Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 10, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | Surna Inc. | |
Entity Central Index Key | 1,482,541 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 146,198,904 | |
Trading Symbol | SRNA | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current Assets | ||
Cash | $ 235,455 | $ 330,557 |
Accounts receivable (net of allowance for doubtful accounts of $85,000 and $40,873, respectively) | 48,710 | 299,194 |
Notes receivable | 187,218 | 207,218 |
Interest receivable | 19,412 | |
Inventory | 916,486 | 1,261,802 |
Prepaid expenses | 176,758 | 193,969 |
Total Current Assets | 1,584,039 | 2,292,740 |
Noncurrent Assets | ||
Property and equipment, net | 100,738 | 162,530 |
Intangible assets, net | 665,723 | 647,464 |
Total Noncurrent Assets | 766,461 | 809,994 |
TOTAL ASSETS | 2,350,500 | 3,102,734 |
Current Liabilities | ||
Accounts payable and accrued liabilities | 1,223,296 | 2,066,803 |
Deferred revenue | 1,420,974 | 986,445 |
Current portion long term debt | 1,551 | |
Amounts due shareholders | 60,000 | 216,995 |
Accrued interest | 2,263 | |
Convertible promissory notes, net | 2,272,694 | 1,227,761 |
Convertible accrued interest | 467,074 | 201,257 |
Derivative liability on conversion feature | 472,967 | |
Derivative liability on warrants | 287,406 | 139,192 |
Total Current Liabilities | 5,733,707 | 5,312,971 |
Noncurrent Liabilities | ||
Amounts due shareholders-long term | 15,989 | |
Convertible promissory notes, net | 523,822 | |
Convertible accrued interest | 80,674 | |
Vehicle loan | 32,564 | |
Total Noncurrent Liabilities | 15,989 | 637,060 |
TOTAL LIABILITIES | 5,749,696 | 5,950,031 |
Commitments and Contingencies | ||
SHAREHOLDERS’ DEFICIT | ||
Preferred stock, $0.00001 par value; 150,000,000 shares authorized; 77,220,000 shares issued and outstanding | 772 | 772 |
Common stock, $0.00001 par value; 350,000,000 shares authorized; 145,268,135 and 125,839,862 shares issued and outstanding, respectively | 1,452 | 1,259 |
Paid in capital | 9,780,598 | 8,214,271 |
Accumulated deficit | (13,182,018) | (11,063,599) |
Total Shareholders’ Deficit | (3,399,196) | (2,847,297) |
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ 2,350,500 | $ 3,102,734 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 85,000 | $ 40,873 |
Preferred stock, par value | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized | 150,000,000 | 150,000,000 |
Preferred stock, shares issued | 77,220,000 | 77,220,000 |
Preferred stock, shares outstanding | 77,220,000 | 77,220,000 |
Common stock, par value | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 350,000,000 | 350,000,000 |
Common stock, shares issued | 145,268,135 | 125,839,862 |
Common stock, shares outstanding | 145,268,135 | 125,839,862 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||||
Revenue | $ 1,170,760 | $ 3,634,091 | $ 5,560,837 | $ 6,182,936 |
Cost of revenue | 753,624 | 3,125,151 | 3,740,488 | 5,338,230 |
Gross margin | 417,136 | 508,940 | 1,820,349 | 844,706 |
Operating expenses: | ||||
Advertising and marketing expenses | 14,319 | 148,656 | 56,852 | 324,110 |
Product development costs | 72,184 | 224,365 | 272,410 | 533,808 |
Selling, general and administrative expenses | 567,512 | 676,325 | 1,662,183 | 2,097,513 |
Total operating expenses | 654,015 | 1,049,346 | 1,991,445 | 2,955,431 |
Operating income (loss) | (236,879) | (540,406) | (171,096) | (2,110,725) |
Other income (expense): | ||||
Interest and other income, net | 10,576 | 19,060 | ||
Interest expense | (89,203) | (78,938) | (282,657) | (367,497) |
Amortization of debt discount on convertible promissory notes | (291,000) | (716,078) | (1,335,429) | (1,727,126) |
(Loss) gain on change in derivative liabilities | (62,000) | (348,297) | 474,873 | |
Total other (expense) | (431,627) | (795,016) | (1,947,323) | (1,619,750) |
Loss from continuing operations before provision for income taxes | (668,506) | (1,335,422) | (2,118,419) | (3,730,475) |
Provision for income taxes | ||||
Net loss | (668,506) | (1,335,422) | (2,118,419) | (3,730,475) |
Other comprehensive income (expense) | ||||
Comprehensive loss | $ (668,506) | $ (1,335,422) | $ (2,118,419) | $ (3,730,475) |
Loss per common share – basic and dilutive | $ 0 | $ (0.01) | $ (0.02) | $ (0.03) |
Weighted average number of shares outstanding, both basic and dilutive | 145,268,135 | 146,816,336 | 139,684,359 | 145,943,222 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Changes in Shareholders' Deficit (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Paid In Capital [Member] | Accumulated Deficit [Member] | Comprehensive Income (Loss) [Member] | Total |
Balance at Dec. 31, 2015 | $ 772 | $ 1,259 | $ 8,214,271 | $ (11,063,599) | $ (2,847,297) | |
Balance, shares at Dec. 31, 2015 | 77,220,000 | 125,839,862 | ||||
Common shares issued pursuant to conversion of debt and accrued interest, net of unamortized debt discount | $ 179 | 888,905 | 889,084 | |||
Common shares issued pursuant to conversion of debt and accrued interest, net of unamortized debt discount, shares | 17,888,828 | |||||
Reclassification of derivative liability to equity pursuant to conversion of debt | 637,050 | 637,050 | ||||
Common shares issued to employees as compensation | 4,028 | 4,028 | ||||
Common shares issued to employees as compensation, shares | 46,045 | |||||
