Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 30, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | Surna Inc. | ||
Entity Central Index Key | 1,482,541 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 18,000,000 | ||
Entity Common Stock, Shares Outstanding | 214,976,478 | ||
Trading Symbol | SRNA | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current Assets | ||
Cash and cash equivalents | $ 2,468,199 | $ 319,546 |
Accounts receivable (net of allowance for doubtful accounts of $105,267 and $91,000, respectively) | 422,589 | 47,166 |
Notes receivable | 157,218 | |
Other receivables | 550 | |
Inventory, net | 522,622 | 747,905 |
Prepaid expenses | 293,458 | 84,976 |
Total Current Assets | 3,707,418 | 1,356,811 |
Noncurrent Assets | ||
Property and equipment, net | 401,356 | 93,565 |
Goodwill | 631,064 | 631,064 |
Intangible assets, net | 37,985 | 36,381 |
Deposits | 51,000 | |
Total Noncurrent Assets | 1,121,405 | 761,010 |
TOTAL ASSETS | 4,828,823 | 2,117,821 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 1,969,263 | 1,337,853 |
Deferred revenue | 1,011,871 | 1,421,344 |
Amounts due to shareholders | 6,927 | 57,398 |
Convertible promissory notes, net | 761,440 | |
Convertible accrued interest | 161,031 | |
Derivative liabilities | 410,880 | 477,814 |
Total Current Liabilities | 3,398,941 | 4,216,880 |
NONCURRENT LIABILITIES | ||
Deferred rent | 17,396 | |
Promissory note due shareholders | 11,985 | |
Total Noncurrent Liabilities | 17,396 | 11,985 |
TOTAL LIABILITIES | 3,416,337 | 4,228,865 |
Commitments and Contingencies (Note 12) | ||
SHAREHOLDERS’ EQUITY (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; 206,248,522 and 160,744,916 shares issued and outstanding, respectively | 2,062 | 1,607 |
Additional paid in capital | 20,664,563 | 12,222,789 |
Accumulated deficit | (19,254,911) | (14,336,212) |
Total Shareholders’ Equity (Deficit) | 1,412,486 | (2,111,044) |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | $ 4,828,823 | $ 2,117,821 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 105,267 | $ 91,000 |
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 | 206,248,522 | 160,744,916 |
Common stock, shares outstanding | 206,248,522 | 160,744,916 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Revenue, net | $ 7,210,241 | $ 7,579,863 |
Cost of revenue | 5,299,977 | 5,275,968 |
Gross profit | 1,910,264 | 2,303,895 |
Operating expenses: | ||
Advertising and marketing expenses | 625,773 | 289,992 |
Product development costs | 319,680 | 349,062 |
Selling, general and administrative expenses | 5,206,471 | 2,197,758 |
Total operating expenses | 6,151,924 | 2,836,812 |
Operating loss | (4,241,660) | (532,917) |
Other income (expense): | ||
Interest and other income, net | 4,097 | 40,157 |
Interest expense | (41,485) | (373,688) |
Amortization of debt discount on convertible promissory notes | (63,157) | (1,529,219) |
Loss on extinguishment of debt | (643,428) | (338,241) |
Gain (loss) on change in fair value of derivative liabilities | 66,934 | (538,705) |
Total other income (expense) | (677,039) | (2,739,696) |
Loss from operations before provision for income taxes | (4,918,699) | (3,272,613) |
Income taxes | ||
Net loss | $ (4,918,699) | $ (3,272,613) |
Loss per common share – basic and dilutive | $ (0.03) | $ (0.02) |
Weighted average number of common shares outstanding, basic and dilutive | 182,857,538 | 140,604,764 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Shareholders' Equity (Deficit) - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid In Capital [Member] | Accumulated Deficit [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 for conversion of debt and interest, net of unamortized debt discount | $ 334 | 3,234,992 | 3,235,326 | ||
Common shares issued for conversion of debt and interest, net of unamortized debt discount, shares outstanding | 33,365,609 | ||||
Reclassification of derivative liability to equity for debt conversion | 673,050 | 673,050 | |||
Common shares issued for compensation | 4,028 | 4,028 | |||
Common shares issued for compensation, shares | 46,045 | ||||
Common shares issued for exercise of stock options | $ 14 | 342 | 356 | ||
Common shares issued for exercise of stock options, shares | 1,493,400 | ||||
Value attributed to modification of warrants | 96,106 | 96,106 | |||
Net loss | (3,272,613) | (3,272,613) | |||
Balance at Dec. 31, 2016 | $ 772 | $ 1,607 | 12,222,789 | (14,336,212) | (2,111,044) |
Balance, shares at Dec. 31, 2016 | 77,220,000 | 160,744,916 | |||
Common shares issued for conversion of debt and interest, net of unamortized debt discount | $ 106 | 1,751,049 | 1,751,155 | ||
Common shares issued for conversion of debt and interest, net of unamortized debt discount, shares outstanding | 10,601,554 | ||||
Value attributed to modification of warrants | 59,000 | 59,000 | |||
Common shares issued with convertible notes payable | $ 3 | 39,127 | 39,129 | ||
Common shares issued with convertible notes payable, shares | 250,000 | ||||
Common shares issued for cash | $ 315 | 4,452,765 | 4,453,080 | ||
Common shares issued for cash, shares | 31,515,250 | ||||
Fair value of warrants issued and options granted to directors for compensation | 415,570 | 415,570 | |||
Common shares issued as compensation for services | $ 32 | 434,293 | 434,325 | ||
Common shares issued as compensation for services, shares | 3,160,494 | ||||
Common shares issued in settlement of restricted stock units awarded as compensation for consulting services | $ 2 | 20,497 | 20,499 | ||
Common shares issued in settlement of restricted stock units awarded as compensation for consulting services, shares to be issued | 200,000 | ||||
Fair value of vested restricted stock units awarded to employees and directors | $ 744,556 | $ 744,556 | |||
Fair value of vested stock options granted to employees | 189,536 | 189,536 | |||
Fair value of vested incentive stock bonuses awarded to employees | $ 364,483 | $ 364,483 | |||
Other common shares | $ (2) | 2 | |||
Other common shares, shares outstanding | (223,692) | ||||
Net loss | (4,918,699) | (4,918,699) | |||
Balance at Dec. 31, 2017 | $ 772 | $ 2,062 | $ 20,664,563 | $ (19,254,911) | $ 1,412,486 |
Balance, shares at Dec. 31, 2017 | 77,220,000 | 206,248,522 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (4,918,699) | $ (3,272,613) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Depreciation and intangible asset amortization expense | 44,865 | 53,084 |
Amortization of debt discounts | 37,637 | 1,529,219 |
Amortization of original issue discount on notes payable | 25,520 | |
(Gain) loss on change in derivative liabilities | (66,934) | 538,705 |
Compensation paid in equity | 2,139,865 | 4,386 |
Provision for doubtful accounts | 14,267 | 50,127 |
Provision for excess and obsolete inventory | 276,015 | |
Loss on extinguishment of debt | 643,428 | 338,241 |
Loss on disposal of other assets | 26,682 | 4,280 |
Changes in operating assets and liabilities: | ||
Accounts and other receivable | (390,240) | 179,793 |
Inventory | (50,732) | 513,897 |
Prepaid expenses | (208,482) | 131,099 |
Accounts payable and accrued liabilities | 289,905 | (775,309) |
Deferred revenue | (86,697) | 434,899 |
Accrued interest | (9,772) | 373,688 |
Deferred rent | 17,396 | |
Lease deposit | (51,000) | |
Net cash (used in) provided by operating activities | (2,266,976) | 103,496 |
Cash Flows From Investing Activities | ||
Capitalization of intangible assets | (18,624) | (25,292) |
Purchases of property and equipment | (183,783) | (18,189) |
Proceeds from the sale of property equipment | 35,100 | |
Cash disbursed for equipment held for lease | (159,806) | |
Cash disbursed for note receivable | (80,000) | |
Payments received on note receivable | 157,218 | 130,000 |
Net cash (used in) provided by investing activities | (204,995) | 41,619 |
Cash Flows From Financing Activities | ||
Cash proceeds from sale of common stock and warrants | 4,453,080 | |
Payments on convertible notes payable | (270,000) | |
Proceeds from issuance of notes payable | 500,000 | |
Payments on loans | (34,115) | |
Payments on loans from shareholders | (62,456) | (122,011) |
Net cash provided by (used in) financing activities | 4,620,624 | (156,126) |
Net increase (decrease) in cash | 2,148,653 | (11,011) |
Cash, beginning of period | 319,546 | 330,557 |
Cash, end of period | 2,468,199 | 319,546 |
Supplemental cash flow information: | ||
Interest paid | 44,150 | |
Non-cash investing and financial activities: | ||
Conversions of promissory notes and accrued interest to common stock | 1,751,155 | 3,235,326 |
Derivative liability on convertible notes and warrants | 673,050 | |
Settlement liability reclassified from deferred revenue | 322,776 | |
Warrant modification included in loss on extinguishment of debt | 59,000 | |
Common shares issued with notes payable | 39,129 | |
Discount on notes payable | 37,500 | |
Unpaid purchases of equipment and other assets | $ 18,729 |
Description of Business
Description of Business | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Description of Business | Note 1 – Description of Business Surna Inc. (the “Company”) was incorporated in Nevada on October 15, 2009. The Company develops innovative technologies and products that monitor, control and or address the energy and resource intensive nature of indoor cannabis cultivation. Currently, the Company’s revenue stream is derived primarily from supplying industrial technology and products to commercial indoor cannabis cultivation facilities. Headquartered in Boulder, Colorado, the Company’s engineering and technical team provides solutions that allow growers to meet the unique demands of a cannabis cultivation environment through precise temperature, humidity, light, and process controls, energy and water efficiency, and satisfaction of the evolving code and regulatory requirements being imposed at the state and local levels. The Company’s objective is to leverage its unique experience in this space in order to bring value-added climate control solutions to its customers that help improve their overall crop quality and yield as well as optimize the resource efficiency of their controlled environment (i.e,. indoor and greenhouses) cultivation facilities. The Company is not involved in the production or sale of cannabis. |
Basis of Presentation; Summary
Basis of Presentation; Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation; Summary of Significant Accounting Policies | Note 2 – Basis of Presentation; Summary of Significant Accounting Policies Financial Statement Presentation The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“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. The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated sufficient revenue and has funded its operating losses through the sale of common stock and the issuance of debt. The Company is subject to risks, expenses and uncertainties similar to those encountered by similarly situated companies. See Note 3. Basis of Consolidation and Reclassifications The consolidated financial statements include the accounts of the Company and its controlled and wholly-owned subsidiary, Hydro Innovations, LLC (“Hydro”). Intercompany transactions, profit, and balances are eliminated in consolidation. The Company has reclassified certain salaries related to marketing personnel from selling, general and administrative expense to advertising and marketing expenses in 2016 to conform to the Company’s presentation of such marketing personnel salaries in 2017. These reclassifications have been applied consistently to the periods presented and had no impact on net loss, total assets and liabilities, or equity. 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 revenue and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that it believes 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. Key estimates include: valuation of derivative liabilities, valuation of intangible assets, valuation of equity-based compensation, valuation of deferred tax assets and liabilities, warranty accruals, inventory allowances, and legal contingencies. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents. The Company may, from time to time, have deposits in financial institutions that exceed the federally insured amount. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivables are recorded at the invoiced amount, or based on revenue earned for items not yet invoiced, and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors, which, in management’s judgment, deserve current recognition in estimating bad debts. Based on its review, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole. As of December 31, 2017 and 2016, the allowance for doubtful accounts was $105,267 and $91,000, respectively. Inventory Inventory is stated at the lower of cost or market. The inventory is valued based on a first-in, first-out (“FIFO”) basis. Lower of cost or market is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence or impaired inventory. Excess and obsolete inventory is charged to cost of revenue and a new lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. As of December 31, 2017 and 2016, the allowance for excess and obsolete inventory was $323,384 and $47,369, respectively. Property and Equipment Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which is generally five years. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful lives or the life of the lease. Upon sale or retirement of assets, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred. Long-lived tangible assets, including property and equipment, are reviewed for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. When such an event occurs, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset’s carrying value. If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. The Company has not identified any such impairment losses to date. Goodwill and Intangible Assets The Company recorded goodwill in connection with its acquisition of Hydro in July 2014. Goodwill is reviewed for impairment annually or more frequently when events or changes in circumstances indicate that fair value of the reporting unit has been reduced to less than its carrying value. The Company performs a quantitative impairment test annually during the fourth quarter by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company completed this assessment as of December 31, 2017, and concluded that no impairment existed. Separable identifiable intangibles consist of intellectual property such as patents and trademarks, and capitalized website costs. Except for trademarks which are not amortized, the Company’s separable identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives. Separable identifiable intangibles are also subject to evaluation for potential impairment if events or circumstances indicate the carrying value may not be recoverable. Fair Value Measurement The Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 - inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. On a Recurring Basis A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. As of December 31, 2017 and 2016, the Company had outstanding warrants to purchase common stock that were issued in connection with Series 3 convertible notes (“Series 3 Warrants”) that provided for a reduction in the exercise price of the warrants in the event the Company issued common stock in a registered offering at a price below the exercise price. See Note 11. In such event, the exercise price under the warrants would be reduced to the price of the common stock in the dilutive issuance. The Company determined that these outstanding warrants subject to the exercise price reduction qualified as a derivative financial instrument. See Note 11 for a discussion of the impact the derivative financial instruments had on the Company’s consolidated financial statements and results of operations. Financial liabilities carried at fair value, measured on a recurring basis were as follows: As of December 31, 2017 As of December 31, 2016 Level 1 Level 2 Level 3 Fair Value Gain Level 1 Level 2 Level 3 Fair Value (Loss) (1) Financial liabilities: Derivative liabilities - conversion feature $ - $ - $ - $ - $ - $ - $ - $ - $ - $ (200,083 ) Derivative liabilities - warrants - - 410,880 410,880 66,934 - - 477,814 477,814 (338,622 ) Total financial liabilities $ - $ - $ 410,880 $ 410,880 $ 66,934 $ - $ - $ 477,814 $ 477,814 $ (538,705 ) (1) The loss on change in derivative liabilities of $538,705 presented in the statement of operations for the year ended December 31, 2016 also includes gains on derivatives associated with convertible promissory note balances outstanding at various dates during the year ended December 31, 2016, which were converted to common stock prior to December 31, 2016. The change in the balance of the warrant derivative liabilities during the years ended December 31, 2017 and 2016 was calculated using the Black-Scholes Option Pricing Model (the “Black-Scholes Model”), which is classified as gain (loss) on change in warrant derivative liabilities in the consolidated statements of operations. The Black-Scholes Model does take into consideration the Company’s stock price, historical volatility, and the risk-free interest rate, which do have observable Level 1 or Level 2 inputs. During the year ended December 31, 2016, the Company converted all of the Series 3 and 4 convertible promissory notes issued in 2015 into common stock, which gave rise to the fair value liabilities for the embedded conversion features. See Note 11. At conversion, the balance of the derivative liability of $673,050 was credited to additional paid in capital in the consolidated balance sheet. On a Non-Recurring Basis Intangible assets that are amortized are evaluated for recoverability whenever adverse effects or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability test consists of comparing the undiscounted projected cash flows with the carrying amount. Should the carrying amount exceed undiscounted projected cash flows, an impairment loss would be recognized to the extent the carrying amount exceeds fair value. For the Company’s indefinite-lived goodwill, the impairment test consists of comparing the fair value, determined using the market value method, with its carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value. As of December 31, 2017, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed. Due to their short-term nature, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, approximate fair value. Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes Model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The Company determined that the Series 3 Warrants qualified as derivative financial instruments. Accordingly, the Series 3 Warrants are derivative liabilities and are marked to market at the end of each reporting period. Any change in fair value during the period is recorded in as gain (loss) on change in derivative liabilities in the Company’s consolidated statements of operations. Revenue Recognition The Company recognizes revenue from the sale of its manufactured products as well as from products manufactured by third-party suppliers, which are typically drop-shipped to the Company’s customer. The principal markets for the Company’s products are the U.S. and Canada. Revenue is recognized when products are shipped and title passes to the customer, provided that persuasive evidence of an arrangement exists, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Sales of the Company’s products are not subject to regulatory requirements that vary from state to state. The Company generally does not provide its customers with a contractual right of return. In certain cases, the Company provides engineering services in connection with the sale of its products and recognizes revenue from such engineering services as the performance of such services occur. Management believes that all relevant criteria and conditions are considered when recognizing revenue. The Company provides climate control equipment and engineering design services for the controlled environment agriculture industry with contract terms typically less than one year. Advance payments received from customers are included in deferred revenue, a component of current liabilities, until such time that all criteria are met, as noted above, and revenue is recognized. Sales arrangements sometimes involve delivering multiple elements, including engineering services and multiple items of equipment. In these instances, revenue is assigned to each element based on vendor-specific objective evidence, third-party evidence or a management estimate of the relative selling price. Revenue is recognized individually for delivered elements only if they have value to the customer on a stand-alone basis and the performance of the undelivered items is probable and substantially in the Company’s control, or the undelivered elements are inconsequential or perfunctory and there are no unsatisfied contingencies related to payment. The majority of these deliverables are tangible products, such as equipment, with a relatively smaller portion attributable to engineering services. The Company does not provide any separate maintenance. Generally, contract duration is less than one-year and cancellation, termination or refund provisions apply only in the event of contract breach. The Company typically charges its customers for shipping and handling, which is included in revenue. Shipping and handling costs are reported within cost of revenue in the consolidated statements of operations. The following table sets forth the Company’s revenue by source: 2017 2016 Equipment $ 6,255,150 $ 6,787,348 Engineering services 588,849 537,020 Shipping and handling 238,908 207,650 Other revenue 127,334 47,845 Total revenue $ 7,210,241 $ 7,579,863 The Company accounts for sales taxes and other related taxes on a net basis, excluding such taxes from revenue. Product Warranty The Company warrants the products that it manufactures for a warranty period equal to the lesser of 12 months from start-up or 18 months from shipment. The Company’s warranty provides for the repair, rework, or replacement of products (at the Company’s option) that fail to perform within stated specification. The Company’s third-party suppliers also warrant their products under similar terms, which are passed-through to the Company’s customers. The Company assesses the historical warranty claims on its manufactured products and, since 2016, warranty claims have been approximately 1% of annual revenue generated on these products. The Company continues to assess the need to record a warranty reserve at the time of sale based on historical claims and other factors. As of December 31, 2017 and 2016, the Company had an accrued warranty reserve amount of $105,122 and $85,000, respectively, which are included in accounts payable and accrued liabilities on the Company’s consolidated balance sheets. Concentrations Two customers accounted for 12% and 11% of the Company’s revenue for the year ended December 31, 2017. Two customers accounted for 14% and 10% of the Company’s revenue for the year ended December 31, 2016. The Company’s accounts receivable from three customers made up 52%, 17% and 17%, respectively, of the total balance as of December 31, 2017. The Company’s accounts receivable from two customers made up 39% and 29% of the total balance as of December 31, 2016. Two suppliers accounted for 35% and 10% of the Company’s purchases of inventory for the year ended December 31, 2017 and 41% and 10% of the Company’s purchases of inventory for the year ended December 31, 2016. Product Development The Company expenses product development costs as incurred. Internal product development costs are expensed as incurred, and third-party product developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. For the years ended December 31, 2017 and 2016, the Company incurred $319,680 and $349,062, respectively, on product development. Accounting for Share-Based Compensation The Company recognizes the cost resulting from all share-based compensation arrangements, including stock options, restricted stock awards and restricted stock units that the Company grants under its equity incentive plan in its consolidated financial statements based on their grant date fair value. The expense is recognized over the requisite service period or performance period of the award. Awards with a graded vesting period based on service are expensed on a straight-line basis for the entire award. Awards with performance-based vesting conditions which require the achievement of a specific company financial performance goal at the end of the performance period and required service period are recognized over the performance period. Each reporting period, the Company reassesses the probability of achieving the respective performance goal. If the goals are not expected to be met, no compensation cost is recognized and any previously recognized amount recorded is reversed. If the award contains market-based vesting conditions, the compensation cost is based on the grant date fair value and expected achievement of market condition and is not subsequently reversed if it is later determined that the condition is not likely to be met or is expected to be lower than initially expected. The grant date fair value of stock options is based on the Black-Scholes Model. The Black-Scholes Model requires judgmental assumptions including volatility and expected term, both based on historical experience. The risk-free interest rate is based on U.S. Treasury interest rates whose term is consistent with the expected term of the option. The grant date fair value of restricted stock and restricted stock units is based on the closing price of the underlying stock on the date of the grant. Share-based compensation expense is reduced for forfeitures as the forfeitures occur since the Company does not have historical data or other factors to appropriately estimate the expected employee terminations and to evaluate whether particular groups of employees have significantly different forfeiture expectations. Share-based awards granted to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustment as the underlying share-based awards vest. Share-based payments to employees, directors and non-employees totaled $2,139,865 and $4,386 for the years ended December 31, 2017 and 2016, respectively. Share-based compensation costs are classified in the Company’s consolidated financial statements in the same manner as if such compensation was paid in cash. The following is a summary of share-based compensation costs included in the Company’s consolidated statements of operations for the years ended December 31, 2017 and 2016: 2017 2016 Share-based compensation expense included in: Cost of revenue $ 75,255 $ - Advertising and marketing expenses 16,377 - Product development costs 5,956 - Selling, general and administrative expenses 2,042,277 4,386 Total share-based compensation expense included in consolidated statement of operations $ 2,139,865 $ 4,386 Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions on the basis of a two-step process in which: (i) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with the related tax authority. Basic and Diluted Net Loss per Common Share Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. Commitments and Contingencies In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, customer disputes, government investigations and tax matters. An accrual for a loss contingency is recognized when it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated. Other Risks and Uncertainties To achieve profitable operations, the Company must successfully develop, manufacture and market its products. There can be no assurance that any such products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed. These factors could have a material adverse effect upon the Company’s financial results, financial position, and future cash flows. The Company is subject to risks common to similarly-situated companies including, but not limited to, new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, product liability, and the need to obtain additional financing. As a supplier of services and equipment to cannabis cultivators, the Company is also subject to risks related to the cannabis industry. Although certain states have legalized medical and/or recreational cannabis, U.S. federal laws continue to prohibit cannabis in all its forms as well as its derivatives. Any changes in the enforcement of U.S. federal laws may adversely affect the implementation of state and local cannabis laws and regulations that permit medical or recreational cannabis and, correspondingly, may adversely impact the Company’s customers. The Company’s success is also dependent upon its ability to raise additional capital and to successfully develop and market its products. See Note 3. Segment Information Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s senior management team in deciding how to allocate resources and in assessing performance. The Company has one operating segment that is dedicated to the manufacture and sale of its products. Recently Adopted Accounting Pronouncements On January 1, 2017, the Financial Accounting Standards Board (“FASB”) adopted Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting During the first quarter of 2017, the Company early adopted ASU 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350) In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) Simplifying the Measurement of Inventory, Recently Issued Accounting Pronouncements In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718) – Scope of Modification Accounting In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In February 2016, the FASB issued ASU 2016-02, Leases In May 2014, the FASB issued ASU 2014-09 (Topic 606), Revenue from Contracts with Customers The new guidance allows for two transition methods in application: (i) retrospective to each prior reporting period presented, or (ii) prospective with the cumulative effect of adoption recognized on January 1, 2018, also known as the modified retrospective approach. The Company intends to adopt the standard using the modified retrospective approach, which will result in an adjustment to accumulated deficit for the cumulative effect of applying this guidance to contracts in process as of the adoption date. Under this approach, prior financial statements presented will not be restated. This guidance requires additional disclosures of the amount by which each financial statement line item affected in the current reporting period during 2018 as compared to the guidance that was in effect before the change, and an explanation of the reasons for the significant changes. The Company is finalizing implementation activities in accordance with the planned effective date. These activities are focused on the review of significant customer contracts and the design and implementation of relevant internal controls. The Company believes that the new standard will not materially change the timing of revenue recognition. The Company also believes that this new guidance will not have a material impact on its consolidated results of operations, cash flows and financial position. |
Going Concern
Going Concern | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | Note 3 – Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has experienced recurring losses since its inception. The Company incurred a net loss of approximately $4,919,000 for the year ended December 31, 2017, and had an accumulated deficit of approximately $19,255,000 as of December 31, 2017. Since inception, the Company has financed its activities principally through debt and equity financing. Management expects to incur additional losses and cash outflows in the foreseeable future in connection with development of its operating activities. The Company is subject to a number of risks similar to those of other similar stage companies, including dependence on key individuals, successful development, marketing and branding of products; uncertainty of product development and generation of revenues; dependence on outside sources of financing; risks associated with research, development; dependence on third-party suppliers and collaborators; protection of intellectual property; and competition with larger, better-capitalized companies. Ultimately, the attainment of profitable operations is dependent on future events, including obtaining adequate financing to fulfill its development activities and generating a level of revenues adequate to support the Company’s cost structure. To support the Company’s financial performance, management undertook several initiatives during 2017, including: ● In the first quarter of 2017, the Company converted promissory notes with an original principal amount of $510,000, together with accrued interest of $134,553, in exchange for 5,001,554 shares of the Company’s common stock; ● In the second quarter of 2017, the Company amended certain promissory notes, each in the original principal amount of $268,750, to provide for the conversion of such notes into 2,800,000 shares, or 5,600,000 shares in the aggregate; ● In the first quarter of 2017, the Company also issued 16,781,250 investment units to accredited investors for gross proceeds of $2,685,000, with each unit consisting one share of common stock and a warrant to purchase one share of common stock (the “Q1 2017 Unit Offering”); and ● In the fourth quarter of 2017, the Company issued 14,734,000 investment units to accredited investors for gross proceeds of $1,768,000, with each unit consisting one share of common stock and a warrant to purchase one share of common stock (the “Q4 2017 Unit Offering”). The warrants issued under the Q1 2017 Unit Offering and the Q4 2017 Unit Offering have an exercise price of $0.26 and $0.20 per share, respectively, and are callable at the Company’s option under conditions. Depending on the market price of the Company’s common stock, these warrants may provide an additional source of capital if they are exercised by the holder. As of January 29, 2018, the call conditions with respect to the warrants issued under the Q4 2017 Unit Offering were satisfied, however, the Company has not yet elected to call such warrants. The Company also adopted the 2017 Equity Incentive Plan (the “2017 Equity Plan”) which allows the Company to grant equity-based awards to attract, motivate, retain, and reward employees, directors and consultants, while permitting the Company preserve its cash resources. There can be no assurance that the Company will be able to raise debt or equity financing in sufficient amounts, when and if needed, on acceptable terms or at all. If results of operations for 2018 do not meet management’s expectations, or additional capital is not available, management believes it has the ability to reduce certain expenditures. The precise amount and timing of the funding needs cannot be determined accurately at this time, and will depend on a number of factors, including the market demand for the Company’s products and services, the quality of product development efforts, management of working capital, and continuation of normal payment terms and conditions for purchase of the Company’s products. The Company believes its cash balances and cash flow from operations will be insufficient to fund its operations for the next 12 months. If the Company is unable to substantially increase revenues, reduce expenditures, or otherwise generate cash flows for operations, then the Company will need to raise additional funding to continue as a going concern. The foregoing factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date the financial statements are issued. These consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty. |
Inventory
Inventory | 12 Months Ended |
Dec. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Inventory | Note 4 – Inventory Inventory consisted of the following: As of December 31, 2017 2016 Finished goods $ 569,047 $ 591,564 Work in progress 14,348 16,518 Raw materials 262,611 187,192 Allowance for excess & obsolete inventory (323,384 ) (47,369 ) Inventory, net $ 522,622 $ 747,905 Overhead expenses of $28,554 and $26,764 were included in the inventory balance as of December 31, 2017 and 2016, respectively. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Note 5 – Property and Equipment Property and equipment consisted of the following: As of December 31, 2017 2016 Furniture and equipment $ 326,894 $ 171,709 Equipment held for lease to related party 159,806 - Molds - 31,063 Vehicles 15,000 15,000 Leasehold Improvements 33,257 38,101 534,957 255,873 Accumulated depreciation (133,601 ) (162,308 ) Property and equipment, net $ 401,356 $ 93,565 Depreciation expense amounted to $39,978 for the year ended December 31, 2017, of which $8,302 was allocated to cost of revenue. Depreciation expense amounted to $47,773 for the year ended December 31, 2016, of which $8,349 was allocated to cost of revenue and inventory. As of December 31, 2017, the Company has recorded $159,806 for the cost of the equipment located at the Sterling facility as leased equipment under fixed assets. See Note 8. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Note 6 – Intangible Assets Intangible assets consisted of the following: As of December 31, 2017 2016 Patents $ 29,952 $ 24,192 Website development costs 22,713 22,713 Trademarks 1,830 1,099 54,495 48,004 Accumulated amortization (16,510 ) (11,623 ) Intangible assets, net $ 37,985 $ 36,381 Patents when issued are amortized over 14 years, and web site development costs are amortized over five years. Trademarks are not amortized since they have an indefinite life. Amortization expense for intangibles amounted to $4,887 and $5,311 for the years ended December 31, 2017 and 2016, respectively. |
Accounts Payable and Accrued Li
