Document and Entity Information
Document and Entity Information | 6 Months Ended |
Jun. 30, 2011shares | |
Document And Entity Information | |
Entity Registrant Name | Structural Enhancement Technologies Corp |
Entity Central Index Key | 1,421,851 |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2011 |
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? | No |
Entity Filer Category | Smaller Reporting Company |
Entity Common Stock, Shares Outstanding | 29,599,433 |
Document Fiscal Period Focus | Q2 |
Document Fiscal Year Focus | 2,011 |
Balance Sheets
Balance Sheets - USD ($) | Jun. 30, 2011 | Dec. 31, 2010 |
Current Assets: | ||
Cash | $ 7,900 | $ 1,290 |
Accounts receivable | 1,500 | 2,805 |
Prepaid expenses | 40,000 | 80,000 |
Total current assets | 49,400 | 84,095 |
Property and Equipment: | ||
Office and computer equipment | 13,682 | 13,682 |
Trailer | 34,000 | 34,200 |
Property and Equipment | 47,882 | 47,882 |
Less: Accumulated depreciation | (31,000) | (26,312) |
Net property and equipment | 16,882 | 21,570 |
Other Assets: | ||
License agreement, net of accumulated amortization of $11,662 and $10,344, respectively | 40,261 | 41,579 |
Trademark, net of accumulated amortization of $1.049 and $869, respectively | 510 | 690 |
Patents pending | 5,000 | 5,000 |
Total other assets | 45,771 | 47,269 |
Total Assets | 112,053 | 152,934 |
Current Liabilities: | ||
Current portion of long-term debt | 93,726 | 91,568 |
Accounts payable | 159,967 | 162,314 |
Accrued liabilities | 199,076 | 191,563 |
Due to related parties - directors, officers and stockholders | 260,297 | 39,162 |
Notes payable | 23,000 | 150,000 |
Payroll and sales taxes payable | 42,146 | 42,136 |
Total current liabilities | 778,212 | 676,743 |
Long-Term Liabilities: | ||
Long-term debt, net of current portion | 24,420 | 48,236 |
Total long-term liabilities | 24,420 | 48,236 |
Total liabilities | 802,632 | 724,979 |
Commitments | ||
Stockholders' Deficiency: | ||
Common stock, $0.0001 par value; 1,000,000,000 shares authorized, 29,599,433 and 25,689,433 shares issued and outstanding, respectively | 2,959 | 2,568 |
Additional paid-in capital | 9,114,014 | 8,756,655 |
Deficit accumulated during the development stage | (9,807,552) | (9,331,268) |
Total stockholders' deficiency | (690,579) | (572,045) |
Total Liabilities and Stockholders' Deficiency | $ 112,053 | $ 152,934 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2011 | Dec. 31, 2010 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, Authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, Issued | 29,599,433 | 25,689,433 |
Common stock, outstanding | 29,599,433 | 25,689,433 |
License Agreement [Member] | ||
Accumulated Amortization | $ 11,662 | $ 10,344 |
Trademark [Member] | ||
Accumulated Amortization | $ 1,049 | $ 869 |
Statements of Operations
Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | 83 Months Ended | ||
Jun. 30, 2011 | Jun. 30, 2010 | Jun. 30, 2011 | Jun. 30, 2010 | Jun. 30, 2011 | |
Income Statement [Abstract] | |||||
Revenues | $ 15,350 | $ 8,123 | $ 21,568 | $ 12,457 | $ 78,931 |
Expenses: | |||||
General and administrative | 199,287 | 246,926 | 306,220 | 221,845 | 1,585,504 |
Stock-based compensation for issued stock options | 629,500 | 957,500 | 1,226,625 | ||
Professional fees paid by issued common stock | 27,000 | 75,000 | 170,750 | 287,000 | 1,935,634 |
Depreciation and amortization | 3,091 | 3,094 | 6,186 | 6,188 | 43,710 |
Total expenses | 229,378 | 954,520 | 483,156 | 1,472,533 | 4,791,473 |
(Loss) from Operations | (214,028) | (946,397) | (461,588) | (1,460,076) | (4,712,542) |
Other Income (Expense): | |||||
Interest (expense) | (7,213) | (7,926) | (14,696) | (14,148) | (168,300) |
Impairment of Goodwill | (1,227,694) | ||||
Fair Market Value in Excess of Debt | (3,292,215) | ||||
(Loss) on asset purchase agreement | (356,801) | ||||
Total Other Income (Expense) | (7,213) | (7,926) | (14,696) | (14,148) | (5,095,010) |
Provision for Income Taxes | |||||
Net (Loss) | $ (221,241) | $ (954,323) | $ (476,284) | $ (1,474,224) | $ (9,807,552) |
(Loss) Per Common Share: | |||||
(loss) per common share - Basic and Diluted | $ (.01) | $ (0.28) | $ (.02) | $ (0.50) | |
Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 19,267,074 | 3,468,129 | 19,267,074 | 2,958,767 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 6 Months Ended | 83 Months Ended | |
Jun. 30, 2011 | Jun. 30, 2010 | Jun. 30, 2011 | |
Cash Flows from Operating Activities: | |||
Net loss | $ (476,284) | $ (1,474,224) | $ (9,807,552) |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation and amortization | 6,186 | 6,188 | 43,711 |
Loss on asset purchase agreement | 356,801 | ||
Impact of recapitalization from reverse merger | 54,797 | ||
Stock-based compensation | 27,000 | 287,000 | 1,253,625 |
Stock Based Compensation for issued stock options | 957,500 | 1,764,884 | |
Impairment of goodwill | 1,227,694 | ||
Fair market value of shares issued in excess of debt satisfied | 3,292,215 | ||
Changes in assets and liabilities: | |||
Accounts receivable | 1,305 | (420) | (1,500) |
Prepaid expenses | 40,000 | 5,667 | 40,000 |
Accounts payable | 2,347 | 7,584 | 188,661 |
Accrued liabilities | 159,924 | (88,969) | 358,954 |
Other current liabilities | 34,669 | ||
Net Cash Used in Operating Activities | (239,522) | (299,674) | (1,143,041) |
Cash Flows from Investing Activities: | |||
Purchases of equipment | (47,882) | ||
Asset purchase agreement | (360,000) | ||
Partial repayment of purchase price - Asset purchase agreement | 3,199 | ||
License agreement | (25,000) | ||
Trademark | (1,559) | ||
Net Cash Used in Investing Activities | 0 | 0 | (431,242) |
Cash Flows from Financing Activities: | |||
Proceeds from bank loan | 400,000 | ||
Payments of principal on bank loan | (14,165) | (40,314) | (273,279) |
Checks in excess of bank balance | 6,152 | ||
Issuance of common stock for cash | 108,500 | ||
Proceeds from promissory note - related party | 7,675 | ||
Proceeds from loans from unrelated party | (7,675) | ||
Proceeds from loans from related parties - directors, officers and stockholders | 260,297 | 282,231 | 950,340 |