Issuance of common shares in connection with exercises of stock options | $ 14 | 344 | 358 | |||
Issuance of common shares in connection with exercises of stock options, shares | 1,493,400 | |||||
Net loss | (2,118,419) | (2,118,419) | ||||
Balance at Sep. 30, 2016 | $ 772 | $ 1,452 | $ 9,780,598 | $ (13,182,018) | $ (3,399,196) | |
Balance, shares at Sep. 30, 2016 | 77,220,000 | 145,268,135 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (2,118,419) | $ (3,730,475) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation and intangible asset amortization expense | 43,870 | 46,586 |
Amortization of debt discounts | 1,335,429 | 1,727,126 |
Gain on change in derivative liability | 348,297 | (474,873) |
Employee compensation paid in stock | 4,028 | |
Provision for doubtful accounts | 44,127 | 20,000 |
Loss on sale of assets other | 1,117 | |
Changes in operating assets and liabilities: | ||
Accounts and note receivable | 186,945 | (580,135) |
Inventory | 345,316 | (697,346) |
Prepaid expenses | 17,211 | (376,128) |
Accounts payable and accrued liabilities | (864,937) | 1,683,607 |
Deferred revenue | 434,529 | 1,081,582 |
Accrued interest | 282,657 | 2,925 |
Deferred compensation | (25,600) | |
Cash provided by (used in) operating activities | 34,570 | (1,297,131) |
Cash Flows From Investing Activities | ||
Purchase of intangible assets | (22,380) | |
Purchase of property and equipment | (15,126) | (22,519) |
Proceeds from the sale of property and equipment | 32,600 | |
Cash disbursed for note receivable | (80,000) | (135,000) |
Cash received on note receivable | 100,000 | |
Cash provided by (used in) investing activities | 15,094 | (157,519) |
Cash Flows From Financing Activities | ||
Proceeds from issuances of convertible promissory notes | 1,859,850 | |
Proceeds from exercises of stock options | 358 | |
Payments on loans | (34,115) | (43,763) |
Payments on loans from shareholders | (111,009) | |
Payments to related parties | (72,091) | |
Cash (used in) provided by financing activities | (144,766) | 1,743,996 |
Net decrease in cash | (95,102) | 289,346 |
Cash, beginning of period | 330,557 | 689,963 |
Cash, end of period | 235,455 | 979,309 |
Supplemental cash flow information: | ||
Interest paid | 4,790 | |
Income tax paid | ||
Non-cash investing and financial activities: | ||
Conversions of promissory note balances to common stock | 889,084 | 1,220,051 |
Derivative liability on convertible promissory notes and warrants | 673,050 | (1,324,283) |
Equipment issued in settlement of debt | 2,500 | |
Debt retirement former CEO | $ 194,958 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Company: Surna Inc. (“Company” “we” “us” or “our”) incorporated in the State of Nevada on October 15, 2009. On March 26, 2014, we acquired Safari Resource Group, Inc. (“Safari”), a Nevada corporation, whereby we became the sole surviving corporation after the acquisition of Safari. On July 25, 2014, we acquired 100% of the membership interest in Hydro Innovations, LLC, a Colorado limited liability company (“Hydro”), pursuant to which Hydro became a wholly-owned subsidiary of the Company. We engineer and manufacture innovative technology and products that address the energy and resource intensive nature of indoor cultivation. Our focus lies in supplying industrial solutions to commercial indoor cannabis cultivation facilities. Our engineering team is tasked with creating novel energy and resource efficient solutions, including our signature liquid-cooled climate control platform. Our engineers continuously seek to create technologies that allow growers to easily meet the highly specific demands of a cannabis cultivation environment through temperature, humidity, light, and process control. Our objective is to provide intelligent solutions that improve the quality, control, and overall yield and efficiency of indoor cannabis cultivation. We are headquartered in Boulder, Colorado. The Company’s operations exclude the production or sale of marijuana. Financial Statement Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016. The balance sheet as of December 31, 2015 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2015. The notes to the unaudited condensed consolidated financial statements are presented on a continuing basis unless otherwise noted. Basis of Consolidation and Reclassifications: The condensed consolidated financial statements include the accounts of the Company and its controlled and wholly-owned subsidiary. Intercompany transactions, profits, and balances are eliminated in consolidation. Certain reclassifications have been made to amounts in prior periods to conform to the current period presentation. All reclassifications have been applied consistently to the periods presented. The reclassifications had no impact on net loss or total assets and liabilities. Use of Estimates: The preparation of financial statements in conformity with GAAP 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 that affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on our operating results. Key estimates include: valuation of derivative liabilities, valuation of intangible assets, and valuation of deferred tax assets and liabilities. Recent Accounting Pronouncements: In August 2016, the accounting standard update related to the classification of certain cash receipts and cash payments was issued. This