Accounts Payable and Accrued Liabilities | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Accrued Liabilities | Note 7 – Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following: As of December 31, 2017 2016 Accounts payable $ 1,159,975 $ 1,020,224 Sales commissions payable 21,931 40,736 Sales tax payable 8,750 23,631 Accrued payroll liabilities 58,557 43,573 Product warranty accrual 105,122 85,000 Commercial dispute settlement 332,418 - Other accrued expenses 282,510 124,689 Total $ 1,969,263 $ 1,337,853 As of December 31, 2017, the Company reclassified $322,776 from previously recorded deferred revenue and recorded a loss of $9,642 in connection with the settlement of a commercial dispute. See Note 18. |
Related Party Agreements and Tr
Related Party Agreements and Transactions | 12 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Agreements and Transactions | Note 8 – Related Party Agreements and Transactions Amounts Due to Shareholders In July of 2014, the Company issued a $250,000 unsecured promissory note (“Hydro Note”) to Stephen and Brandy Keen as part of the purchase price of Hydro. Stephen Keen is a principal shareholder of the Company and was a former executive officer and director, and is now a consultant to the Company (see below). Brandy Keen, the wife of Stephen Keen, is also a principal shareholder of the Company and has been, and currently serves as, an executive officer and director of the Company. On April 15, 2016, the Keens and the Company entered into an amendment to the original Hydro Note under which the Company made a payment of $100,000 in April 2016, which resulted in the reduction of the outstanding balance from $194,514 to $94,514. Additionally, pursuant to the amendment, the Company was not obligated to make further payments until July 2016, at which time, the Company would resume monthly payments equal to $5,000 per month until the Hydro Note was paid in full. As part of the amendment, the parties also agreed that the Hydro Note no longer had to be paid in full by July 18, 2016 and that no default had occurred. The interest rate is 6% per annum. As of December 31, 2017, the Hydro Note had a balance of $6,927, which is reflected on the balance sheet as a current liability. As of December 31, 2016, the Hydro Note had a balance of $69,383, of which $57,398 and $11,985 were reflected on the Company’s consolidated balance sheet as a current and long-term liability, respectively. Subsequent to December 31, 2017, the balance of the Hydro Note was paid in full. As of December 31, 2015, there was a deferred compensation balance of $25,600 due to Stephen and Brandy Keen, which was paid in full during 2016. Stephen Keen Consulting Agreement On May 10, 2017, the Board approved a three-year consulting agreement between the Company and Stephen Keen, a principal shareholder of the Company and a former executive officer and director. Under the consulting agreement, Stephen Keen will provide certain consulting services to the Company including research and development, new product design and innovations, existing product enhancements and improvements, and other technology advancements with respect to the Company’s business and products in exchange for an annual consulting fee of $30,000. The consulting agreement also includes certain activity restrictions which prohibit Stephen Keen from competing with the Company. In connection with the execution of this consulting agreement, Stephen Keen’s employment with the Company ceased as of April 28, 2017 and he resigned as a director of the Company on May 10, 2017. Pursuant to the terms of this consulting agreement, the Company recorded consulting fees of $20,000 payable to Stephen Keen during 2017. Sterling Pharms Equipment Agreement On May 10, 2017, the Board approved a three-year equipment, demonstration and product testing agreement between the Company and Sterling Pharms, LLC (“Sterling”), an entity controlled by Stephen Keen, which operates a Colorado-regulated cannabis cultivation facility currently under construction. Under this agreement, the Company agreed to provide to Sterling certain lighting, environmental control, and air sanitation equipment for use at the Sterling facility in exchange for a quarterly fee of $16,500. Also, under this agreement, Sterling agreed to allow the Company and its existing and prospective customers to have access to the Sterling facility for demonstration tours in a working environment, which the Company believes will assist it in the sale of its products. Sterling also agreed to monitor, test and evaluate the Company’s products installed at the Sterling facility and to collect data and provide feedback to the Company on the energy and operational efficiency and efficacy of the installed products, which the Company intends to use to improve, enhance and develop new or additional product features, innovations and technologies. In consideration for access to the Sterling facility to conduct demonstration tours and for the product testing and data to be provided by Sterling, the Company will pay Sterling a quarterly fee of $12,000. As of December 31, 2017, Sterling Pharms had accepted substantially all the equipment under this agreement, but is in the process of completing the installation of the equipment. Pursuant to the terms of this agreement, the respective payments will begin upon the delivery and installation of the equipment. As of December 31, 2017, the Company has recorded $159,806 for the cost of the equipment located at the Sterling facility as equipment held for lease to related party in fixed assets. Upon commencement of the respective payments under this agreement, the Company intends to record the $16,500 quarterly fee for use of the equipment as other income and to depreciate the cost of the leased equipment over the term of this agreement. The Company’s quarterly fee payable to Sterling will be charged equally between marketing and product development expense. During the fourth quarter of 2017, the Company and Sterling agreed to revise the equipment schedule to the original agreement to include additional equipment purchased by the Company at a cost of $23,580. Subsequent to December 31, 2017, at the request of Sterling, the Company purchased additional equipment at a cost of $7,687 to be included in the equipment schedule to the original agreement. On March 22, 2018, the Company and Sterling entered into an amendment of the original agreement to include the additional leased equipment as discussed above and to increase the quarterly fee payable to the Company to $18,330. The amendment of the original agreement also provided that, upon expiration of the initial three-year term, either: (i) the leased equipment would be returned to the Company and the agreement would terminate, (ii) Sterling could purchase the leased equipment at the agreed upon residual value of $81,827, or (iii) Sterling and the Company could agree to an extension of the original agreement at mutually agreed to quarterly payments to and from the parties. See Note 18. Separately, Sterling purchased equipment from the Company unrelated to this agreement for $78,310, which represented the Company’s cost. |
Promissory Notes
Promissory Notes | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Promissory Notes | Note 9 – Promissory Notes On February 9, 2017, the Company entered into a securities purchase agreement with two accredited investors pursuant to which the Company issued promissory notes in the aggregate original principal amount of $537,500. In addition, each investor received 125,000 shares, an aggregate of 250,000 shares, of the Company’s common stock. The notes were unsecured, had an interest rate of 6%, per annum and were originally due and payable, with all accrued interest, on November 9, 2017. The total proceeds were approximately $500,000 with an original issue discount of approximately $37,500. The Company allocated the cash proceeds amount between the debt and shares issued on a relative fair value basis. Based on relative fair value, the Company allocated approximately $461,000 and $39,000 to the promissory notes and the shares of common stock, respectively. The original issue discount of $37,500 and fair value of the shares issued of $39,000 were amortized and expensed over the life of the loans. On August 8, 2017, the Company executed an amendment (the “Amendment”) with the holders of the promissory notes, each in the original principal amount of $268,750. The Amendment provided for each of the holder’s notes to convert its principal into 2,800,000 shares, or 5,600,000 shares in the aggregate, of the Company’s common stock, at a price per share of approximately $0.096. The Company’s closing share price on August 7, 2017 was $0.135. In connection with this Amendment, the holders also agreed to surrender to the Company the portion of the promissory notes representing the accrued interest as the consideration for this Amendment, which approximated $15,900 in total. The transactions contemplated by the Amendment closed on August 22, 2017. The Company has accounted for the Amendment as debt extinguishment whereby the difference between the reacquisition price of the debt and the net carrying amount of the extinguished debt was recognized as a loss during the third quarter of 2017. The following details the calculation of the loss on extinguishment of the notes payable: Carrying amount of debt Principal converted $ 537,500 Accrued interest converted 15,904 Unamortized debt discount (25,832 ) Total carrying amount of debt 527,572 Reacquisition price of debt Fair value of shares of common stock issued 756,000 Loss on extinguishment of debt $ (228,428 ) During the year ended December 31, 2017, the amortization expense related to the debt discount was $49,997. |
Convertible Notes
Convertible Notes | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Convertible Notes | Note 10 – Convertible Notes The following table summarizes the convertible promissory notes for the years ended December 31, 2017 and 2016: Series 2 Series 3 Series 4 Total Balance January 1, 2016 $ 2,536,250 $ 711,000 $ 103,273 $ 3,350,523 Additions - - - - Conversions (1,756,250 ) (711,000 ) (103,273 ) (2,570,523 ) Balance December 31, 2016 $ 780,000 $ - $ - 780,000 Discounts and deferred finance charges (18,560 ) Convertible notes payable, net 761,440 Less current portion - December 31, 2016 761,440 Long-term portion - December 31, 2016 $ - Balance January 1, 2017 $ 780,000 $ - $ - $ 780,000 Conversions (510,000 ) - - (510,000 ) Repayments (270,000 ) - - (270,000 ) Balance December 31, 2017 $ - $ - $ - $ - Series 2 Convertible Notes In October 2014, the Company offered up to 60 investment units at a price per unit of $50,000. Each unit consisted of (i) 250,000 shares of the Company’s common stock, (ii) a $50,000 10% convertible promissory note (“Series 2 Convertible Note”), and (iii) warrants for the purchase of 50,000 shares of the Company’s common stock (Series 2 Warrants”). The Series 2 Convertible Notes: (i) were unsecured, (ii) accrued interest at the rate of 10% per annum, and (iii) if not converted, were due and payable two years from the date of issuance. The Series 2 Convertible Notes were convertible after 360 days from the issuance date, at the investor’s option, into a number of shares of the Company’s common stock that was determined by dividing the amount to be converted by the $0.60 conversion price. Additionally, the entire principal amount under the Series 2 Convertible Notes would be automatically converted into common stock at a conversion price equal to the greater of $0.50 per share or 75% of the public offering price per share, without any action by the investor, on the earlier of: (x) the date on which the Company closed on a financing transaction involving the sale of the Company’s common stock at a price of no less than $2.00 per share with gross proceeds to the Company of no less than $5,000,000, or (y) the date which is three days after the common stock traded at a volume-weighted-average-price (“VWAP”) of at least $2.00 per share for a period of 10 consecutive trading days. The Company raised $2,536,250 from the sale of these investment units. The gross proceeds from the sale of the Series 2 Convertible Notes were recorded net of a discount related to the conversion feature of the embedded conversion option and the fair value of the Series 2 Warrants, each of which were calculated pursuant to the Black-Scholes Model. The fair value of conversion feature and the Series 2 Warrants were recorded as a reduction to the Series 2 Convertible Notes payable and were charged to operations as interest expense in accordance with the effective interest method within the term of the Series 2 Convertible Notes. Transaction costs were apportioned to Series 2 Convertible Notes payable, common stock, Series 2 Warrants and derivative liabilities. The portion of transaction costs attributed to the conversion feature, warrants and common stock were immediately expensed, because the derivative liabilities are accounted for at fair value through the statement of operations. During the year ended December 31, 2016 and the first quarter of 2017, the Company entered into note conversion and warrant amendment agreements (each, an “Agreement” and together, the “Agreements”) to: (i) amend the Series 2 Convertible Notes to reduce the conversion price and simultaneously cause the conversion of the outstanding amount under such Series 2 Convertible Notes into shares of the Company’s common stock, and (ii) reduce the exercise price of the Series 2 Warrants. Each Agreement has been privately negotiated so the terms vary. Pursuant to the Agreements, the Series 2 Convertible Notes were amended to reflect a reduced conversion price per share between $0.09 and $0.22. Additionally, pursuant to the Agreements, the Series 2 Warrants were amended to reflect a reduced exercise price per share between $0.30 and $0.35, except for one Series 2 Warrant to reflect a reduced exercise price of $0.15 per share. The term of one Series 2 Warrant was also extended. Pursuant to the Agreements, during the year ended December 31, 2016, the Company converted Series 2 Convertible Notes with an aggregate outstanding principal amount of $1,756,250, together with accrued interest of $399,063, in exchange for the issuance of 15,253,089 shares of the Company’s common stock. The exercise price of the Series 2 Warrants related to these converted notes was also reduced. Pursuant to the Agreements, in the first quarter of 2017, the Company converted Series 2 Convertible Notes with an aggregate outstanding principal amount of $510,000, together with accrued interest of $134,553, in exchange for the issuance of 5,001,554 shares of the Company’s common stock. The exercise price of the Series 2 Warrants related to these converted notes was also reduced. In the first quarter of 2017, the Company also made payments of $314,150 to settle Series 2 Convertible Notes in the principal amount of $270,000, together with accrued interest of $44,150. As of December 31, 2017, the Company had no Series 2 Convertible Notes outstanding. The Company has accounted for the Agreements as debt extinguishment whereby the difference between the reacquisition price of the debt and the net carrying amount of the extinguished debt was recognized as a loss during for the years ended December 31, 2017 and 2016. The following details the calculation of the loss on extinguishment of the Series 2 Convertible Notes: For the Year ended December 31, 2017 2016 Carrying amount of debt Principal converted $ 510,000 $ 1,756,250 Accrued interest converted 134,553 399,063 Unamortized debt discount (5,398 ) (51,208 ) Total carrying amount of debt 639,155 2,104,105 Reacquisition price of debt Fair value of shares of common stock issued 995,155 2,346,240 Warrant modification value 59,000 96,106 Total reacquisition price of debt 1,054,155 2,442,346 Loss on extinguishment of debt $ (415,000 ) $ (338,241 ) During the year ended December 31, 2017, the amortization expense related to the debt discount was $13,160. As of December 31, 2017, Series 2 Warrants to purchase 2,536,250 shares of common stock are outstanding. The exercise price varies from a low of $0.15 to a high of $3.00 per share, with a weighted average exercise price of $0.45 per share. Series 3 Convertible Notes During the third quarter of 2015, the Company entered into Securities Purchase Agreements with three accredited investors (each a “Purchaser” and together the “Purchasers”), pursuant to which the Company sold and the Purchasers purchased convertible notes (“Series 3 Convertible Notes”) with a one-year term in the aggregate original principal amount of $711,000, with an aggregate original issue discount of $61,000, together with warrants to purchase up to an aggregate of 2,625,000 shares of the Company’s common stock (“Series 3 Warrants”), for aggregate cash proceeds of $656,250. The Series 3 Convertible Notes accrued interest a rate of 10% per annum, expect for Series 3 Convertible Notes in the principal amount of $106,000 which had an interest rate of 11% per annum. The conversion price of the Series 3 Convertible Notes was equal to 80% of the lowest trading price of the Company’s common stock as reported on the OTCQB for the 15 trading days prior to conversion. The Company determined that the Series 3 Convertible Notes had an embedded conversion option that qualified for derivative accounting and bifurcation under ASC 815-40 and, as a result, the Company recognized the fair value of the embedded conversion feature as a derivative liability upon issuance of the Series 3 Convertible Notes. The Series 3 Warrants have a five-year term and an exercise price of $0.25 per share, subject to adjustment. The Series 3 Warrants may be exercised on a cashless basis. The Series 3 Warrants also provide for a reduction in the exercise price in the event the Company issued common stock in a registered offering at a price below the exercise price. In such case, the exercise price under the warrants would be reduced to the price of the common stock in the registered offering. The Company determined that this exercise price reduction qualified as a derivative financial instrument. The gross proceeds from the sale of the Series 3 Convertible Notes were recorded net of a discount related to the conversion feature of the embedded conversion option and the fair value of the Series 3 Warrants, each of which were calculated pursuant to the Black-Scholes Model. The fair value of conversion feature and the Series 3 Warrants were recorded as a reduction to the Series 3 Convertible Notes payable and were charged to operations as interest expense in accordance with the effective interest method within the term of the Series 3 Convertible Notes. Transaction costs were apportioned to Series 3 Convertible Notes payable, Series 3 Warrants and derivative liabilities. The portion of transaction costs attributed to the conversion feature, warrants and common stock were immediately expensed, because the derivative liabilities are accounted for at fair value through the statement of operations. Upon issuance of the Series 3 Convertible Notes, the Company determined a fair value of $1,023,881 for the derivative liabilities, with the fair value of the warrants determined to be $246,020 and the fair value of the conversion feature determined to be $777,861. The aggregate debt discount was amortized over the term of the Series 3 Convertible Notes. During the year ended December 31, 2016, the Company issued 15,598,870 shares of its common stock in connection with the conversion the Series 3 Convertible Notes in the principal amount of $711,000 and accrued interest of $72,128. As of December 31, 2017, Series 3 Warrants to purchase 2,625,000 shares of common stock are outstanding. Series 4 Convertible Note On December 18, 2015, the Company and the noteholder agreed to amend a certain secured promissory note issued in July 2015 which, at the time of the amendment, had an outstanding principal balance of $100,273 together with accrued interest of $3,046. Pursuant to the amendment, the maturity date was extended to from December 22, 2015 to April 30, 2016 and a conversion was added allowing for conversion into shares of the Company’s common stock, at any time following the amendment, at a conversion price equal to 70% of the lowest trading price of the Company’s common stock as reported on the OTCQB for the 20 trading days prior to conversion (“Series 4 Convertible Note”). The Series 4 Convertible Note had an embedded conversion option that qualified for derivative accounting and bifurcation under GAAP. The Company recognized the fair value of the embedded conversion feature as a derivative liability at the time of amendment. Since the present value of the cash flows under the new debt instrument was at least ten percent different from the present value of the remaining cash flows under the terms of the original debt instrument, the Company accounted for the amendment as a debt extinguishment. During the year ended December 31, 2016, the Company issued 2,289,958 shares of its common stock in connection with the conversion the Series 4 Convertible Notes in the principal amount of $103,319 and accrued interest of $2,637. |