Payments on loans from related parties - directors, officers and stockholders | (175) | (13,675) | |
Proceeds from short-term loan | 50,000 | 150,000 | |
Net Cash Provided by Financing Activities | 246,137 | 297,894 | 1,582,183 |
Net Increase (Decrease) in Cash | 6,610 | (1,784) | 7,900 |
Cash - Beginning of Period | 1,290 | 1,784 | 0 |
Cash - End of Period | $ 7,900 | $ 0 | $ 7,900 |
Basis of Presentation, Organiza
Basis of Presentation, Organization and Business Description | 6 Months Ended |
Jun. 30, 2011 | |
Accounting Policies [Abstract] | |
Basis of Presentation, Organization and Business Description | (1) Basis of Presentation, Organization and Business Description Basis of Presentation The accompanying unaudited interim consolidated financial statements of Structural Enhancement Technologies Corp. and Subsidiary (the “Company”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 filed with the SEC on May 19, 2011. Organization and Business Description The Company is a Delaware corporation in the development stage. The Company was incorporated under the laws of the United Kingdom as T&T Homes Limited on July 28, 2004. On November 25, 2004, the Company changed its name to Falcon Media Services, Ltd. On November 12, 2008, the Company changed its name to Extreme Mobile Coatings Corp., Ltd. On March 2, 2009, the Company changed its name to Extreme Mobile Coatings Worldwide Corp. Lastly, on May 19, 2010, the Company amended its name to Structural Enhancement Technologies Corp. to indicate the growing business plan of increasing in other areas of operations and coatings. On September 16, 2008, the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement #1”) with Extreme Mobile Coatings, Inc. (“EMC”), a Delaware corporation, and its stockholders pursuant to which the Company agreed to acquire 100 percent of the outstanding shares of EMC in exchange for 1,350,509 shares of common stock (post reverse stock split) of the Company. On this date, the Company began focusing on establishing franchises to market, use, and sell coating products and equipment licensed from XIOM Corp. Given that EMC is considered to have acquired the Company by a reverse merger through the Share Exchange Agreement #1, and its former stockholders currently have voting control of the Company, the accompanying consolidated financial statements and related disclosures in the notes to consolidated financial statements present the financial position as of December 31, 2010 and 2009, and the operations for the years ended December 31, 2010 and 2009, and cumulative from inception of EMC under the name of Structural. The reverse merger has been recorded as a recapitalization of the Company, with the net assets of EMC and Structural brought forward at their historical bases. The costs associated with the reverse merger have been expensed as incurred. On March 2, 2009, the Company completed a second Share Exchange Agreement (the “Share Exchange Agreement #2”) between the Company, as Extreme Mobile Coatings Corp, Ltd. and Extreme Mobile Coatings Worldwide Corp., a newly formed Delaware corporation. The Share Exchange Agreement #2 was completed in order to change the domicile of the Company from the United Kingdom to the State of Delaware, the authorized common stock to 500,000,000 shares, par value $0.0001 per share, and the name of the Company from Extreme Mobile Coatings Corp. Ltd. to Extreme Mobile Coatings Worldwide Corp. The Company exchanged 1,791,469 shares of its common stock (post reverse stock split) for a like number of shares of common stock of the newly formed Delaware Corporation. In addition, the Certificate of Incorporation of Extreme Mobile Coatings Worldwide Corp. became the Certificate of Incorporation of the Company. Effective November 25, 2008, the Company effected a 2 for 1 forward split on its common stock. Effective March 12, 2009, the Company effected a 5 for 1 forward split on its common stock. Effective May 19, 2010, the Company effected a 1 for 100 reverse split on its common stock. The accompanying consolidated financial statements have been retroactively adjusted to reflect these stock splits. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2011 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | (2) Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany balances and transactions have been properly eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the three and six months ended June 30, 2011 and 2010, and cumulative from inception. Actual results could differ from those estimates. Cash and Cash Equivalents For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents. Concentration of Credit Risk The Company maintained its cash account at one commercial bank. At certain times, bank balance may exceed coverage provided by the Federal Deposit Insurance Corporation. However due to the size and strength of the bank where the balance is held, such exposure to loss is considered minimal. Property and Equipment Property and equipment are recorded at historical cost. Minor additions and renewals are expensed in the year incurred. Major additions and renewals are capitalized and depreciated over their estimated useful lives. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in the results of operations for the respective period. The Company uses the straight-line method of depreciation. The estimated useful lives are as follows: Office and computer equipment 5-10 years Trailer 5 years Depreciation expense for the three and six months ended June 30, 2011 and 2010 totaled $2,344 and $4,688, respectively. License Agreement The Company capitalizes the costs incurred to acquire franchise rights. Such costs are amortized over the remaining useful life of the related rights of 19.6 years (see Note 4). Amortization expense for the three and six months ended June 30, 2011 and 2010 totaled $660 and $1,320, respectively. Trademark The Company obtained a servicemark from the State of Kentucky effective December 26, 2007, and registered it with the U.S. Patent and Trademark Office. The servicemark covers the name “Extreme Mobile Coating.” The cost of obtaining the servicemark has been capitalized by the