standard update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this update are effective as of the first quarter of 2018; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements. In June 2016, the standard update related to the measurement of credit losses on financial instruments was issued. This standard update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard update is effective as of the first quarter of 2020; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements. In May 2016, accounting guidance was issued to clarify the not yet effective revenue recognition guidance issued in May 2014. This additional guidance does not change the core principle of the revenue recognition guidance issued in May 2014, rather, it provides clarification of accounting for collections of sales taxes as well as recognition of revenue (i) associated with contract modifications, (ii) for noncash consideration, and (iii) based on the collectability of the consideration from the customer. The guidance also specifies when a contract should be considered “completed” for purposes of applying the transition guidance. The effective date and transition requirements for this guidance are the same as the effective date and transition requirements for the guidance previously issued in 2014, which is effective for interim and annual periods beginning on or after December 15, 2017. The Company has not yet determined the impact that this new guidance will have on its consolidated financial statements. In April 2016, accounting guidance was issued pertaining to identifying performance obligations in contracts with customers and improving the operability and understandability of licensing implementation guidance. The guidance is effective for interim and annual periods beginning on or after December 15, 2017. The Company has not yet determined the impact of this new guidance on its condensed consolidated financial statements. In March 2016, accounting guidance was issued to improve the accounting for employee stock-based payments. The guidance simplifies accounting for stock-based award transactions specific to income tax consequences, the classification of awards as equity or liabilities, and the classification of award payments on the statement of cash flows. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. The Company is currently assessing the impact that the adoption of this new guidance will have on its condensed consolidated financial statements. In March 2016, accounting guidance was issued to clarify the application of previously issued revenue recognition guidance related to whether an entity is a principal or an agent. More specifically, this new guidance clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The guidance is effective for interim and annual periods beginning on or after December 15, 2017. The Company has not yet determined the impact that this new guidance will have on its condensed consolidated financial statements. In March 2016, accounting guidance was issued pertaining to accounting for derivatives and hedging activity. The guidance amends existing GAAP by clarifying that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met. The amendment improves prior guidance by eliminating diversity in practice. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. The guidance may be applied prospectively or using a modified retrospective approach to adjust retained earnings. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements. In March 2016, additional accounting guidance was issued pertaining to accounting for derivatives and hedging activity. The guidance clarifies the steps required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. The amendment improves prior guidance by eliminating diversity in practice in assessing embedded contingent call (put) options in debt instruments. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. The Company is currently assessing the impact that the adoption of this new guidance will have on its condensed consolidated financial statements. In February 2016, accounting guidance was issued pertaining to leases to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The core principle of this guidance is that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The guidance is effective for interim and annual periods beginning on or after December 15, 2018. The Company is currently evaluating the impact that the adoption of this new guidance will have on its condensed consolidated financial. In January 2016, accounting guidance was issued on the classification and measurement of financial assets and liabilities (equity securities and financial liabilities) under the fair value option and the presentation and disclosure requirements for financial instruments. The guidance modifies how an entity measures equity investments and presents changes in the fair value of financial liabilities. Under the new guidance, an entity will have to measure at fair value those equity investments that do not result in consolidation and are not accounted for under the equity method, and an entity will have to recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. That exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under the guidance, and, as such, these investments may be measured at cost. The guidance will be effective on January 1, 2018. The Company is currently assessing the impact that the adoption of this new guidance will have on its condensed consolidated financial statements. We continually assess any new accounting pronouncements to determine their applicability to us. Where it is determined that a new accounting pronouncement affects our financial reporting, we undertake a study to determine the consequence of the change to our financial statements and assure that there are proper controls in place to ascertain that our financial statements properly reflect the change. We have evaluated all other GAAP issued through the date the condensed consolidated financials were issued and believe that the adoption of these will not have a material impact on our condensed consolidated financial statements. |