Derivative Liabilities
Derivative Liabilities | 12 Months Ended |
Dec. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Liabilities | Note 11 – Derivative Liabilities The Company determined that the Series 3 Warrants qualified as derivative financial instruments. Accordingly, the Series 3 Warrants are derivative liabilities and are marked to market at the end of each reporting period. Any change in fair value during the period is recorded in as gain (loss) on change in derivative liabilities in the Company’s consolidated statements of operations. The following table sets forth movement in the derivative liability related to the Series 3 Warrants: Balance December 31, 2015 $ 139,192 Loss on change in derivative liability, net 338,622 Balance December 31, 2016 477,814 (Gain) on change in derivative liability, net (66,934 ) Balance December 31, 2017 $ 410,880 During the year ended December 31, 2016, the Company also had a loss on change in derivative liabilities of $200,083 associated with certain convertible promissory note balances outstanding at various dates during the year ended December 31, 2016, which were converted to common stock prior to December 31, 2016. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 12 – Commitments and Contingencies Litigation From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict and the Company’s view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a liability for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company’s operations or its financial position, liquidity or results of operations. Internal Revenue Service Penalties The Company has been penalized by the Internal Revenue Service (“IRS”) for failure to file its Foreign Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, for the years 2011, 2012 and 2014 on a timely basis. The penalties and interest approximate $115,000. The Company’s request that the penalties be abated for reasonable cause was denied by the IRS. The Company has appealed the IRS’s denial based on statutory grounds under Revenue Procedure 92-70, which provides a summary filing procedure for filing Form 5471 with respect to dormant foreign corporations. Persons complying with this revenue procedure are deemed to satisfy their Form 5471 filing obligations with respect to dormant foreign corporations and are not subject to penalties related to the failure to timely file a complete Form 5471 and to timely furnish information requested thereon. The IRS has notified the Company that it needs additional time to respond to the Company’s appeal, which response is not expected until April 2018. The Company believes it has complied with the summary filing procedures for filing Form 5471 under Revenue Procedure 92-70 and the likelihood of abatement is high. However, there can be no assurance of any abatement until the IRS acts upon the appeal. See Note 17. Building Lease The Company had a lease agreement for its manufacturing and office space consisting of approximately 18,000 square feet during 2016, which expired April 1, 2017. As the parties negotiated a new lease agreement in connection with the sale of the property to a new landlord, the parties extended the then current lease until September 29, 2017. On June 27, 2017, the Company executed a new lease, which commenced September 29, 2017 and continues through August 31, 2022. The Company occupied its same leased space for $12,967 per month until January 1, 2018. On January 2, 2018, the leased space was expanded and the monthly rental rate increased to $18,979 until August 31, 2018. Beginning September 1, 2018, the monthly rent will increase by 3% each year through the end of the lease. Pursuant to the new lease, the Company made a security deposit of $51,000 on July 31, 2017 and is entitled to a $100,000 tenant allowance for leasehold improvements. The Company has recorded leasehold improvements in progress of $7,285 as of December 31, 2017, none of which had been reimbursed by the landlord under the tenant improvement allowance as of December 31, 2017. During the first quarter of 2016, the Company also rented additional space under a short-term lease. Rent expense under these leases amounted to $218,926 and $210,957 for the years ended December 31, 2017 and 2016, respectively. The following is a schedule by years of the minimum future lease payments on the new building lease as of December 31, 2017. Year Ended December 31, 2018 $ 230,025 2019 236,926 2020 244,034 2021 251,355 2022 170,888 Total future minimum lease payments $ 1,133,228 Total rent under the new building lease is charged to expense over the term of the lease on a straight-line basis, resulting in the same monthly rent expense throughout the lease. The difference between the rent expense amount and the actual rent paid is recorded to deferred rent on the Company’s consolidated balance sheets. Other Commitments In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers and employees that will require the Company to, among other things, indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers, or employees. The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors and certain of its officers and employees, and former officers, directors, and employees of acquired companies, in certain circumstances. |
Preferred and Common Stock
Preferred and Common Stock | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Preferred and Common Stock | Note 13 – Preferred and Common Stock Preferred Stock As of December 31, 2017 and 2016, there were 77,220,000 shares of Series A preferred stock, par value $0.00001 per share, issued and outstanding. The holders of Series A preferred stock have one vote per share of Series A preferred stock equivalent to one vote of the Company’s common stock. The Series A preferred stock ranks senior to the Company’s common stock. The holders of shares of Series A Preferred Stock are not entitled to receive dividends and have no conversion or preemptive rights. Upon liquidation, dissolution or winding up of the Company’s business, after payment to the holders of any senior securities, the holders of Series A preferred stock are entitled to receive a preferential cash payment per share of Series A preferred stock equal to the stated value of the preferred stock, prior to any payment to the holders of common stock. Common Stock During the year ended December 31, 2017, the Company issued restricted shares of its common stock as follows: ● 5,001,554 shares of common stock were issued upon conversion of Series 2 Convertible Notes with a principal amount of $510,000, together with accrued interest (see Note 10); ● 40,000 shares of common stock were issued to an employee as compensation; ● 250,000 shares were issued to two investors in connection with the Company’s issuance of certain promissory notes; ● 16,781,250 shares of common stock were issued to accredited investors in the Q1 2017 Unit Offering (see Note 14); ● 5,600,000 shares of common stock were issued to two investors upon conversion of certain promissory notes (see Note 9); ● 700,000 shares of common stock were issued to an independent director as an equity retention payment; and ● 14,734,000 shares of common stock were issued to accredited investors in the Q4 2017 Unit Offering (see Note 14). During the year ended December 31, 2017, the Company also issued shares of its common stock under the 2017 Equity Plan as follows: ● 216,009 shares of common stock were issued to independent directors in lieu of cash director fees; ● 600,000 shares of common stock were issued to a director as compensation for services prior to becoming a director; ● 1,200,000 shares were issued to an employee in connection with the execution of an employment agreement with the Company; ● 200,000 shares of common stock were issued to a consultant in settlement of vested restricted stock units; and ● 404,485 shares were issued to a consultant as compensation for services rendered in lieu of cash fees. During the year ended December 31, 2016, the Company issued restricted shares of its common stock as follows: ● 46,045 shares of common stock were issued to employees as compensation; ● 1,493,400 shares of common stock were issued upon the exercise of stock options; ● 15,253,089 shares of common stock were issued upon conversion of Series 2 Convertible Notes with a principal amount of $1,756,250 (see Note 10); and ● 17,888,828 shares of common stock were issued upon conversion of the Series 3 and 4 Convertible Notes (see Note 10). |
Unit Offerings
Unit Offerings | 12 Months Ended |
Dec. 31, 2017 | |
Unit Offerings | |
Unit Offerings | Note 14 – Unit Offerings In March 2017, the Company entered into a securities purchase agreement with certain accredited investors. The Company issued an aggregate of 16,781,250 investment units, for aggregate gross proceeds of $2,685,000, or $0.16 per unit. Each unit consisted of one share of the Company’s common stock and one warrant for the purchase of one share of the Company’s common stock (“Q1 2017 Warrants”); however, one investor declined receipt of the warrant to purchase 468,750 shares of the Company’s common stock. Pursuant to the Q1 2017 Warrants, the holder thereof may at any time on or after six months after the issuance date and on or prior to the close of business on the date that is the third anniversary of the issuance date, purchase up to the number of shares of the Company’s common stock as set forth in the respective warrant. The exercise price per share of the common stock under the Q1 2017 Warrants is $0.26, subject to customary adjustments as provided in the warrant. Each Q1 2017 Warrant is callable at the Company’s option commencing six months from the issuance date, provided the closing price of the Company’s common stock is $0.42 or greater for five consecutive trading days. Commencing at any time after the date on which such call condition is satisfied, the Company has the right, upon 30 days’ notice to the holder, to redeem the warrant shares at a price of $0.01 per warrant share. The holder may exercise the warrant at any time (in whole or in part) prior to the redemption date at the exercise price. On December 12, 2017, the Company completed a private placement offering of investment units, at a price of $0.12 per unit, with certain accredited investors. Each unit consisted of one share of the Company’s common stock and one warrant for the purchase of one share of the Company’s common stock (“Q4 2017 Warrants”). The Company issued a total of 14,734,000 units for aggregate proceeds of $1,768,080. The Q4 2017 Warrants have an exercise price of $0.20 per share, subject to customary adjustments as provided in the warrant, and have a term of three years. The Q4 2017 Warrants are callable at the Company’s option, provided the closing price of the Company’s common stock is $0.36 or greater for five consecutive trading days. Commencing at any time after the date on which the call condition is satisfied, the Company has the right, upon notice to the holders, to redeem the shares of common stock underlying each warrant at a price of $0.01 per share, but such redemption may not occur earlier than sixty-one (61) days following the date of the receipt of notice by the holder. The holder may exercise the warrant at any time (in whole or in part) prior to the redemption date at the exercise price. The call condition with respect to the Q4 2017 Warrants was satisfied on January 29, 2018, however, the Company has not elected to call such warrants. As of December 31, 2017, Q1 2017 Warrants to purchase 16,312,500 shares of common stock and Q4 2017 Warrants to purchase 14,734,000 shares of common stock are outstanding. |
Equity Issued as Compensation f
Equity Issued as Compensation for Services | 12 Months Ended |
Dec. 31, 2017 | |
Equity Issued As Compensation For Services | |
Equity Issued as Compensation for Services | Note 15 – Equity Issued as Compensation for Services Warrants Issued to Former Director Pursuant to certain letter agreements dated May 26, 2017 and June 16, 2017, and in connection with the resignation of a former director, the Company agreed to issue the former director three individual warrants to purchase: (i) 900,000 shares (“Warrant 1”), (ii) 460,525 shares (“Warrant 2”), and (iii) 460,525 shares (“Warrant 3”) (collectively, the “Warrants”) of the Company’s common stock for a period of five years. Warrant 1 was granted on June 20, 2017, is fully vested, and can be exercised beginning December 21, 2017 at an exercise price of $0.114 per share with the option for a cashless exercise. Warrants 2 and 3 were granted on June 20, 2017, are fully vested, and can be exercised beginning December 21, 2017 at an exercise price of $0.0005 per share with the option for a cashless exercise. The Company recorded $189,592 of compensation expense for the fair value of the Warrants on the grant date. The fair value of the Warrants at the date of grant was determined using the Black-Scholes Model. The assumptions used in the Black-Scholes Model were the term of the Warrants of 5 years, volatility rate of 119.96%, quarterly dividends 0%, and a risk-free interest rate of 1.77%. Warrants Issued to Investment Bank Pursuant to a certain agreement dated June 19, 2017, for services rendered in connection with the conversion of the Original Notes, the Company issued to an investment bank or its designees a warrant (“Banker Warrant”) to purchase, at an exercise price $0.35 per share, 500,000 shares of the Company’s common stock for a period of three years. The Banker Warrants were fully vested on the date of issuance and may be exercised beginning December 20, 2017. The Company recorded $30,687 of expense for the fair value of the Banker Warrant on the date of issuance. The fair value of the Banker Warrants at date of issuance was determined using the Black-Scholes Model. The assumptions used in the Black-Scholes Model were term of the Banker Warrant of 3 years, volatility rate of 120.02%, rate of quarterly dividends 0% and a risk-free interest rate of 1.52%. Common Shares Issued to Employee During the first quarter of 2017, the Company issued to an employee 40,000 shares of common stock which were valued at $8,840 on the date of issuance. These shares were fully vested on the date of issuance and immediately expensed. Common Shares Issued to Director Pursuant to an agreement dated March 7, 2017, the Company issued to its Chairman of the Board (the “Chairman”) 700,000 shares of common stock as an equity retention award. These shares were valued, using the closing price for the Company’s common stock, as of the date of ratification for total value of $121,450, which was immediately expensed as compensation. |
Equity Incentive Plan