Company, and is being amortized over a period of five years. Amortization expense for the three months ended June 30, 2011 and 2010 totaled $90 and $180, respectively. Patents The Company acquired two pending patents in the Asset Purchase Agreement with Reflectkote, Inc. (“Reflectkote”), dated March 10, 2010 (see Note 5). The cost of obtaining the patents has been capitalized by the Company, and will be amortized once the related patents are issued, and a useful life is determined. Revenue Recognition The Company recognizes revenues from the development and sale of franchises and licensed products and equipment. Revenues are recognized for financial reporting purposes when delivery has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by the customer, the fee is fixed or determinable, and collection of the related receivable is probable. Impairment of Long-Lived Assets The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. For the three and six months ended June 30, 2011 and 2010 no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required. Loss per Common Share Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the three and six months ended June 30, 2011 and 2010. Stock Based Compensation Arrangements The Company accounts for stock-based compensation arrangements in accordance with guidance provided by the Financial Accounting Standards Board Accounting Standards Codification (“ASC”). This guidance addresses all forms of share-based payment awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights, as well as share grants and other awards issued to employees and non-employees under free-standing arrangements. These awards are recorded at costs that are measured at fair value on the awards’ grant dates, based on the estimated number of awards that are expected to vest and will result in charges to operations. From time to time, the Company’s shares of common stock have been issued as payment to employees and non-employees for services. These are non-cash transactions that require management to make judgments related to the fair value of the shares issued, which affects the amounts reported in the Company’s consolidated financial statements for certain of its assets and expenses. Income Taxes The Company accounts for income taxes under the provisions of Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740 “ Income Tax Advertising Costs The Company expenses advertising costs as incurred and amounted to $-0- and $-0- for the three and six months ended June 30, 2011 and 2010, respectively. Fair Value of Financial Instruments Substantially all of the Company’s financial instruments, consisting of cash, accounts receivable, accounts payable, accrued liabilities and all debt, are carried at, or approximate, fair value because of their short-term nature or because they carry market rates of interest. Reclassifications Certain items have been reclassified in 2010 in order to be compatible with corresponding amounts in the consolidated financial statement presentation in 2011. Common Stock Registration Expenses The Company considers incremental costs and expenses related to the registration of equity securities with the SEC, whether by contractual arrangement as of a certain date or by demand, to be unrelated to original issuance transactions. As such, subsequent registration costs and expenses are reflected in the accompanying consolidated financial statements as general and administrative expenses and are expensed as incurred. Recent Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying consolidated financial statements. |
Development Stage Activities an
Development Stage Activities and Going Concern | 6 Months Ended |
Jun. 30, 2011 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Development Stage Activities and Going Concern | (3) Development Stage Activities and Going Concern The Company is currently in the development stage, and the business plan of the Company is to establish franchises to market, use, and sell coating products and equipment licensed from EIHC. Initial activities of the Company through June 30, 2011, include organization and incorporation, target market identification, marketing plans, entering into a licensing agreement, a reverse merger with EMC, and other capital formation activities. While the management of the Company believes that the Company will be successful in its capital formation and operating activities, there can be no assurance that it will be able to raise additional equity capital, or be able to generate sufficient revenues to sustain its operations. The Company also intends to conduct additional capital formation activities through the issuance of its common stock to establish sufficient working capital and to commence operations. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred operating losses since inception and the cash resources of the Company are insufficient to meet its planned business objectives. At June 30, 2011 and December 31, 2010, the Company had stockholders’ and working capital deficiencies of $729,412 and $592,648, respectively. Management believes the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the Company, but cannot assure that such financing will be available on acceptable terms. The Company's continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required. The outcome of this uncertainty cannot be assured. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. |
Master License Agreement
Master License Agreement | 6 Months Ended |
Jun. 30, 2011 | |
Notes to Financial Statements | |
