanding at November 30, 2014: | |||||||||||||
Warrants Exercisable | |||||||||||||
Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | ||||||||
$ | 1.5 | 250,000 | .38 Years | $ | 1.5 | $ | 250,000 | $ | 1.5 | ||||
$ | 2.7 | 463,772 | .20 Years | $ | 2.7 | $ | 463,772 | $ | 2.7 | ||||
$ | 3 | 135,662 | .42 Years | $ | 3 | $ | 135,662 | $ | 3 | ||||
849,434 | .29 Years | $ | 2.39 | $ | 849,434 | $ | 2.39 | ||||||
Note_7_Stock_Based_Compensatio1
Note: 7. Stock - Based Compensation: 2009 Stock Option Plan - Abakan (Policies) | 6 Months Ended | |||||||
Nov. 30, 2014 | ||||||||
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 six months ended November 30, 2014 and 2013, was $-0- and $234,271, respectively. | ||||||||
A summary of the options granted to employees and non-employees under the plan and changes during the six months ended November 30, 2014 year ending May 31, 2014 is presented below: | ||||||||
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Terms(In Years) | Aggregate Intrinsic Value | |||||
Balance at June 1, 2013 | 3,800,000 | $ | 1.26 | 7.78 years | $ | 108,750 | ||
Granted | 850,000 | 1.35 | ||||||
Exercised | - | - | ||||||
Forfeited or expired | -1,230,006 | $ | 1.35 | |||||
Balance at May 31, 2014 | 3,419,994 | $ | 1.36 | 7.90 years | $ | 126,750 | ||
Granted | - | - | ||||||
Exercised | -50,000 | 0.65 | ||||||
Forfeited or expired | -391,662 | $ | 1.87 | |||||
Balance at November 30, 2014 | 2,978,332 | $ | 1.38 | 7.34 years | $ | 104,500 | ||
Exercisable at November 30, 2014 | 2,060,001 | $ | 1.3 | 7.34 years | $ | -- | ||
Weighted average fair value of | $ | N/A | ||||||
options granted during the six months ending November 30, 2014 | ||||||||