Equity Incentive Plan | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Equity Incentive Plan | Note 16 – Equity Incentive Plans 2014 Stock Ownership Plan As of December 31, 2016, the Company had non-qualified stock options to purchase 6,177,600 shares of the Company’s common stock, with an exercise price of $0.00024, outstanding under the 2014 Stock Ownership Plan of Safari Resource Group, Inc. (the “2014 Stock Plan”). Upon the adoption of the Company’s 2017 Equity Incentive Plan (the “2017 Equity Plan”), there will be no further awards under the 2014 Stock Plan. In March 2017, in a private transaction, certain principal shareholders of the Company, assigned to the Previous CEO, non-qualified stock options to purchase 3,088,800 shares of the Company’s common stock outstanding under the 2014 Stock Plan. The principal shareholders informed the Company that they agreed to assign these options as an incentive (i) for the Previous CEO to complete the negotiations with the Company’s convertible noteholders to convert their notes into shares of the Company’s common stock, and (ii) for the Previous CEO to complete a private placement of the Company’s common stock. The Previous CEO thereupon delivered a purported notice of exercise of the options to the Company just prior to the expiration of the options. The Company erroneously reported in its Form 10-K for the year ended December 31, 2016 that the common stock underlying these options had been issued during the three months ended March 31, 2017. Prior to the Company’s acceptance of the notice of exercise and issuances of these shares in response thereto, in May 2017, the Previous CEO and the principal shareholders entered into a rescission agreement to nullify the March 2017 assignment transaction. Pursuant to their terms, these options have expired. In March 2017, a former CEO of the Company, holding non-qualified options to 3,088,800 shares of the Company’s common stock outstanding under the 2014 Stock Plan, requested to exercise options with respect to 3,000,000 shares at an exercise price of $0.00024 per share. The Board did not approve the request for the issuance of the common stock underlying these exercised options and, as a result, the Company has treated these options as expired. As of December 31, 2017, there are no options outstanding under the 2014 Stock Plan. The following table summarizes certain details regarding the options under the 2014 Stock Plan are set forth in the table below: Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value of Outstanding Options Outstanding, December 31, 2016 6,177,600 $ 0.00024 0.2 $ 1,155,211 Granted - - - Exercised - - - Forfeited - - - Expired (6,177,600 ) $ 0.00024 - Outstanding, December 31, 2017 - Vested and exercisable, December 31, 2017 - 2017 Equity Incentive Plan On August 1, 2017, the Board adopted and approved the 2017 Equity Plan in order to attract, motivate, retain, and reward high-quality executives and other employees, officers, directors, consultants, and other persons who provide services to the Company by enabling such persons to acquire an equity interest in the Company. Under the 2017 Equity Plan, the Board (or the compensation committee of the Board, if one is established) may award stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”), shares granted as a bonus or in lieu of another award, and other stock-based performance awards. The 2017 Equity Plan allocates 50,000,000 shares of the Company’s common stock (“Plan Shares”) for issuance of equity awards under the 2017 Equity Plan. As of December 31, 2017, the Company has granted, under the 2017 Equity Plan, awards in the form of RSAs for services rendered by independent directors and consultants, non-qualified stock options, RSUs and stock bonus awards. The total unrecognized compensation expense for unvested non-qualified stock options, RSUs and stock bonus awards at December 31, 2017 was $1,311,109, which will be recognized over approximately 2.25 years. This unrecognized compensation expense does not include the potential future compensation expense related to non-qualified stock options and RSUs which are subject to vesting based on certain revenue thresholds for 2018 and 2019 being satisfied (the “Performance-based Awards”). As of December 31, 2017 and the grant date, the Company has determined that the likelihood of performance levels being obtained is remote. The unrecognized compensation expense with respect to these Performance-based Awards at December 31, 2017 was $1,102,780. Restricted Stock Awards On August 8, 2017, the Company’s current Chief Executive Officer (the “CEO”) was awarded 600,000 shares of restricted stock under the 2017 Equity Plan in consideration of services rendered to the Company prior to his appointment as a director. These restricted shares were fully vested at the time of the award and the value attributable to these shares, which were issued in August 2017, was $84,000 as calculated using the fair value of the Company’s common stock on August 7, 2017. On August 8, 2017, the Company awarded 111,113 restricted shares under the 2017 Equity Plan to independent directors in lieu of the payment of cash fees earned during the second quarter of 2017. The quarterly director fees are paid 50% in cash and 50% in shares of the Company’s common stock, with the number of shares determined based on the closing price of the common stock on the date of issuance. These restricted shares were fully vested at the time of the award. The value attributable to these shares, which were issued in August 2017, was $15,000 as calculated using the fair value of the Company’s common stock on August 7, 2017. On August 8, 2017, the Company awarded 260,778 restricted shares under the 2017 Equity Plan to a consultant who provided corporate and financial services to the Company. These restricted shares were awarded in lieu of cash fees earned for the April, May, June and July 2017 and were fully vested at the time of the award. The value attributable to these shares, which were issued in August 2017, was $35,205 as calculated using the fair value of the Company’s common stock on August 7, 2017. On September 6, 2017, the Company awarded 1,200,000 restricted shares under the 2017 Equity Plan to an employee as compensation. These restricted shares were fully vested at the time of the award. The value attributable to these shares, which were issued in October 2017, was $134,280 as calculated using the fair value of the Company’s common stock on September 6, 2017. On November 7, 2017, the Company awarded 104,896 restricted shares under the 2017 Equity Plan to independent directors in lieu of the payment of cash fees earned during the third quarter of 2017. These restricted shares were fully vested at the time of the award. The value attributable to these shares, which were issued in November 2017, was $15,000 as calculated using the fair value of the Company’s common stock on November 6, 2017. As of December 31, 2017, the independent directors are owed cash fees of $15,000 which were paid in the form of fully vested restricted shares in February 2018. See Note 18. On November 7, 2017, the Company awarded 143,707 restricted shares under the 2017 Equity Plan to a consultant who provided corporate and financial services to the Company. These restricted shares were awarded in lieu of cash fees earned in August September and October 2017 and were fully vested at the time of the award. The value attributable to these shares, which were issued in November 2017, was $20,550 as calculated using the fair value of the Company’s common stock on November 6, 2017, which is equivalent to the value of the services provided. As of December 31, 2017, the consultant is owed cash fees of $12,750 which were paid in the form of fully vested restricted shares in February 2018. See Note 18. Non-Qualified Stock Options On August 8, 2017, the Board granted to certain independent directors non-qualified stock options, under the 2017 Equity Plan, to purchase a total of 1,800,000 shares of the Company’s common stock at an exercise price of $0.135 per share for a period of ten years. These options vest 50% on date of grant and the remaining 50% on March 1, 2018, provided they are still serving as a director on such date. On August 17, 2017, one of these independent directors was appointed the CEO and, in consideration of the grant of the restricted stock units and the eligibility for the special bonus, the CEO agreed to terminate and cancel the non-qualified stock options to purchase 900,000 shares of the Company’s common stock previously granted to him. During 2017, the Board granted to certain employees non-qualified stock options, under the 2017 Equity Plan, to purchase a total of 12,530,000 shares of the Company’s common stock at an exercise price equal to the closing market price of the Company’s common stock on the day before the grant. The terms of the options are summarized as follows: (a) Non-qualified stock options to purchase 1,805,000 shares at an exercise price of $0.135 per share granted to certain employees on August 8, 2017, which vest based on the employee’s continued service over 2.4 years, as follows: (i) 661,672 options will vest if the employee remains employed at various dates during 2017, (ii) 571,665 options will vest if the employee remains employed at various dates during 2018, and (iii) 571,663 options will vest if the employee remains employed at various dates during 2019, and have a term of 10 years. As of December 31, 2017, non-qualified stock options to purchase 60,000 shares expired unexercised, and non-qualified options to purchase 285,000 shares were forfeited due to employee terminations. (b) Non-qualified stock options to purchase 1,300,000 shares at an exercise price of $0.121 per share granted to a former employee on August 17, 2017, which were fully vested on the grant date and have a term of three years. (c) Non-qualified stock options to purchase 1,200,000 shares at an exercise price of $0.135 per share granted to certain employees on August 8, 2017, which vest based on the employee’s continued service and subject to the following performance thresholds: (i) 400,000 options will vest if the Company achieves $8,000,000 and $10,000,000 of revenue and new bookings, respectively, for the year end December 31, 2017, (ii) 400,000 options will vest if the Company achieves 2018 revenue of $18,000,000, and (iii) 400,000 options will vest if the Company achieves 2019 revenue of $25,000,000, and have a term of 10 years. As of December 31, 2017, non-qualified stock options to purchase 400,000 shares were forfeited due to the failure to achieve the 2017 performance thresholds. (d) Non-qualified stock options to purchase 4,050,000 shares at an exercise price of $0.121 per share granted to certain employees on August 17, 2017, which vest based on the employee’s continued service and subject to the following performance thresholds: (i) 800,000 options will vest if the Company achieves $8,000,000 and $10,000,000 of revenue and new bookings, respectively, for the year end December 31, 2017, (ii) 1,300,000 options will vest if the Company achieves 2018 revenue of $18,000,000, and (iii) 1,950,000 options will vest if the Company achieves 2019 revenue of $25,000,000, and have a term of 10 years. As of December 31, 2017, non-qualified stock options to purchase 800,000 shares were forfeited due to the failure to achieve the 2017 performance thresholds. (e) Non-qualified stock options to purchase 4,000,000 shares at an exercise price of $0.112 per share granted to an employee on September 6, 2017, which vest based on the employee’s continued service and subject to the following performance thresholds: (i) 750,000 options will vest if the Company achieves $8,000,000 and $10,000,000 of revenue and new bookings, respectively, for the year end December 31, 2017, (ii) 1,250,000 options will vest if the Company achieves 2018 revenue of $18,000,000, and (iii) 2,000,000 options will vest if the Company achieves 2019 revenue of $25,000,000, and have a term of 10 years. As of December 31, 2017, non-qualified stock options to purchase 750,000 shares were forfeited due to the failure to achieve the 2017 performance thresholds. (f) Non-qualified stock options to purchase 175,000 shares at an exercise price of $0.105 per share granted to certain employees on October 10, 2017, which vest based on the employee’s continued service over 2.25 years, as follows: (i) 58,336 options will vest if the employee remains employed during 2017, (ii) 58,332 options will vest if the employee remains employed during 2018, and (iii) 58,332 options will vest if the employee remains employed during 2019, and have a term of 10 years. The Company uses the Black-Scholes The Company determines the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for options granted throughout the year. The valuation assumptions used to determine the fair value of each option award on the date of grant were: expected stock price volatility 115.82% - 118.20%; expected term in years 1.5 - 7.5 and risk-free interest rate 1.32% - 2.18%. A summary of the non-qualified stock options granted to employees under the as of December 31, 2017, and changes during the year then ended, are presented in the table below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2016 - Granted 12,530,000 $ 0.121 Exercised - - Forfeited (2,235,000 ) 0.122 Expired (60,000 ) 0.135 Outstanding, December 31, 2017 10,235,000 0.121 8.7 $ 1,218,375 Exercisable, December 31, 2017 1,885,008 0.124 4.5 $ 217,876 Outstanding vested and expected to vest, December 31, 2017 2,935,000 0.127 6.4 $ 331,625 Performance options based on 2018 and 2019 revenue thresholds - uncertain vesting as of December 31, 2017 7,300,000 0.119 9.7 $ 886,750 A summary of non-vested non-qualified stock options granted to employees under the as of December 31, 2017, and any changes during the year then ended, are presented in the table below: Number of Options Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Nonvested, December 31, 2016 - Granted 12,530,000 $ 0.103 Vested (1,885,008 ) $ 0.082 Forfeited (2,235,000 ) $ 0.109 Expired (60,000 ) $ 0.122 Nonvested, December 31, 2017 8,349,992 $ 0.107 $ 1,000,499 During the year ended December 31, 2017, the Company has recorded $189,536 as compensation expense related to vested options issued to employees, net of forfeitures. As of December 31, 2017, total unrecognized share-based compensation related to unvested options was $863,610, of which $96,530 was related to time-based vesting and $767,080 was related to performance-based vesting. As of December 31, 2017, the Company had granted non-qualified options to purchase 9,250,000 shares which were performance-based. At December 31, 2017, non-qualified options to purchase 1,950,000 shares were forfeited due to the failure to satisfy the 2017 performance thresholds. Of the remaining non-qualified options to purchase 7,300,000 shares which are performance-based, the Company has determined that the likelihood of the performance thresholds being satisfied is remote as of the date of grant and December 31, 2017; therefore, no expense was recognized. A summary of the non-qualified stock options granted to the directors under the as of December 31, 2017, and changes during the year then ended, are presented in the table below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value ($000) Outstanding, December 31, 2016 - $ - - - Granted 1,800,000 0.135 Exercised - - Forfeited/Cancelled (900,000 ) 0.135 Expired - - Outstanding, December 31, 2017 900,000 $ 0.135 9.6 $ 94,500 Exercisable, December 31, 2017 450,000 $ 0.135 9.6 $ 47,250 Outstanding vested and expected to vest, December 31, 2017 900,000 $ 0.135 9.6 $ 94,500 A summary of non-vested non-qualified stock options granted to directors under the as of December 31, 2017, and any changes during the year then ended, are presented in the table below: Number of Options Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Nonvested, December 31, 2016 - Granted 1,800,000 $ 0.123 Vested (450,000 ) $ 0.123 Forfeited (900,000 ) $ 0.123 Expired - Nonvested, December 31, 2017 450,000 $ 0.123 $ 52,470 During the year ended December 31, 2017, the Company has recorded $166,187 as compensation expense related to vested options issued to directors. As of December 31, 2017, total unrecognized share-based compensation related to unvested options was $6,306. Restricted Stock Units On August 8, 2017, the Company awarded 700,000 RSUs to the Chairman based on the retention agreement between the Company and the Chairman entered into in March 2017 prior to his appointment. These RSUs will vest on March 1, 2018, provided he remains a director on such date, and will be settled by the issuance of one share of common stock for each vested restricted stock unit. On June 12, 2017, the Company entered into a consulting agreement for a sales and business development services. The consulting term ended on September 1, 2017. The consultant was compensated with an award of 200,000 RSUs, which vested on the following dates: 66,667 units on July 7, 2017, 66,667 units on August 4, 2017 and 66,666 units on September 1, 2017. Each vested RSU will be settled by the issuance of one share of common stock. The Company will account for these RSUs using the graded vesting method with the total value of the RSUs calculated on the date the shares of common stock are issued to the consultant. For accounting purposes, the RSUs will be revalued at each reporting date with the final value being the date the shares of common stock are issued to the consultant. The Company recorded an expense of $20,499 for the year ended December 31, 2017. The Company issued 200,000 shares of common stock to settle the vested RSUs on October 3, 2017. During 2017, the Company also issued 13,100,000 RSUs to employees as follows: (a) On August 17, 2017, the Company granted 700,000 RSUs to certain employees which vest at various times during the first quarter of 2018, provided the employee remains employed as of the vesting date. (b) On August 17, 2017, the Company granted to the Company’s former Chief Executive Officer (the “Previous CEO”) 9,000,000 RSUs, which vest in 12 equal installments (750,000 RSUs per installment) commencing on the first business day of January 2018 and continuing on the first business day of each of the next 11 calendar months, provided that the Previous CEO is employed by the Company on such vesting date or, if the initial term under the employment agreement has expired, the Previous CEO has not materially breached any non-competition, non-solicitation and other post-termination of his employment obligations. (c) On September 6, 2017, the Company granted 3,000,000 RSUs to the CEO, which vest based on the CEO’s continued service and subject to the following performance thresholds: (i) 1,500,000 RSUs will vest if the Company achieves 2018 revenue of $18,000,000, and (ii) 1,500,000 RSUs will vest if the Company achieves 2019 revenue of $25,000,000. (d) During the fourth quarter of 2017, the Company granted 400,000 RSUs to certain employees which vest at various times during the second quarter of 2018, provided the employee remains employed as of the vesting date. All of the foregoing RSUs will be settled by the issuance of one share of common stock for each vested RSU. Subsequent to December 31, 2017, the Company issued a total of 2,250,000 shares of common stock to the Previous CEO in settlement of RSUs that vested on the first business day of January, February and March 2018 and were settled in shares of common stock. See Note 18. A summary of the RSUs awarded to employees, directors and consultants under the 2017 Equity Plan as December 31, 2017 and changes during the period then ended, are presented in the table below: Number of Units Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Outstanding, December 31, 2016 - Granted 14,000,000 $ 0.122 Vested and settled with share issuance (200,000 ) $ 0.103 Forfeited - Outstanding, December 31, 2017 13,800,000 $ 0.122 $ 3,312,000 Expected to vest as of December 31, 2017 10,800,000 $ 0.125 $ 2,592,000 2018/2019 Performance Units - uncertain vesting 3,000,000 $ 0.112 $ 720,000 During the year ended December 31, 2017, the Company has recorded $765,055 as compensation expense related to vested RSUs issued to employees, directors and consultants. As of December 31, 2017, total unrecognized share-based compensation related to unvested RSUs was $938,056, of which $602,356 was related to time-based vesting and $335,700 was related to performance-based vesting. The total intrinsic value of RSUs vested and settled with share issuance was $20,499 for the year ended December 31, 2017. As of December 31, 2017, the Company had granted 3,000,000 RSUs to the CEO which were performance-based. The Company has determined that the likelihood of the performance thresholds being satisfied is remote as of the date of grant and December 31, 2017; therefore, no expense was recognized. Incentive Stock Bonus Awards Beginning December 31, 2017 and for each six-month period thereafter through December 31, 2019, the CEO is eligible to receive a special bonus of 1,000,000 shares of the Company’s common stock, provided the Board has