Going Concern
Going Concern | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | NOTE 2 - GOING CONCERN The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. In the course of its development activities, the Company has sustained and continues to sustain losses. The Company cannot predict if or when the Company will generate profits. The Company has a deficit in working capital of approximately $4,149,668 as of September 30, 2016. Additionally, the Company has generated cumulative net losses of approximately $13,182,018 during the period from inception through September 30, 2016. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern depends on it obtaining the adequate capital to fund operating losses until it becomes profitable. Management plans to continue as a going concern to achieve a profitable level of operations including generating cash through increased product sales, reducing planned expenditures, if necessary, and raising capital from investors. While management plans to take the steps necessary to extend the time period over which the then-available resources would be able to fund the operations, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. Additionally, there can be no assurance that, if such efforts are successful, the terms and conditions of such financing will be favorable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. During the year ended December 31, 2015, we raised a total of approximately $1,781,000 in connection with issuances of three series of convertible promissory notes. During the year ended December 31, 2014, we raised approximately $2,962,000 in connection with issuances of two series of convertible promissory notes (“Notes”). The Notes become due and payable starting in November 2016 through February 2017. The Company has been in discussion with several investment firms and is evaluating the Company’s options for additional funding. Also, the Company has begun negotiations with the holders of the Notes to determine a mutual agreement to retire the Notes and amend associated warrants. As of the issuance of these condensed consolidated financial statements, the Company has not entered into any agreements. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish its plans and eventually secure other sources of financing and attain profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. |
Notes Receivable
Notes Receivable | 9 Months Ended |
Sep. 30, 2016 | |
Loans and Leases Receivable, Other Information [Abstract] | |
Notes Receivable | NOTE 3 - NOTES RECEIVABLE On April 26, 2016, the Company entered into a non-binding letter of intent (“LOI”) to acquire substantially all of the assets of a third party (“Seller”). Per the terms of the Agreement, Company and Seller endeavored to close the transaction before August 31, 2016, which was extended to September 30, 2016 (“Exclusivity Period”). Although the Exclusivity Period has terminated, the Company is still in the due diligence phase. During the Exclusivity Period, the Company was required to provide the Seller a loan in the amount of $20,000 per month, up to a maximum of $80,000, which has been advanced as of September 30, 2016. The Company has changed its intent from acquiring the Company as a whole to acquiring certain assets and patents, which don’t constitute a business, from the Seller. |
Convertible Promissory Notes
Convertible Promissory Notes | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Convertible Promissory Notes | NOTE 4 - CONVERTIBLE PROMISSORY NOTES During the first six months of 2016, approximately $890,000 of convertible promissory notes were converted into 17,888,828 shares of the Company’s common stock. The remaining balance of our convertible promissory notes as of September 30, 2016 of approximately $2,280,000 (after debt discounts of approximately $256,000) relates to our Convertible Series 2 issuance. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 5 - SUBSEQUENT EVENTS There have been no significant events occurring after September 30, 2016. |
Summary of Significant Accoun12