Master License Agreement | (4) Master License Agreement On October 25, 2006, the Company entered into a Master License Agreement (the “License Agreement”) with XIOM Corp. (XIOM”), a then related party Delaware corporation. XIOM develops, manufacturers, markets, and sells certain products, including spray-on coating materials and equipment. Through the License Agreement, the Company is granted the exclusive right to establish franchises, sell franchise rights, and assign certain rights to franchisees in the contiguous states of the United States of America. The License Agreement expires in the year 2026. EMC has the option to extend the License Agreement for 10 successive three-year periods. The cost of obtaining the License Agreement amounted to $51,923, and is being amortized over a period of 19.6 years. The Company issued 451,193 shares of its common stock (post reverse stock split), valued at $26,923 in exchange for the License Agreement, and incurred $25,000 in legal fees. On March 25, 2011, XIOM filed a voluntary petition in the United States Bankruptcy Court (District of Delaware) under Chapter 7 of the United States Bankruptcy Code requesting liquidation of the assets and liabilities of XIOM. |
Asset Purchase Agreements
Asset Purchase Agreements | 6 Months Ended |
Jun. 30, 2011 | |
Property, Plant and Equipment [Abstract] | |
Asset Purchase Agreements | (5) Asset Purchase Agreements On March 5, 2007, EMC entered into a non-binding Letter of Intent with SABA Contracting, Inc. (“SABA”), an unrelated New York corporation, to purchase certain construction equipment and vehicles (the “SABA Equipment”) for $360,000. Under the terms of the Letter of Intent, the parties agreed that the transaction was to be evidenced by a written Purchase and Sale of Equipment Agreement (the “Asset Purchase Agreement”) which was to be signed at the closing of the transaction. In order to complete the acquisition of the SABA Equipment, EMC obtained a term loan from Central Bank FSB, of Nicholasville, KY in the amount of $400,000 (see Note 8). The Company, in good faith, provided proceeds of $360,000 from the bank loan to SABA before the closing of the transaction which was used to pay off SABA’s equipment-related debt of $60,000 and purchase the SABA Equipment. The Company also advanced an additional $18,200 to SABA in connection with the transaction, and SABA agreed to provide the funds to pay three payments on the Bank Loan totaling $25,519. The parties were not able to evidence the transaction under the terms of the Letter of Intent with an Asset Purchase Agreement, and the transaction was never closed. The Company is seeking to obtain clear title to the SABA Equipment for the purpose of selling the equipment to recover sufficient funds to repay the bank loan. There can be no assurance that the Company will be successful in either obtaining clear title to the SABA Equipment, or selling the SABA Equipment for a sufficient amount to fully repay the bank loan. As of June 30, 2011 and December 31, 2010, the Company owed $127,638 and $139,804, respectively, on the loan from Central Bank FSG related to the Asset Purchase Agreement. On March 11, 2010, the Company entered into an Asset Purchase Agreement with Reflectkote, Inc. (“Reflectkote”), dated March 10, 2010, wherein Reflectkote sold certain assets to the Company, and the Company assumed certain liabilities, as well as the obligation to issue 500,000 shares of restricted common stock of the Company (post reverse stock split) to the stockholders of Reflectkote. The former Vice-President and Director of the Company, James W. Zimbler, is also a director of Reflectkote, Inc. The assets purchased include pending patents for a permanently applied reflective coating that does not come off in the manner that reflective tape can. Reflectkote coatings do not corrode and protects the surface it’s applied to. The agreement was closed on May 13, 2010 when the 500,000 shares of restricted common stock of the Company (post reverse stock split) were issued to the stockholders of Reflectkote. The total value of the transaction was $1,282,694, with $5,000 allocated for a patent and the balance allocated to goodwill in the amount of $1,277,694. As consideration for this transaction, the Company assumed liabilities of $826,693 (see Note 8) and the restricted common stock with a value of $456,000. As of December 31, 2010, the Company determined that the goodwill recorded as part of Reflectkote transaction was substantially impaired as a result of the XIOM bankruptcy. This bankruptcy severely limited the Company’s ability to obtain the equipment and blended powder required to be used in the patented coating process. As such, the entire goodwill balance of $1,277,694 has been reserved with a corresponding amount expensed and separately disclosed in Other Income (Expense) on the Consolidated Statements of Operations for the year ended December 31, 2010. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2011 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | (6) Related Party Transactions As of June 30, 2011 and December 31, 2010, the Company owed to directors, officers and stockholders of the Company $260,297and $39,162, respectively. The amounts are unsecured, non-interest bearing, and have no terms for repayment. In November 2010, a substantial portion of the amount owed to the directors, officers and stockholders was repaid as part of the 6,000,000 shares of restricted common stock issued at that time (see Note 9). On May 20, 2010, the President of the Company’s wholly-owned subsidiary loaned $35,000 and received a promissory note from the Company with an annual interest rate of 8%. The note has a term of six months, at which then principal and accrued interest is due and payable. The note can be prepaid at any time and from time to time at par and accrued interest. The principal and interest of the note is also convertible to 100,000 shares of the Company’s common stock (post reverse stock split) at the end of the six-month term at the designation of the holder. As of June 30, 2011 and December 31, 2010, respectively,$35,000 and $35,000 of principal and $3,130 and $1,730 of accrued interest is due and payable to the note holder. Interest expense related to this loan was $1,400 for the six months ended June 30, 2011. On April 28, 2008, the Company entered into a promissory note with XIOM, a stockholder of the Company. Per the terms of the Note (as amended November 14, 2009), the Company was able borrow up to $158,500 from XIOM, at an annual interest rate of 5%. On February 12, 2010, the Company issued 110,000 shares of restricted common stock (post reverse stock split) to XIOM as a principal repayment of $55,000 on the note. On March 4, 2010, the Company issued an additional 107,000 shares of restricted common stock (post reverse stock split) to XIOM as a principal payment of $53,500 on the note. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2011 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (7) Income Taxes The provision (benefit) for income taxes for the six months ended June 30, 2011 and 2010 are as follows, assuming a combined effective tax rate of approximately 40% and 23.7%, respectively: Six Months Ended June 30, 2011 2010 Federal and state- Taxable income $ - $ - Total current tax provision $ - $ - Federal and state- Loss carryforwards $ 102,017 $ 123,217 Change in valuation allowance (102,017 ) (123,217 ) Total deferred tax provision $ - $ - 2011 2010 Loss carryforwards $ 3,665,877 $ 454,007 Less - Valuation allowance (3,665,877 ) (454,007 ) Total net deferred tax assets $ - $ - The Company has provided a full valuation allowance against the total of the net deferred tax assets for the six months ended June 30, 2011 and 2010 due to the uncertainty of future realization. As of June 30, 2011 and December 31, 2010, the Company has net operating loss carry forwards of approximately $9,807,522 and $8,910,000, respectively, which expire in 2028 through 2030. |
Notes Payable and Long-term Deb
Notes Payable and Long-term Debt | 6 Months Ended |
Jun. 30, 2011 | |
Debt Disclosure [Abstract] | |
Notes Payable and Long-term Debt | (8) Notes Payable and Long-term Debt Notes payable and long-term debt at June 30, 2011 and December 31, 2010 consists of the following: On January 6, 2011, the Company entered into a six-month promissory note for $40,000 at 8% interest per annum due July 6, 2011. After ninety-days (90) of the date of issuance and before the due date, the holder has the right to convert, in whole or in part, the outstanding principal and accrued but unpaid interest into shares of restricted common stock of the Company at the greater of $0.20 per share or at 50% of the average closing bid price for the ten days prior to the date of conversion. The Company has two other promissory notes outstanding; one for $100,000, dated November 3, 2009, and the other for $50,000, dated January 11, 2010. Both notes had six month terms and accrued interest at 8% per annum. As of June 30, 2011 and December 31, 2010, both notes were in default and, as such, the holder has the right to convert the amounts due to shares of restricted common stock at a 25% discount to the thirty-day average closing price prior to the date of conversion. However, subsequent to June 30, 2011, the holder agreed not to convert the debt to shares and to settle these obligations for $150,000, plus accrued interest (see Note 11). The Company obtained a bank loan for $400,000 on April 17, 2007 with interest payable at 8.5% per annum, and used $360,000 of the proceeds from the loan to fund the acquisition of the SABA Equipment. Monthly principal and interest payments totaling $8,231 are due through April 2012. Collateral for the loan consists of all assets of the Company (including the SABA Equipment), 146,785 shares of common stock of XIOM Corp. (a then related party), and has the personal guarantees of Charles Woodward, Andrew Mazzone, and James W. Zimbler, Directors of the Company (who also represent entities that are stockholders of the Company). As part of the Asset Purchase agreement with Reflectkote dated March 10, 2010 (see Note 5), the Company acquired a settlement agreement to pay an unrelated party $400,000 in monthly payments for a period of three years with an annual interest rate of 6%. The monthly payments were to have started February 28, 2010. Also, as part of the Asset Purchase Agreement with Reflectkote dated March 10, 2010 (see Note 5), the Company acquired a settlement agreement to pay an unrelated party $270,000 in monthly payments for a period of eighteen months with no interest accrued. The monthly payments were to have started November 15, 2009. In October 2010, the Company entered into a Debt Conversion Agreement with the two unrelated parties related to the Reflectkote transaction to convert the $670,000 owed, plus accrued interest and penalties in the amount of $37,785, by issuing 10,000,000 free trading shares of common stock (see Note 9). The fair market value of the shares issued ($4,000,000) in excess of the debt converted ($707,785) was $3,292,215, and was separately disclosed as Other Income (Expense) on the Consolidated Statements of Operations for the year ended December 31, 2010. The value of the shares issued in satisfaction of the debt converted has been guaranteed, jointly and severally, by Keystone Capital Resources LLC and James W. Zimbler in favor of the two unrelated parties. June 30, December 31, 2011 2010 Bank loan, monthly payments of $8,231 through April 2012, interest at 8.50% per annum; secured $ 118,146 $ 139,804 Less: current portion of long-term debt 93,726 91,568 Long-term portion $ 24,420 $ 48,236 Future minimum annual principal payments on long-term debt are as follows: Year Ending December 31, 2011 $ 69,910 2012 48,236 $ 118,146 |
Common Stock
Common Stock | 6 Months Ended |
Jun. 30, 2011 | |
Equity [Abstract] | |
Common Stock | (9) Common Stock On June 27, 2004, the Company issued one share of common stock (post reverse stock split) to a Director of the Company valued at a price of $2.00 per share for cash. On December 13, 2005, the Company commenced a capital formation activity through a Private Placement Offering (“PPO”), exempt from registration under the Securities Act of 1933, to issue up to 2,160 shares of its common stock (post reverse stock split) at an offering price of $0.50 per share for total proceeds of $1,080. The PPO was closed on May 6, 2006, and proceeds amounted to $1,080. Because the authorized common stock of the Company was insufficient at the time of the completion of the PPO, the stock certificates related thereto were not issued until December 26, 2007. On December 26, 2007, the Company issued 126,300 shares of common stock (post reverse stock split) to its sole Director and officer for services rendered, at an offering price of $0.01 per share for total