determined, in its sole discretion, that the CEO’s performance has been average or better for such special bonus period. This special bonus was granted as part of the CEO’s employment agreement and is payable only if the CEO continues in the employment of the Company. On February 13, 2018, the Board approved the issuance of the special stock bonus of 1,000,000 shares of common stock to the CEO for the period ended December 31, 2017. See Note 18. Beginning December 31, 2017 and for each six-month period thereafter through December 31, 2019, an employee is eligible to receive a special bonus of 560,000 shares of the Company’s common stock, provided the Board has determined, in its sole discretion, that the employee’s performance has been average or better for such special bonus period. This special bonus was granted as part of the employee’s employment agreement and is payable only if the employee continues in the employment of the Company. On February 13, 2018, the Board approved the issuance of the special stock bonus of 560,000 shares of common stock to the employee for the period ended December 31, 2017. See Note 18. In addition, three other employees are eligible to receive special bonuses aggregating 400,000 shares of the Company’s common stock on the first and second anniversaries of their employment, provided the Board has determined, in its sole discretion, that the employee’s performance has been average or better for such special bonus period. This special bonus was granted as part of the employee’s employment agreement and is payable only if the employee continues in the employment of the Company. These incentive stock bonus awards are treated as vesting over each award’s service period based on the fair value of the award at the time of grant. Even though the awards are subject to Board approval, the awards are vested over each service period because it is more likely than not that the Board will approve the award based on the “average or better” employee performance standard. Since the awards are denominated in shares of common stock, the fair value of the vested award is charged to additional paid-in capital. A summary of the incentive stock bonus awards granted to employees under the 2017 Equity Plan as December 31, 2017 and changes during the period then ended, are presented in the table below: Number of Shares Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Unvested, December 31, 2016 - $ - Awarded 8,600,000 $ 0.113 Vested (1,560,000 ) $ 0.113 Forfeited - Unvested, December 31, 2017 7,040,000 $ 0.113 $ 1,689,600 Expected to vest as of December 31, 2017 7,040,000 $ 0.113 $ 1,689,600 During the year ended December 31, 2017, the Company has recorded $364,483 as compensation expense related to vested stock bonus awards issued to employees. As of December 31, 2017, total unrecognized share-based compensation related to unvested stock bonus awards was $605,917. Subsequent to December 31, 2017, the Company issued 1,560,000 shares in payment of the vested stock bonus awards having a total intrinsic value of $374,400. |
Income Tax
Income Tax | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Tax | Note 17 – Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law. This U.S. tax reform contains several key provisions including the reduction of the U.S. federal corporate income tax rate to 21% effective January 1, 2018 as well as a variety of other changes including the limitation of the tax deductibility of interest expense, acceleration of expensing of certain business assets, and reductions in the amount of executive pay that could qualify as a tax deduction. As a result of the change in the corporate tax rate, the Company remeasured its deferred tax assets as of December 31, 2017 based on the rate at which they are expected to reverse in the future, and recorded a reduction in net deferred tax assets of $1,177,000 in the fourth quarter of 2017, which is fully offset by the corresponding reduction in the valuation allowance of the same amount. This remeasurement and interpretation of the new law is provisional subject to clarifications of the provisions of the new legislation and final calculations. Any future changes to the Company’s provisional estimated impact of the U.S. tax reform will be reflected as a change in estimate in the period in which the change in estimate is made in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), Income Tax Accounting Implications of the Tax Cuts and Jobs Act For financial reporting purposes, the provision for income taxes consisted of the following components: 2017 2016 Current taxes: U.S. Federal $ - $ - U.S. State - - International - - Current taxes - - Deferred taxes: U.S. Federal - - U.S. State - - International - - Deferred taxes - - Provision for income taxes, net $ - $ - The differences between income taxes expected at the U.S. federal statutory income tax rate and the reported provision for income taxes are summarized as follows: 2017 2016 Expected income tax (benefit) expense at the federal statutory rate $ (1,535,000 ) $ (1,021,000 ) State taxes, net of federal benefits (109,000 ) (92,000 ) Permanent differences 225,000 50,000 Other, net (8,000 ) 122,000 Change due to U.S. tax reform 1,177,000 - Change in valuation allowance 250,000 941,000 Reported income tax (benefit) expense $ - $ - The components of the net deferred tax assets as of December 31, 2017 and 2016 are as follows: 2017 2016 Deferred tax assets: Net operating losses $ 2,706,000 $ 2,735,000 Equity compensation 274,000 - Other deferred tax assets 263,000 297,000 Total deferred tax assets 3,243,000 3,032,000 Deferred tax liabilities: Other deferred tax liabilities - (39,000 ) Total deferred tax liabilities - (39,000 ) Net deferred tax assets before valuation allowance 3,243,000 2,993,000 Less valuation allowance (3,243,000 ) (2,993,000 ) Net deferred tax assets $ - $ - The Company went through a determination of its 2016 deferred tax assets and has modified certain components of the 2016 deferred tax assets which are offset by a full valuation allowance. There was no material effect on the Company’s net deferred tax assets, liabilities or income tax expense as a result of these modifications. As of December 31, 2017, the Company has U.S. federal and state NOLs of approximately $10,848,000, which will expire, if not utilized, in the years 2034 through 2037. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, use of the Company’s NOLs carryforwards may be limited in the event of cumulative changes in ownership of more than 50% within a three-year period. The Company must assess the likelihood that its net deferred tax assets will be recovered from future taxable income, and to the extent the Company believes that recovery is not likely, the Company establishes a valuation allowance. Management’s judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against the net deferred tax assets. The Company recorded a full valuation allowance as of December 31, 2017 and 2016. Based on the available evidence, the Company believes it is more likely than not that it will not be able to utilize its net deferred tax assets in the foreseeable future. The Company intends to maintain valuation allowances until sufficient evidence exists to support the reversal of such valuation allowances. The Company makes estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s plans. Should the actual amounts differ from the Company’s estimates, the carrying value of the Company’s deferred tax assets could be materially impacted. The Company is under examination, or may be subject to examination, by the IRS for the calendar year 2009 and thereafter. These examinations may lead to ordinary course adjustments or proposed adjustments to the Company’s taxes or the Company’s net operating losses with respect to years under examination as well as subsequent periods. The Company has filed its U.S. federal corporate income tax returns from 2009 through 2016, although the returns for the years 2009 through 2015 were not timely filed. Accordingly, the Company may be subject to penalties, including those described below, for non-compliance; however, the Company believes that it had no taxable income in the U.S. or in any foreign jurisdiction for the years 2009 through 2016. The Company has filed Colorado state tax returns for years 2014 through 2016. The Company intends to amend its U.S. and Colorado income tax returns for the years 2014 through 2016. The Company recognizes in its consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of operating expense. The Company does not believe there are any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. There were no penalties or interest liabilities accrued as of December 31, 2017 or 2016, nor were any penalties or interest costs included in expense for the years ended December 31, 2017 and 2016. The Company has been penalized by the IRS for failure to file its Foreign Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, for the years 2011, 2012 and 2014 on a timely basis. The penalties and interest approximate $115,000. The Company’s request that the penalties be abated for reasonable cause was denied by the IRS. The Company has appealed the IRS’s denial based on statutory grounds under Revenue Procedure 92-70, which provides a summary filing procedure for filing Form 5471 with respect to dormant foreign corporations. Persons complying with this revenue procedure are deemed to satisfy their Form 5471 filing obligations with respect to dormant foreign corporations and are not subject to penalties related to the failure to timely file a complete Form 5471 and to timely furnish information requested thereon. The IRS has notified the Company that it needs additional time to respond to the Company’s appeal, which response is not expected until April 2018. The Company believes it has complied with the summary filing procedures for filing Form 5471 under Revenue Procedure 92-70 and the likelihood of abatement is high. However, there can be no assurance of any abatement until the IRS acts upon the appeal. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 18 – Subsequent Events In accordance with ASC 855, Subsequent Events, the Company has evaluated all subsequent events through April 2, 2018, the date the financial statements were available to be issued. The following events occurred after December 31, 2017. Since December 31, 2017, the Company issued shares of its restricted common stock as follows: ● 100,000 shares upon the exercise of Series 2 Warrants by an investor and payment of the exercise price of $15,000; ● 1,039,079 shares upon the exercise of Warrant 1 and Warrant 2 by a former director on a cashless exercise basis (see Note 15); ● 1,168,540 shares upon exercise of certain Series 3 Warrants by investors on a cashless exercise basis (see Note 10); and ● 800,000 shares in connection with the settlement of a commercial dispute, together with certain other cash and equipment consideration provided by the Company, all of which were adequately accrued for in the Company’s consolidated financial statements as of December 31, 2017 (see Note 7). Since December 31, 2017, the Company also issued shares of its common stock under the 2017 Equity Plan as follows: ● 2,250,000 shares to the Previous CEO in settlement of restricted stock units that vested on the first business day of January, February and March 2018 and were settled in shares of common stock (see Note 16); ● 25,000 shares upon exercise of certain non-qualified stock options by a former employee upon payment of the exercise price of $3,375; ● 53,004 shares of common stock to independent directors in lieu of cash director fees of $15,000 related to the fourth quarter of 2017; ● 158,658 shares to a consultant as compensation for services rendered in lieu of cash fees of $44,900 for the period November 1, 2017 to February 13, 2018; ● 700,000 shares to a director in settlement of certain RSUs that vested in 2018; ● 700,000 shares to certain employees in settlement of certain RSUs that vested in 2018; ● 173,675 shares to a consultant as compensation for services rendered in connection with recruiting; and ● 1,560,000 shares pursuant to special incentive stock bonuses earned by the CEO and another employee for the period ended December 31, 2017. On February 13, 2018, the Company granted to a new employee: (i) 200,000 restricted stock units which vest in the third quarter of 2018, and (ii) non-qualified stock options to purchase 1,000,000 shares at an exercise price of $0.283 per share, which vest based on the employee’s continued service and subject to the following performance thresholds: (x) 400,000 options will vest if the Company achieves 2018 revenue of $18,000,000, and (y) 600,000 options will vest if the Company achieves 2019 revenue of $25,000,000. Subsequent to December 31, 2017, at the request of Sterling, the Company purchased additional equipment at a cost of $7,687 to be included in the equipment schedule to the original agreement. On March 22, 2018, the Company and Sterling entered into an amendment of the original agreement to include the additional leased equipment as discussed above and to increase the quarterly fee payable to the Company to $18,330. The amendment of the original agreement also provided that, upon expiration of the initial three-year term, either: (i) the leased equipment would be returned to the Company and the agreement would terminate, (ii) Sterling could purchase the leased equipment at the agreed upon residual value of $81,827, or (iii) Sterling and the Company could agree to an extension of the original agreement at mutually agreed to quarterly payments to and from the parties. See Note 8. |
Basis of Presentation; Summar25
Basis of Presentation; Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Financial Statement Presentation | Financial Statement Presentation The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“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. The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated sufficient revenue and has funded its operating losses through the sale of common stock and the issuance of debt. The Company is subject to risks, expenses and uncertainties similar to those encountered by similarly situated companies. See Note 3. |
Basis of Consolidation and Reclassifications | Basis of Consolidation and Reclassifications The consolidated financial statements include the accounts of the Company and its controlled and wholly-owned subsidiary, Hydro Innovations, LLC (“Hydro”). Intercompany transactions, profit, and balances are eliminated in consolidation. The Company has reclassified certain salaries related to marketing personnel from selling, general and administrative expense to advertising and marketing expenses in 2016 to conform to the Company’s presentation of such marketing personnel salaries in 2017. These reclassifications have been applied consistently to the periods presented and had no impact on net loss, total assets and liabilities, or equity. |
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 revenue and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that it believes 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. Key estimates include: valuation of derivative liabilities, valuation of intangible assets, valuation of equity-based compensation, valuation of deferred tax assets and liabilities, warranty accruals, inventory allowances, and legal contingencies. |
Cash and Cash Equivalents | Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less at the date of purchase are considered to be cash equivalents. The Company may, from time to time, have deposits in financial institutions that exceed the federally insured amount. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivables are recorded at the invoiced amount, or based on revenue earned for items not yet invoiced, and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors, which, in management’s judgment, deserve current recognition in estimating bad debts. Based on its review, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole. As of December 31, 2017 and 2016, the allowance for doubtful accounts was $105,267 and $91,000, respectively. |
Inventory | Inventory Inventory is stated at the lower of cost or market. The inventory is valued based on a first-in, first-out (“FIFO”) basis. Lower of cost or market is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence or impaired inventory. Excess and obsolete inventory is charged to cost of revenue and a new lower-cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. As of December 31, 2017 and 2016, the allowance for excess and obsolete inventory was $323,384 and $47,369, respectively. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which is generally five years. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful lives or the life of the lease. Upon sale or retirement of assets, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred. Long-lived tangible assets, including property and equipment, are reviewed for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. When such an event occurs, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset’s carrying value. If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. The Company has not identified any such impairment losses to date. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company recorded goodwill in connection with its acquisition of Hydro in July 2014. Goodwill is reviewed for impairment annually or more frequently when events or changes in circumstances indicate that fair value of the reporting unit has been reduced to less than its carrying value. The Company performs a quantitative impairment test annually during the fourth quarter by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is considered not impaired. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company completed this assessment as of December 31, 2017, and concluded that no impairment existed. Separable identifiable intangibles consist of intellectual property such as patents and trademarks, and capitalized website costs. Except for trademarks which are not amortized, the Company’s separable identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives. Separable identifiable intangibles are also subject to evaluation for potential impairment if events or circumstances indicate the carrying value may not be recoverable. |