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Company | Company: Surna Inc. (“Company” “we” “us” or “our”) incorporated in the State of Nevada on October 15, 2009. On March 26, 2014, we acquired Safari Resource Group, Inc. (“Safari”), a Nevada corporation, whereby we became the sole surviving corporation after the acquisition of Safari. On July 25, 2014, we acquired 100% of the membership interest in Hydro Innovations, LLC, a Colorado limited liability company (“Hydro”), pursuant to which Hydro became a wholly-owned subsidiary of the Company. We engineer and manufacture innovative technology and products that address the energy and resource intensive nature of indoor cultivation. Our focus lies in supplying industrial solutions to commercial indoor cannabis cultivation facilities. Our engineering team is tasked with creating novel energy and resource efficient solutions, including our signature liquid-cooled climate control platform. Our engineers continuously seek to create technologies that allow growers to easily meet the highly specific demands of a cannabis cultivation environment through temperature, humidity, light, and process control. Our objective is to provide intelligent solutions that improve the quality, control, and overall yield and efficiency of indoor cannabis cultivation. We are headquartered in Boulder, Colorado. The Company’s operations exclude the production or sale of marijuana. |
Financial Statement Presentation | Financial Statement Presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to these rules and regulations, certain information and note disclosures, normally included in financial statements prepared in accordance with GAAP, have been condensed or omitted. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016. The balance sheet as of December 31, 2015 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2015. The notes to the unaudited condensed consolidated financial statements are presented on a continuing basis unless otherwise noted. |
Basis of Consolidation and Reclassifications | Basis of Consolidation and Reclassifications: The condensed consolidated financial statements include the accounts of the Company and its controlled and wholly-owned subsidiary. Intercompany transactions, profits, and balances are eliminated in consolidation. Certain reclassifications have been made to amounts in prior periods to conform to the current period presentation. All reclassifications have been applied consistently to the periods presented. The reclassifications had no impact on net loss or total assets and liabilities. |
Use of Estimates | Use of Estimates: The preparation of financial statements in conformity with GAAP 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 that affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on our operating results. Key estimates include: valuation of derivative liabilities, valuation of intangible assets, and valuation of deferred tax assets and liabilities. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements: In August 2016, the accounting standard update related to the classification of certain cash receipts and cash payments was issued. This standard update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this update are effective as of the first quarter of 2018; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements. In June 2016, the standard update related to the measurement of credit losses on financial instruments was issued. This standard update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard update is effective as of the first quarter of 2020; however, early adoption is permitted. We are currently evaluating the impact that this standard update will have on our condensed consolidated financial statements. In May 2016, accounting guidance was issued to clarify the not yet effective revenue recognition guidance issued in May 2014. This additional guidance does not change the core principle of the revenue recognition guidance issued in May 2014, rather, it provides clarification of accounting for collections of sales taxes as well as recognition of revenue (i) associated with contract modifications, (ii) for noncash consideration, and (iii) based on the collectability of the consideration from the customer. The guidance also specifies when a contract should be considered “completed” for purposes of applying the transition guidance. The effective date and transition requirements for this guidance are the same as the effective date and transition requirements for the guidance previously issued in 2014, which is effective for interim and annual periods beginning on or after December 15, 2017. The Company has not yet determined the impact that this new guidance will have on its consolidated financial statements. In April 2016, accounting guidance was issued pertaining to identifying performance obligations in contracts with customers and improving the operability and understandability of licensing implementation guidance. The guidance is effective for interim and annual periods beginning on or after December 15, 2017. The Company has not yet determined the impact of this new guidance on its condensed consolidated financial statements. In March 2016, accounting guidance was issued to improve the accounting for employee stock-based payments. The guidance simplifies accounting for stock-based award transactions specific to income tax consequences, the classification of awards as equity or liabilities, and the classification of award payments on the statement of cash flows. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. The Company is currently assessing the impact that the adoption of this new guidance will have on its condensed consolidated financial statements. In March 2016, accounting guidance was issued to clarify the application of previously issued revenue recognition guidance related to whether an entity is a principal or an agent. More specifically, this new guidance clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The guidance is effective for interim and annual periods beginning on or after December 15, 2017. The Company has not yet determined the impact that this new guidance will have on its condensed consolidated financial statements. In March 2016, accounting guidance was issued pertaining to accounting for derivatives and hedging activity. The guidance amends existing GAAP by clarifying that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require de-designation of that hedging relationship, provided that all other hedge accounting criteria continue to be met. The amendment improves prior guidance by eliminating diversity in practice. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. The guidance may be applied prospectively or using a modified retrospective approach to adjust retained earnings. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements. In March 2016, additional accounting guidance was issued pertaining to accounting for derivatives and hedging activity. The guidance clarifies the steps required when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. The amendment improves prior guidance by eliminating diversity in practice in assessing embedded contingent call (put) options in debt instruments. The guidance is effective for interim and annual periods beginning on or after December 15, 2016. The Company is currently assessing the impact that the adoption of this new guidance will have on its condensed consolidated financial statements. In February 2016, accounting guidance was issued pertaining to leases to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The core principle of this guidance is that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The guidance is effective for interim and annual periods beginning on or after December 15, 2018. The Company is currently evaluating the impact that the adoption of this new guidance will have on its condensed consolidated financial. In January 2016, accounting guidance was issued on the classification and measurement of financial assets and liabilities (equity securities and financial liabilities) under the fair value option and the presentation and disclosure requirements for financial instruments. The guidance modifies how an entity measures equity investments and presents changes in the fair value of financial liabilities. Under the new guidance, an entity will have to measure at fair value those equity investments that do not result in consolidation and are not accounted for under the equity method, and an entity will have to recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. That exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under the guidance, and, as such, these investments may be measured at cost. The guidance will be effective on January 1, 2018. The Company is currently assessing the impact that the adoption of this new guidance will have on its condensed consolidated financial statements. We continually assess any new accounting pronouncements to determine their applicability to us. Where it is determined that a new accounting pronouncement affects our financial reporting, we undertake a study to determine the consequence of the change to our financial statements and assure that there are proper controls in place to ascertain that our financial statements properly reflect the change. We have evaluated all other GAAP issued through the date the condensed consolidated financials were issued and believe that the adoption of these will not have a material impact on our condensed consolidated financial statements. |
Summary of Significant Accoun13
Summary of Significant Accounting Policies (Details Narrative) | Oct. 15, 2009 | Jul. 25, 2014 |
Safari Resource Group, Inc [Member] | ||
Business acquisition effective date of acquisition | Mar. 26, 2014 | |
Hydro Innovations, LLC [Member] | ||
Percentage of interest acquired | 100.00% |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Working capital deficits | $ 4,149,668 | |||
Cumulative net losses | 13,182,018 | $ 11,063,599 | ||
Proceeds from issuance of convertible promissory notes | $ 1,859,850 | |||
Debt starting date | Nov. 30, 2016 | |||
Debt ending date | Feb. 28, 2017 | |||
Three Series of Convertible Promissory Notes [Member] | ||||
Proceeds from issuance of convertible promissory notes | $ 1,781,000 | |||
Two Series of Convertible Promissory Notes [Member] | ||||
Proceeds from issuance of convertible promissory notes | $ 2,962,000 |
Notes Receivable (Details Narra
Notes Receivable (Details Narrative) - Seller [Member] | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Seller loan amount | $ 20,000 |
Maximum [Member] | |
Seller loan amount | $ 80,000 |
Convertible Promissory Notes (D
Convertible Promissory Notes (Details Narrative) - USD ($) | 6 Months Ended | 9 Months Ended | |
Jun. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | |
Convertible notes that converted into common stock | $ 889,084 | $ 1,220,051 | |
Hydro Note [Member] | |||
Convertible notes that converted into common stock | $ 890,000 | ||
Number of shares convered of convertible promissory notes | 17,888,828 | ||
Hydro Note [Member] | |||
Convertible promissory notes | 2,280,000 | ||
Debt discounts | $ 256,000 |