value of $1,263. The Company entered into a one-year Consulting Agreement on December 1, 2007, with Kingsgate Development, Ltd. (a British Virgin Islands Corporation and “Kingsgate”) whereby Kingsgate agreed to assist the Company in becoming publicly traded, by utilizing its skills and by bearing up to $90,000 of registration costs on behalf of the Company. In exchange for its services, Kingsgate was issued 200,000 shares of common stock (post reverse stock split) for a value of $90,000 or $0.45 per share to satisfy this obligation. The Company issued the shares to Kingsgate on December 26, 2007. On December 1, 2007, the Company entered into a one-year Consulting Agreement with Eastern Glow Investments, Ltd, (a British Virgin Islands Corporation and “Eastern Glow”) whereby Eastern Glow agreed to assist the Company in becoming publicly traded, by utilizing its skills on behalf of the Company as well as a commitment to loan to the Company up to a maximum of $50,000, at the Libor interest rate plus 2.5 % for the marketing plan of the Company. In exchange for its services, Eastern Glow was issued 112,500 shares of common stock of the Company (post reverse stock split) at $0.44 per share to satisfy this obligation. The Company issued the shares to Eastern Glow on December 26, 2007. Effective September 16, 2008, the Company entered into a Share Exchange with the shareholders of EMC, whereby the Company acquired all of the issued and outstanding capital stock of EMC (135,050,850 shares) in exchange for 1,350,509 shares of common stock (post reverse stock split) of the Company. As a result of the Share Exchange, the stockholders of EMC controlled the Company, and EMC has been determined to have effected a reverse merger for financial reporting purposes as of the date of the Share Exchange. The reverse merger has been recorded as a recapitalization of the Company, with the net assets of the Company and EMC brought forward at their historical bases. In connection with the issuance of 1,350,509 shares of common stock (post reverse stock split), 6,139 of such shares (post reverse stock split) were issued for professional services valued at $55,000. On November 25, 2008, the Company declared a 2-for-1 forward stock split of its issued and outstanding common stock to the holders of record on that date. Such forward stock split was effective as of November 25, 2008. The accompanying financial statements and related notes thereto have been adjusted accordingly to reflect this forward stock split. In February 2009, the Company entered into a verbal agreement with Aires Capital, Inc. whereby Aires Capital, Inc. agreed to perform introductory services related to capital formation activities. On February 9, 2009, the Company issued 15,000 shares of common stock (post reverse stock split) to Aires Capital, Inc. for such services. The services were valued at $50,000. On March 2, 2009, the Company completed a second Share Exchange Agreement (the “Share Exchange Agreement #2”) between the Company, as Extreme Mobile Coatings Corp, Ltd. and Structural Enhancement Technologies Corp., a newly formed Delaware corporation. The Share Exchange Agreement #2 was completed in order to change the domicile of the Company from the United Kingdom to the State of Delaware, the authorized common stock to 500,000,000 shares, par value $0.0001 per share, and the name of the Company from Extreme Mobile Coatings Corp. Ltd. to Extreme Mobile Coatings Worldwide Corp. The Company exchanged 1,791,469 shares of its common stock (post reverse stock split) for a like number of shares of the newly formed Delaware corporation. In addition, the Certificate of Incorporation of Extreme Mobile Coatings Worldwide Corp. became the Certificate of Incorporation of the Company. The Share Exchange Agreement #2 has been treated as a reverse merger. The reverse merger has been recorded as a recapitalization of the Company, with the net assets of Extreme Mobile Coatings Corp. Ltd. and the Company brought forward at their historical bases. The costs associated with the reverse merger have been expensed as incurred. On March 2, 2009, the Company declared a 5-for-1 forward stock split of its issued and outstanding common stock to the holders of record on that date. Such forward stock split was effective as of March 12, 2009. The accompanying financial statements and related notes thereto have been adjusted accordingly to reflect this forward stock split. On May 27, 2009, the Company issued 5,500 shares of common stock (post reverse stock split) for consulting services valued at $84,121. On August 20, 2009, the Company issued 100,625 shares of common stock (post reverse stock split) for professional services valued at $78,000. On October 9, 2009, the Company issued 137,500 shares of common stock (post reverse stock split) for professional services valued at $75,000. On November 9, 2009, the Company issued 60,000 shares of common stock (post reverse stock split) for professional services valued at $48,000. On November 12, 2009, the Company issued 35,000 shares of common stock (post reverse stock split) for consulting services valued at $17,500. On January 28, 2010, the Company increased the amount of authorized shares of common stock from 500,000,000 shares with a par value of $.0001 per share to 1,000,000,000 shares with a par value of $.0001 per share. On January 22, 2010, the Company issued 80,000 shares of common stock (post reverse stock split) for consulting services related to the reverse merger. The services were valued at $40,000. On January 27, 2010, the Company issued 7,500 shares of common stock (post reverse stock split) to an employee and to an officer of the Company as compensation for services rendered valued at $75,000. On January 27, 2010, the Company filed an S-8 registration statement in order to register 250,000 shares of the Company’s common stock (post reverse stock split) issuable under the 2010 Employee and Consultant Stock Plan. On February 1, 2010, the Company issued 89,000 shares of common stock (post reverse stock split) for consulting services valued at $44,500. On February 1, 2010, the Company issued 