Fair Value Measurement | Fair Value Measurement The Company records its financial assets and liabilities at fair value. The accounting standard for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting standard establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 - inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. On a Recurring Basis A financial asset or liability’s classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. As of December 31, 2017 and 2016, the Company had outstanding warrants to purchase common stock that were issued in connection with Series 3 convertible notes (“Series 3 Warrants”) that provided for a reduction in the exercise price of the warrants in the event the Company issued common stock in a registered offering at a price below the exercise price. See Note 11. In such event, the exercise price under the warrants would be reduced to the price of the common stock in the dilutive issuance. The Company determined that these outstanding warrants subject to the exercise price reduction qualified as a derivative financial instrument. See Note 11 for a discussion of the impact the derivative financial instruments had on the Company’s consolidated financial statements and results of operations. Financial liabilities carried at fair value, measured on a recurring basis were as follows: As of December 31, 2017 As of December 31, 2016 Level 1 Level 2 Level 3 Fair Value Gain Level 1 Level 2 Level 3 Fair Value (Loss) (1) Financial liabilities: Derivative liabilities - conversion feature $ - $ - $ - $ - $ - $ - $ - $ - $ - $ (200,083 ) Derivative liabilities - warrants - - 410,880 410,880 66,934 - - 477,814 477,814 (338,622 ) Total financial liabilities $ - $ - $ 410,880 $ 410,880 $ 66,934 $ - $ - $ 477,814 $ 477,814 $ (538,705 ) (1) The loss on change in derivative liabilities of $538,705 presented in the statement of operations for the year ended December 31, 2016 also includes gains on derivatives associated with convertible promissory note balances outstanding at various dates during the year ended December 31, 2016, which were converted to common stock prior to December 31, 2016. The change in the balance of the warrant derivative liabilities during the years ended December 31, 2017 and 2016 was calculated using the Black-Scholes Option Pricing Model (the “Black-Scholes Model”), which is classified as gain (loss) on change in warrant derivative liabilities in the consolidated statements of operations. The Black-Scholes Model does take into consideration the Company’s stock price, historical volatility, and the risk-free interest rate, which do have observable Level 1 or Level 2 inputs. During the year ended December 31, 2016, the Company converted all of the Series 3 and 4 convertible promissory notes issued in 2015 into common stock, which gave rise to the fair value liabilities for the embedded conversion features. See Note 11. At conversion, the balance of the derivative liability of $673,050 was credited to additional paid in capital in the consolidated balance sheet. On a Non-Recurring Basis Intangible assets that are amortized are evaluated for recoverability whenever adverse effects or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability test consists of comparing the undiscounted projected cash flows with the carrying amount. Should the carrying amount exceed undiscounted projected cash flows, an impairment loss would be recognized to the extent the carrying amount exceeds fair value. For the Company’s indefinite-lived goodwill, the impairment test consists of comparing the fair value, determined using the market value method, with its carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value. As of December 31, 2017, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed. Due to their short-term nature, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, approximate fair value. |
Derivative Financial Instruments | Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes Model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The Company determined that the Series 3 Warrants qualified as derivative financial instruments. Accordingly, the Series 3 Warrants are derivative liabilities and are marked to market at the end of each reporting period. Any change in fair value during the period is recorded in as gain (loss) on change in derivative liabilities in the Company’s consolidated statements of operations. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue from the sale of its manufactured products as well as from products manufactured by third-party suppliers, which are typically drop-shipped to the Company’s customer. The principal markets for the Company’s products are the U.S. and Canada. Revenue is recognized when products are shipped and title passes to the customer, provided that persuasive evidence of an arrangement exists, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Sales of the Company’s products are not subject to regulatory requirements that vary from state to state. The Company generally does not provide its customers with a contractual right of return. In certain cases, the Company provides engineering services in connection with the sale of its products and recognizes revenue from such engineering services as the performance of such services occur. Management believes that all relevant criteria and conditions are considered when recognizing revenue. The Company provides climate control equipment and engineering design services for the controlled environment agriculture industry with contract terms typically less than one year. Advance payments received from customers are included in deferred revenue, a component of current liabilities, until such time that all criteria are met, as noted above, and revenue is recognized. Sales arrangements sometimes involve delivering multiple elements, including engineering services and multiple items of equipment. In these instances, revenue is assigned to each element based on vendor-specific objective evidence, third-party evidence or a management estimate of the relative selling price. Revenue is recognized individually for delivered elements only if they have value to the customer on a stand-alone basis and the performance of the undelivered items is probable and substantially in the Company’s control, or the undelivered elements are inconsequential or perfunctory and there are no unsatisfied contingencies related to payment. The majority of these deliverables are tangible products, such as equipment, with a relatively smaller portion attributable to engineering services. The Company does not provide any separate maintenance. Generally, contract duration is less than one-year and cancellation, termination or refund provisions apply only in the event of contract breach. The Company typically charges its customers for shipping and handling, which is included in revenue. Shipping and handling costs are reported within cost of revenue in the consolidated statements of operations. The following table sets forth the Company’s revenue by source: 2017 2016 Equipment $ 6,255,150 $ 6,787,348 Engineering services 588,849 537,020 Shipping and handling 238,908 207,650 Other revenue 127,334 47,845 Total revenue $ 7,210,241 $ 7,579,863 The Company accounts for sales taxes and other related taxes on a net basis, excluding such taxes from revenue. |
Product Warranty | Product Warranty The Company warrants the products that it manufactures for a warranty period equal to the lesser of 12 months from start-up or 18 months from shipment. The Company’s warranty provides for the repair, rework, or replacement of products (at the Company’s option) that fail to perform within stated specification. The Company’s third-party suppliers also warrant their products under similar terms, which are passed-through to the Company’s customers. The Company assesses the historical warranty claims on its manufactured products and, since 2016, warranty claims have been approximately 1% of annual revenue generated on these products. The Company continues to assess the need to record a warranty reserve at the time of sale based on historical claims and other factors. As of December 31, 2017 and 2016, the Company had an accrued warranty reserve amount of $105,122 and $85,000, respectively, which are included in accounts payable and accrued liabilities on the Company’s consolidated balance sheets. |
Concentrations | Concentrations Two customers accounted for 12% and 11% of the Company’s revenue for the year ended December 31, 2017. Two customers accounted for 14% and 10% of the Company’s revenue for the year ended December 31, 2016. The Company’s accounts receivable from three customers made up 52%, 17% and 17%, respectively, of the total balance as of December 31, 2017. The Company’s accounts receivable from two customers made up 39% and 29% of the total balance as of December 31, 2016. Two suppliers accounted for 35% and 10% of the Company’s purchases of inventory for the year ended December 31, 2017 and 41% and 10% of the Company’s purchases of inventory for the year ended December 31, 2016. |
Product Development | Product Development The Company expenses product development costs as incurred. Internal product development costs are expensed as incurred, and third-party product developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. For the years ended December 31, 2017 and 2016, the Company incurred $319,680 and $349,062, respectively, on product development. |
Accounting for Share-Based Compensation | Accounting for Share-Based Compensation The Company recognizes the cost resulting from all share-based compensation arrangements, including stock options, restricted stock awards and restricted stock units that the Company grants under its equity incentive plan in its consolidated financial statements based on their grant date fair value. The expense is recognized over the requisite service period or performance period of the award. Awards with a graded vesting period based on service are expensed on a straight-line basis for the entire award. Awards with performance-based vesting conditions which require the achievement of a specific company financial performance goal at the end of the performance period and required service period are recognized over the performance period. Each reporting period, the Company reassesses the probability of achieving the respective performance goal. If the goals are not expected to be met, no compensation cost is recognized and any previously recognized amount recorded is reversed. If the award contains market-based vesting conditions, the compensation cost is based on the grant date fair value and expected achievement of market condition and is not subsequently reversed if it is later determined that the condition is not likely to be met or is expected to be lower than initially expected. The grant date fair value of stock options is based on the Black-Scholes Model. The Black-Scholes Model requires judgmental assumptions including volatility and expected term, both based on historical experience. The risk-free interest rate is based on U.S. Treasury interest rates whose term is consistent with the expected term of the option. The grant date fair value of restricted stock and restricted stock units is based on the closing price of the underlying stock on the date of the grant. Share-based compensation expense is reduced for forfeitures as the forfeitures occur since the Company does not have historical data or other factors to appropriately estimate the expected employee terminations and to evaluate whether particular groups of employees have significantly different forfeiture expectations. Share-based awards granted to non-employees are recorded at their fair value on the measurement date and are subject to periodic adjustment as the underlying share-based awards vest. Share-based payments to employees, directors and non-employees totaled $2,139,865 and $4,386 for the years ended December 31, 2017 and 2016, respectively. Share-based compensation costs are classified in the Company’s consolidated financial statements in the same manner as if such compensation was paid in cash. The following is a summary of share-based compensation costs included in the Company’s consolidated statements of operations for the years ended December 31, 2017 and 2016: 2017 2016 Share-based compensation expense included in: Cost of revenue $ 75,255 $ - Advertising and marketing expenses 16,377 - Product development costs 5,956 - Selling, general and administrative expenses 2,042,277 4,386 Total share-based compensation expense included in consolidated statement of operations $ 2,139,865 $ 4,386 |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Company records uncertain tax positions on the basis of a two-step process in which: (i) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with the related tax authority. |
Basic and Diluted Net Loss Per Common Share | Basic and Diluted Net Loss per Common Share Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. |
Commitments and Contingencies | Commitments and Contingencies In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, customer disputes, government investigations and tax matters. An accrual for a loss contingency is recognized when it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated. |
Other Risks and Uncertainties | Other Risks and Uncertainties To achieve profitable operations, the Company must successfully develop, manufacture and market its products. There can be no assurance that any such products can be developed or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed. These factors could have a material adverse effect upon the Company’s financial results, financial position, and future cash flows. The Company is subject to risks common to similarly-situated companies including, but not limited to, new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, product liability, and the need to obtain additional financing. As a supplier of services and equipment to cannabis cultivators, the Company is also subject to risks related to the cannabis industry. Although certain states have legalized medical and/or recreational cannabis, U.S. federal laws continue to prohibit cannabis in all its forms as well as its derivatives. Any changes in the enforcement of U.S. federal laws may adversely affect the implementation of state and local cannabis laws and regulations that permit medical or recreational cannabis and, correspondingly, may adversely impact the Company’s customers. The Company’s success is also dependent upon its ability to raise additional capital and to successfully develop and market its products. See Note 3. |
Segment Information | Segment Information Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s senior management team in deciding how to allocate resources and in assessing performance. The Company has one operating segment that is dedicated to the manufacture and sale of its products. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements On January 1, 2017, the Financial Accounting Standards Board (“FASB”) adopted Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting During the first quarter of 2017, the Company early adopted ASU 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment (Topic 350) In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) Simplifying the Measurement of Inventory, |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718) – Scope of Modification Accounting In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In February 2016, the FASB issued ASU 2016-02, Leases In May 2014, the FASB issued ASU 2014-09 (Topic 606), Revenue from Contracts with Customers The new guidance allows for two transition methods in application: (i) retrospective to each prior reporting period presented, or (ii) prospective with the cumulative effect of adoption recognized on January 1, 2018, also known as the modified retrospective approach. The Company intends to adopt the standard using the modified retrospective approach, which will result in an adjustment to accumulated deficit for the cumulative effect of applying this guidance to contracts in process as of the adoption date. Under this approach, prior financial statements presented will not be restated. This guidance requires additional disclosures of the amount by which each financial statement line item affected in the current reporting period during 2018 as compared to the guidance that was in effect before the change, and an explanation of the reasons for the significant changes. The Company is finalizing implementation activities in accordance with the planned effective date. These activities are focused on the review of significant customer contracts and the design and implementation of relevant internal controls. The Company believes that the new standard will not materially change the timing of revenue recognition. The Company also believes that this new guidance will not have a material impact on its consolidated results of operations, cash flows and financial position. |
Basis of Presentation; Summar26
Basis of Presentation; Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of Financial Liabilities at Fair Value Measured | Financial liabilities carried at fair value, measured on a recurring basis were as follows: As of December 31, 2017 As of December 31, 2016 Level 1 Level 2 Level 3 Fair Value Gain Level 1 Level 2 Level 3 Fair Value (Loss) (1) Financial liabilities: Derivative liabilities - conversion feature $ - $ - $ - $ - $ - $ - $ - $ - $ - $ (200,083 ) Derivative liabilities - warrants - - 410,880 410,880 66,934 - - 477,814 477,814 (338,622 ) Total financial liabilities $ - $ - $ 410,880 $ 410,880 $ 66,934 $ - $ - $ 477,814 $ 477,814 $ (538,705 ) (1) The loss on change in derivative liabilities of $538,705 presented in the statement of operations for the year ended December 31, 2016 also includes gains on derivatives associated with convertible promissory note balances outstanding at various dates during the year ended December 31, 2016, which were converted to common stock prior to December 31, 2016. |
Schedule of Revenue by Source | The following table sets forth the Company’s revenue by source: 2017 2016 Equipment $ 6,255,150 $ 6,787,348 Engineering services 588,849 537,020 Shipping and handling 238,908 207,650 Other revenue 127,334 47,845 Total revenue $ 7,210,241 $ 7,579,863 |
Summary of Share-based Compensation Costs | The following is a summary of share-based compensation costs included in the Company’s consolidated statements of operations for the years ended December 31, 2017 and 2016: 2017 2016 Share-based compensation expense included in: Cost of revenue $ 75,255 $ - Advertising and marketing expenses 16,377 - Product development costs 5,956 - Selling, general and administrative expenses 2,042,277 4,386 Total share-based compensation expense included in consolidated statement of operations $ 2,139,865 $ 4,386 |
Inventory (Tables)
Inventory (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventory consisted of the following: As of December 31, 2017 2016 Finished goods $ 569,047 $ 591,564 Work in progress 14,348 16,518 Raw materials 262,611 187,192 Allowance for excess & obsolete inventory (323,384 ) (47,369 ) Inventory, net $ 522,622 $ 747,905 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consisted of the following: As of December 31, 2017 2016 Furniture and equipment $ 326,894 $ 171,709 Equipment held for lease to related party 159,806 - Molds - 31,063 Vehicles 15,000 15,000 Leasehold Improvements 33,257 38,101 534,957 255,873 Accumulated depreciation (133,601 ) (162,308 ) Property and equipment, net $ 401,356 $ 93,565 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | Intangible assets consisted of the following: As of December 31, 2017 2016 Patents $ 29,952 $ 24,192 Website development costs 22,713 22,713 Trademarks 1,830 1,099 54,495 48,004 Accumulated amortization (16,510 ) (11,623 ) Intangible assets, net $ 37,985 $ 36,381 |