50,000 shares of common stock (post reverse stock split) valued at $25,000 to stockholders as payment on debt owed to the stockholders. On February 1, 2010, the Company issued 40,000 shares of common stock (post reverse stock split) to a director and officer of the Company as compensation for services rendered valued at $20,000. On February 12, 2010, the Company issued 110,000 shares of common stock (post reverse stock split) to XIOM as a principal payment of $55,000 on the promissory note owed to XIOM. On February 25, 2010, the Company issued 15,000 shares of common stock (post reverse stock split) for consulting services valued at $7,500. On March 4, 2010, the Company issued 107,000 shares of common stock (post reverse stock split) to XIOM as a principal payment of $53,500 on the promissory note owed to XIOM. On May 13, 2010, the Company issued 500,000 shares of common stock (post reverse stock split) valued at $456,000 to the stockholders of Reflectkote as required under the Asset Purchase Agreement with Reflectkote (see Note 5). On May 14, 2010, the Company issued 20,000 shares of common stock (post reverse stock split) for the partial payment of $24,000 on a accounts payable debt. On May 19, 2010, the Company issued 200,000 shares of common stock (post reverse stock split) for consulting services valued at $100,000. On May 19, 2010, the Company issued 800,000 shares of common stock (post reverse stock split) to a director and to an officer of the Company for the partial payment of $400,000 on loans from these related parties. On May 10, 2010, the Company declared a 1-for-100 reverse stock split of its outstanding common stock to the holders of record on that date. Such reverse stock split was effective as of May 19, 2010. The accompanying financial statements and related notes thereto have been adjusted accordingly to reflect this reverse stock split. On July 23, 2010, the Company issued 100,000 shares of common stock (post reverse stock split) to a consultant for services to be rendered. The transaction was valued at $50,000. On July 27, 2010, the Company issued 53,616 shares of common stock (post reverse stock split) valued at $18,675 for a debt related settlement agreement. On July 27, 2010, the Company issued 750,000 shares of common stock (post reverse stock split) to a director and to an officer of the Company regarding and employment agreement entered into. The transaction was valued at $75,000. On July 27, 2010, the Company issued 500,000 shares of common stock (post reverse stock split) to a director and to an officer of the Company regarding and employment agreement entered into. The transaction was valued at $50,000. On July 27, 2010, the Company issued 500,000 shares of common stock (post reverse stock split) to a director and to an officer of the Company regarding and employment agreement entered into. The transaction was valued at $50,000. On July 27, 2010, the Company issued 250,000 shares of common stock (post reverse stock split) to a consultant for services to be rendered. The transaction was valued at $25,000. On July 27, 2010, the Company issued 250,000 shares of common stock (post reverse stock split) to a consultant for services rendered. The transaction was valued at $25,000. On November 2, 2010, the Company issued 10,000,000 shares of common stock (post reverse stock split) for a debt related settlement agreement. The transaction was valued at $4,000,000 (see Note 8) On November 2, 2010, the Company issued 6,000,000 restricted shares of common stock (post reverse stock split) for the payment of debt, consulting and professional services at $0.16 per share (a 60% discount on date of issuance closing bid price of $0.40 per share). The transaction was valued at $960,000. On November 2, 2010, the Company issued 3,050,000 restricted shares of common stock (post reverse stock split) for consulting and professional services at $0.16 per share (a 60% discount on date of issuance closing bid price of $0.40 per share). The transaction was valued at $488,000, including $80,000 recorded as a prepaid expense related to a consulting agreement that commenced January 1, 2011 (see Note 10). On January 28, 2011, the Company issued 470,000 shares of common stock (post reverse stock split) to a consultant for services rendered. The transaction was valued at $58,750. On February 24, 2011, the Company issued 650,000 shares of common stock (post reverse stock split) to a consultant for services rendered. The transaction was valued at $65,000. On March 29, 2011, the Company issued 400,000 shares of common stock (post reverse stock split) valued at a price of $0.10 per share for cash. On April I, 20 II, the Company issued I ,800,000 shares of common stock (post reverse stock split) from escrow in connection with the payment for the conversion of debt valued at $135,000. On May 20, 2011, the Company issued 750,000 shares of common stock (post reverse stock split) for legal fees valued at $27,000. On June 7, 2011, the Company issued 1,000,000 shares of common stock (post reverse stock split) from escrow in connection with the payment for the conversion of debt valued at $32,000. Stock Options On February 8, 2010, the Company granted two members of the Company’s Board of Directors nonqualified stock options to purchase up to 200,000 shares each (400,000 combined shares) of the Company’s common stock, exercisable at a price of $0.50 per share for five years. These options were 100% vested upon issuance and included a provision for a cashless exercise. The Company estimated the fair value of these options to be $424,000 and, as these awards were in recognition of past performance, recorded a non-cash expense of that amount on the date of grant. On March 11, 2010, a Director of the Company exercised 100,000 options in a cashless transaction, and was issued 72,223 shares of common stock (post reverse stock split). On May 10, 2010, the Company granted nonqualified stock options to a director to purchase up to 300,000 shares of the Company’s common stock, exercisable at a price of $0.50 per share for five years. On the same date, the Company granted nonqualified stock options to the Company’s general counsel to purchase up to 250,000 shares of the Company’s common stock, exercisable at a price of $0.50 per share for five years. These options were 100% vested upon issuance and included a provision for a cashless exercise. The Company estimated the fair value of these options to be $533,500 and, as these awards were in recognition of past performance, recorded a non-cash expense of that amount on the date of grant. On July 27, 2010, the Company granted three members of the Company’s Board of Directors nonqualified stock options to purchase up to 250,000 shares each (750,000 combined shares) of the Company’s common stock, exercisable at a price of $0.20 per share for five years. The Company also granted a consultant as well as the Company’s general counsel nonqualified stock options to purchase up to 250,000 shares each (500,000 combined shares) of the Company’s common stock, exercisable at a price of $0.20 per share for five years. These options were 100% vested upon issuance and included a provision for a cashless exercise. The Company estimated the fair value of these options to be $269,125 and, as these awards were in recognition of past performance, recorded a non-cash expense of that amount on the date of grant. The fair value of each stock option granted has been estimated on the date of grant using the Black-Scholes pricing model. The following is a summary of the stock option activity for the six months ended June 30, 2011: 2011 Outstanding, beginning of period 2,100,000 Granted during the period - Exercised during the period - Forfeited / expired / cancelled during the period - Outstanding, end of period 2,100,000 Risk free rate of return .75%-1.10 % Dividend yield 0 % Volatility 142%-149 % Average expected term (years to exercise) 2.5 Aggregate intrinsic value of vested exercisable options, end of year $ 0 Total intrinsic value of options exercised during the year $ 0 Stock options outstanding at June 30, 2011 (all non-qualified) consisted of: Granted in Year Ended December 31, Number Outstanding and Exercisable Exercise Price ($) Expiration Date 2010 300,000 .50 February 7, 2015 2010 550,000 .50 May 9, 2015 2010 1,250,000 .20 July 27, 2015 Total 2,100,000 |
Commitments
Commitments | 6 Months Ended |
Jun. 30, 2011 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments | (10) Commitments Operating Leases The Company leases office space in South Setauket, New York on a month-to-month basis at $1,500 per month. EMC leases office and warehouse space in Nicholasville, Kentucky under a two-year operating non-cancelable lease expiring in September 2011 at an annual rental of $18,000. The lease contains options to renew for two additional periods of two years each. Rent expense amounted to $9,000 and $12,000 for six months ended June 30, 2011 and 2010, respectively. Future minimum annual lease commitments for the year ending December 31, 2011 is $4,500 related to the office and warehouse space in Nicholasville, Kentucky. Employment Agreements The Company entered into an employment agreement dated July 27, 2010 with the Interim President. The agreement is for a term of two years unless, at the discretion of the Board of Directors, a qualified successor is located and employed prior to the end of the two-year term. Compensation includes an annual base salary of $50,000, the issuance of 750,000 shares of restricted common stock, the issuance of an option to purchase 250,000 shares of common stock for $.20 per share and any other benefits as may be approved by the Board of Directors. The Company also entered into an employment agreement dated July 27, 2010 with the President of its wholly-owned subsidiary. The agreement is for a term of one year and will automatically renew for successive one year terms, unless 60 days written notice is given prior to the end of any one year term. Compensation includes an annual base salary of $90,000, the issuance of 500,000 shares of restricted common stock, the issuance of an option to purchase 250,000 shares of common stock for $.20 per share and any other benefits as may be approved by the Board of Directors. Consulting Agreement The Company has an agreement with a consultant that commenced on January 1, 2011 for a period of twelve months, terminating on December 31, 2011. Additional compensation includes the issuance of 500,000 shares of restricted common stock. The consultant also receives a monthly retainer of $5,000, which is not part of the formal written agreement. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2011 | |
Subsequent Events [Abstract] | |
Subsequent Events | (11) Subsequent Events On September 14, 2011, the Company issued 9,000,000 shares of common stock (post reverse stock split) for the payment of principal and interest on a promissory note valued at $42,220. On September 21, 2011, the Company issued 10,000,000 shares of common stock (post reverse stock split) for the payment of professional fees valued at $40,000. On October 3, 2011, the Company issued 10,000,000 shares of common stock (post reverse stock split) for the payment of debt and consulting fees of a stockholder, and former officer and director of the Company valued at $50,000. On October 4, 2011, the Company issued 750,000 shares of common stock (post reverse stock split) for the payment of consulting fees of a stockholder, and former officer and director of the Company valued at $1,875. On November 3, 2011, the Company issued 2,000,000 shares of common stock (post reverse stock split) for the payment of debt and consulting fees of a stockholder, and former officer and director of the Company valued at $20,000. On November 18, 2011, the Company issued 2,083,333 shares of common stock (post reverse stock split) for the payment of debt and consulting fees of a stockholder, and former officer and director of the Company valued at $13,437. On September 17, 2011, the Company effected a Modification and Extension Agreement with the bank to extend the loan from April17, 2012, to October 17,2015, and reduce the monthly payments to $2,716 per month from $8,231. Other terms and conditions on the loan remain the same. |