Accounts Payable and Accrued 30
Accounts Payable and Accrued Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payable and Accrued Liabilities | Accounts payable and accrued liabilities consisted of the following: As of December 31, 2017 2016 Accounts payable $ 1,159,975 $ 1,020,224 Sales commissions payable 21,931 40,736 Sales tax payable 8,750 23,631 Accrued payroll liabilities 58,557 43,573 Product warranty accrual 105,122 85,000 Commercial dispute settlement 332,418 - Other accrued expenses 282,510 124,689 Total $ 1,969,263 $ 1,337,853 |
Promissory Notes (Tables)
Promissory Notes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Loss On Extinguishment of Promissory Notes Payable | The following details the calculation of the loss on extinguishment of the notes payable: Carrying amount of debt Principal converted $ 537,500 Accrued interest converted 15,904 Unamortized debt discount (25,832 ) Total carrying amount of debt 527,572 Reacquisition price of debt Fair value of shares of common stock issued 756,000 Loss on extinguishment of debt $ (228,428 ) |
Convertible Notes (Tables)
Convertible Notes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Convertible Promissory Notes | The following table summarizes the convertible promissory notes for the years ended December 31, 2017 and 2016: Series 2 Series 3 Series 4 Total Balance January 1, 2016 $ 2,536,250 $ 711,000 $ 103,273 $ 3,350,523 Additions - - - - Conversions (1,756,250 ) (711,000 ) (103,273 ) (2,570,523 ) Balance December 31, 2016 $ 780,000 $ - $ - 780,000 Discounts and deferred finance charges (18,560 ) Convertible notes payable, net 761,440 Less current portion - December 31, 2016 761,440 Long-term portion - December 31, 2016 $ - Balance January 1, 2017 $ 780,000 $ - $ - $ 780,000 Conversions (510,000 ) - - (510,000 ) Repayments (270,000 ) - - (270,000 ) Balance December 31, 2017 $ - $ - $ - $ - |
Schedule of Loss on Extinguishment of Notes Payable - Series 2 | The following details the calculation of the loss on extinguishment of the Series 2 Convertible Notes: For the Year ended December 31, 2017 2016 Carrying amount of debt Principal converted $ 510,000 $ 1,756,250 Accrued interest converted 134,553 399,063 Unamortized debt discount (5,398 ) (51,208 ) Total carrying amount of debt 639,155 2,104,105 Reacquisition price of debt Fair value of shares of common stock issued 995,155 2,346,240 Warrant modification value 59,000 96,106 Total reacquisition price of debt 1,054,155 2,442,346 Loss on extinguishment of debt $ (415,000 ) $ (338,241 ) |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Liabilities Activity | The following table sets forth movement in the derivative liability related to the Series 3 Warrants: Balance December 31, 2015 $ 139,192 Loss on change in derivative liability, net 338,622 Balance December 31, 2016 477,814 (Gain) on change in derivative liability, net (66,934 ) Balance December 31, 2017 $ 410,880 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Lease Payments | The following is a schedule by years of the minimum future lease payments on the new building lease as of December 31, 2017. Year Ended December 31, 2018 $ 230,025 2019 236,926 2020 244,034 2021 251,355 2022 170,888 Total future minimum lease payments $ 1,133,228 |
Equity Incentive Plan (Tables)
Equity Incentive Plan (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Schedule of Stock Option Activity | A summary of the non-qualified stock options granted to the directors under the as of December 31, 2017, and changes during the year then ended, are presented in the table below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value ($000) Outstanding, December 31, 2016 - $ - - - Granted 1,800,000 0.135 Exercised - - Forfeited/Cancelled (900,000 ) 0.135 Expired - - Outstanding, December 31, 2017 900,000 $ 0.135 9.6 $ 94,500 Exercisable, December 31, 2017 450,000 $ 0.135 9.6 $ 47,250 Outstanding vested and expected to vest, December 31, 2017 900,000 $ 0.135 9.6 $ 94,500 A summary of non-vested non-qualified stock options granted to directors under the as of December 31, 2017, and any changes during the year then ended, are presented in the table below: Number of Options Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Nonvested, December 31, 2016 - Granted 1,800,000 $ 0.123 Vested (450,000 ) $ 0.123 Forfeited (900,000 ) $ 0.123 Expired - |
Schedule of Restricted Stock Units Award Activity | A summary of the RSUs awarded to employees, directors and consultants under the 2017 Equity Plan as December 31, 2017 and changes during the period then ended, are presented in the table below: Number of Units Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Outstanding, December 31, 2016 - Granted 14,000,000 $ 0.122 Vested and settled with share issuance (200,000 ) $ 0.103 Forfeited - Outstanding, December 31, 2017 13,800,000 $ 0.122 $ 3,312,000 Expected to vest as of December 31, 2017 10,800,000 $ 0.125 $ 2,592,000 2018/2019 Performance Units - uncertain vesting 3,000,000 $ 0.112 $ 720,000 |
Schedule of Incentive Stock Bonus | A summary of the incentive stock bonus awards granted to employees under the 2017 Equity Plan as December 31, 2017 and changes during the period then ended, are presented in the table below: Number of Shares Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Unvested, December 31, 2016 - $ - Awarded 8,600,000 $ 0.113 Vested (1,560,000 ) $ 0.113 Forfeited - Unvested, December 31, 2017 7,040,000 $ 0.113 $ 1,689,600 Expected to vest as of December 31, 2017 7,040,000 $ 0.113 $ 1,689,600 |
2014 Stock Ownership Plan [Member] | |
Schedule of Stock Option Activity | The following table summarizes certain details regarding the options under the 2014 Stock Plan are set forth in the table below: Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value of Outstanding Options Outstanding, December 31, 2016 6,177,600 $ 0.00024 0.2 $ 1,155,211 Granted - - - Exercised - - - Forfeited - - - Expired (6,177,600 ) $ 0.00024 - Outstanding, December 31, 2017 - Vested and exercisable, December 31, 2017 - |
2017 Equity Incentive Plan [Member] | |
Schedule of Stock Option Activity | A summary of the non-qualified stock options granted to employees under the as of December 31, 2017, and changes during the year then ended, are presented in the table below: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding, December 31, 2016 - Granted 12,530,000 $ 0.121 Exercised - - Forfeited (2,235,000 ) 0.122 Expired (60,000 ) 0.135 Outstanding, December 31, 2017 10,235,000 0.121 8.7 $ 1,218,375 Exercisable, December 31, 2017 1,885,008 0.124 4.5 $ 217,876 Outstanding vested and expected to vest, December 31, 2017 2,935,000 0.127 6.4 $ 331,625 Performance options based on 2018 and 2019 revenue thresholds - uncertain vesting as of December 31, 2017 7,300,000 0.119 9.7 $ 886,750 A summary of non-vested non-qualified stock options granted to employees under the as of December 31, 2017, and any changes during the year then ended, are presented in the table below: Number of Options Weighted Average Grant-Date Fair Value Aggregate Intrinsic Value Nonvested, December 31, 2016 - Granted 12,530,000 $ 0.103 Vested (1,885,008 ) $ 0.082 Forfeited (2,235,000 ) $ 0.109 Expired (60,000 ) $ 0.122 Nonvested, December 31, 2017 8,349,992 $ 0.107 $ 1,000,499 |
Income Tax (Tables)
Income Tax (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Provision for Income Taxes | For financial reporting purposes, the provision for income taxes consisted of the following components: 2017 2016 Current taxes: U.S. Federal $ - $ - U.S. State - - International - - Current taxes - - Deferred taxes: U.S. Federal - - U.S. State - - International - - Deferred taxes - - Provision for income taxes, net $ - $ - |
Schedule of U.S. Federal Statutory Income Tax Rate and Reported Provision for Income Taxes | The differences between income taxes expected at the U.S. federal statutory income tax rate and the reported provision for income taxes are summarized as follows: 2017 2016 Expected income tax (benefit) expense at the federal statutory rate $ (1,535,000 ) $ (1,021,000 ) State taxes, net of federal benefits (109,000 ) (92,000 ) Permanent differences 225,000 50,000 Other, net (8,000 ) 122,000 Change due to U.S. tax reform 1,177,000 - Change in valuation allowance 250,000 941,000 Reported income tax (benefit) expense $ - $ - |
Schedule of Deferred Tax Assets | The components of the net deferred tax assets as of December 31, 2017 and 2016 are as follows: 2017 2016 Deferred tax assets: Net operating losses $ 2,706,000 $ 2,735,000 Equity compensation 274,000 - Other deferred tax assets 263,000 297,000 Total deferred tax assets 3,243,000 3,032,000 Deferred tax liabilities: Other deferred tax liabilities - (39,000 ) Total deferred tax liabilities - (39,000 ) Net deferred tax assets before valuation allowance 3,243,000 2,993,000 Less valuation allowance (3,243,000 ) (2,993,000 ) Net deferred tax assets $ - $ - |
Basis of Presentation; Summar37
Basis of Presentation; Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Allowance for doubtful accounts | $ 105,267 | $ 91,000 |
Allowance for excess and obsolete inventory | $ 323,384 | 47,369 |
Property and equipment useful lives | 5 years | |
Derivative liability | 673,050 | |
Warranty claims percentage | 1.00% | |
Accrued warranty | $ 105,122 | 85,000 |
Product development cost | 319,680 | 349,062 |
Share based compensation expense | $ 2,139,865 | $ 4,386 |
Customer One [Member] | Revenue [Member] | ||
Revenue percentage | 12.00% | 14.00% |
Customer One [Member] | Accounts Receivable [Member] | ||
Revenue percentage | 52.00% | 39.00% |
Customer Two [Member] | Revenue [Member] | ||
Revenue percentage | 11.00% | 10.00% |
Customer Two [Member] | Accounts Receivable [Member] | ||
Revenue percentage | 17.00% | 29.00% |
Customer Three [Member] | Accounts Receivable [Member] | ||
Revenue percentage | 17.00% | |
Supplier One [Member] | ||
Revenue percentage | 35.00% | 41.00% |
Supplier Two [Member] | ||
Revenue percentage | 10.00% | 10.00% |
Basis of Presentation; Summar38
Basis of Presentation; Summary of Significant Accounting Policies - Schedule of Financial Liabilities at Fair Value Measured (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | ||
Derivative liabilities - conversion feature | ||||
Derivative liabilities - warrants | 410,880 | 477,814 | ||
Total financial liabilities | 410,880 | 477,814 | $ 139,192 | |
Derivative liabilities - conversion feature Gains (Loss) | (200,083) | [1] | ||
Derivative liabilities - warrants Gains (Loss) | 66,934 | (338,622) | [1] | |
Gains (Loss) | 66,934 | (538,705) | [1] | |
Fair Value, Inputs, Level 1 [Member] | ||||
Derivative liabilities - conversion feature | ||||
Derivative liabilities - warrants | ||||
Total financial liabilities | ||||
Fair Value, Inputs, Level 2 [Member] | ||||
Derivative liabilities - conversion feature | ||||
Derivative liabilities - warrants | ||||
Total financial liabilities | ||||
Fair Value, Inputs, Level 3 [Member] | ||||
Derivative liabilities - conversion feature | ||||
Derivative liabilities - warrants | 410,880 | 477,814 | ||
Total financial liabilities | $ 410,880 | $ 477,814 | ||
[1] | The loss on change in derivative liabilities of $538,705 presented in the statement of operations for the year ended December 31, 2016 also includes gains on derivatives associated with convertible promissory note balances outstanding at various dates during the year ended December 31, 2016, which were converted to common stock prior to December 31, 2016. |
Basis of Presentation; Summar39
Basis of Presentation; Summary of Significant Accounting Policies - Schedule of Financial Liabilities at Fair Value Measured (Details) (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||
(Gain) loss on change in derivative liabilities | $ (66,934) | $ 538,705 |
Basis of Presentation; Summar40
Basis of Presentation; Summary of Significant Accounting Policies - Schedule of Revenue by Source (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||
Equipment | $ 6,255,150 | $ 6,787,348 |
Engineering services | 588,849 | 537,020 |
Shipping and handling | 238,908 | 207,650 |
Other revenue | 127,334 | 47,845 |
Total revenue | $ 7,210,241 | $ 7,579,863 |
Basis of Presentation; Summar41
Basis of Presentation; Summary of Significant Accounting Policies - Summary of Share-based Compensation Costs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Total share-based compensation expense included in consolidated statement of operations | $ 2,139,865 | $ 4,386 |
Cost of Revenue [Member] | ||
Total share-based compensation expense included in consolidated statement of operations | 75,255 | |
Advertising and Marketing Expenses [Member] | ||
Total share-based compensation expense included in consolidated statement of operations | 16,377 | |
Product Development Costs [Member] | ||
Total share-based compensation expense included in consolidated statement of operations | 5,956 | |
Selling, General and Administrative Expenses [Member] | ||
Total share-based compensation expense included in consolidated statement of operations | $ 2,042,277 | $ 4,386 |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | Aug. 08, 2017 | Dec. 31, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 |
Net loss | $ 4,918,699 | $ 3,272,613 | ||||
Accumulated deficit | $ 19,254,911 | 19,254,911 | $ 14,336,212 | |||
Number of shares of common stock issued | $ 4,453,080 | |||||
Q1 2017 Unit Offering [Member] | ||||||
Exercise price of warrants | $ 0.26 | |||||
Q4 2017 Unit Offering [Member] | ||||||
Exercise price of warrants | $ 0.20 | |||||
Accredited Investors [Member] | ||||||
Debt instruments conversion into shares | 5,600,000 | |||||
Accredited Investors [Member] | Q4 2017 Unit Offering [Member] | ||||||
Number of shares of common stock issued, shares | 14,734,000 | |||||
Number of shares of common stock issued | $ 1,768,000 | |||||
Common stock units description | each unit consisting one share of common stock and a warrant to purchase one share of common stock (the Q4 2017 Unit Offering). | |||||
Accredited Investors [Member] | Q1 2017 Unit Offering [Member] | ||||||
Number of shares of common stock issued, shares | 16,781,250 | |||||
Number of shares of common stock issued | $ 2,685,000 | |||||
Common stock units description | each unit consisting one share of common stock and a warrant to purchase one share of common stock (the Q4 2017 Unit Offering). | |||||
Converted Promissory Notes [Member] | ||||||
Convertible promissory notes principal amount | $ 268,750 | $ 510,000 | ||||
Accrued interest | $ 134,553 | |||||
Debt instruments conversion into shares | 2,800,000 | 5,001,554 |
Inventory (Details Narrative)
Inventory (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | ||
Overhead expenses | $ 28,554 | $ 26,764 |
Inventory - Schedule of Invento
Inventory - Schedule of Inventory (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 569,047 | $ 591,564 |
Work in progress | 14,348 | 16,518 |
Raw materials | 262,611 | 187,192 |
Allowance for excess & obsolete inventory | (323,384) | (47,369) |
Total inventory | $ 522,622 | $ 747,905 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash disbursed for equipment held for lease | $ (159,806) | |
Property And Equipment [Member] | ||
Depreciation expense | 39,978 | 47,773 |
Depreciation expense allocated to cost of revenue and inventory | 8,302 | $ 8,349 |
Cash disbursed for equipment held for lease | $ 159,806 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Property and equipment, Gross | $ 534,957 | $ 255,873 |
Accumulated depreciation | (133,601) | (162,308) |
Property and equipment, net | 401,356 | 93,565 |
Furniture And Equipment [Member] | ||
Property and equipment, Gross | 326,894 | 171,709 |
Equipment Held For Lease to Related Party [Member] | ||
Property and equipment, Gross | 159,806 | |
Molds [Member] | ||
Property and equipment, Gross | 31,063 | |
Vehicles [Member] | ||
Property and equipment, Gross | 15,000 | 15,000 |
Leasehold Improvements [Member] | ||
Property and equipment, Gross | $ 33,257 | $ 38,101 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Amortization expense | $ 4,887 | $ 5,311 |
Patents [Member] | ||
Intangible assets amortization period | 14 years | |
Web Site Development Costs [Member] | ||
Intangible assets amortization period | 5 years |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Intangible assets | $ 54,495 | $ 48,004 |
Accumulated amortization | (16,510) | (11,623) |
Intangible assets, Net | 37,985 | 36,381 |
Patents [Member] | ||
Intangible assets | 29,952 | 24,192 |
Web Site Development Costs [Member] | ||
Intangible assets | 22,713 | 22,713 |
Trademarks [Member] | ||
Intangible assets | $ 1,830 | $ 1,099 |
Accounts Payable and Accrued 49
Accounts Payable and Accrued Liabilities (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Payables and Accruals [Abstract] | |
Reclassified deferred revenue | $ 322,776 |
Loss on settlement of commercial dispute | $ 9,642 |
Accounts Payable and Accrued 50
Accounts Payable and Accrued Liabilities - Schedule of Accounts Payable and Accrued Liabilities (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | ||
Accounts payable | $ 1,159,975 | $ 1,020,224 |
Sales commissions payable | 21,931 | 40,736 |
Sales tax payable | 8,750 | 23,631 |
Accrued payroll liabilities | 58,557 | 43,573 |
Product warranty accrual | 105,122 | 85,000 |
Commercial dispute settlement | 332,418 | |
Other accrued expenses | 282,510 | 124,689 |
Total | $ 1,969,263 | $ 1,337,853 |
Related Party Agreements Transa
Related Party Agreements Transactions (Details Narrative) - USD ($) | May 10, 2017 | Apr. 15, 2016 | Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Nov. 09, 2017 | Dec. 31, 2015 | Jul. 31, 2014 |
Annual interest rate on promissory note | 6.00% | |||||||
Amounts due to shareholders | $ 6,927 | $ 6,927 | $ 57,398 | |||||
Payments to purchase equipment | 183,783 | 18,189 | ||||||
Sterling Facility [Member] | ||||||||
Quarterly fee | 16,500 | |||||||
Equipment held for lease to related party | 159,806 | |||||||
Payments of additional equipment | 23,580 | 7,687 | ||||||
Payments to purchase equipment | $ 78,310 | |||||||
Sterling Facility [Member] | March 22, 2018 [Member] | ||||||||
Agreement term | 3 years | |||||||
Quarterly fee | $ 18,330 | |||||||
Payments to purchase equipment | 81,827 | |||||||
Stephen and Brandy Keen [Member] | ||||||||
Deferred compensation | $ 25,600 | |||||||
Original Hydro Note [Member] | Minimum [Member] | ||||||||
Notes payable | $ 94,514 | |||||||
Original Hydro Note [Member] | Maximum [Member] | ||||||||
Notes payable | 194,514 | |||||||
Consulting Agreement [Member] | Stephen Keen [Member] | ||||||||
Agreement term | 3 years | |||||||
Annual consulting fees | $ 30,000 | |||||||
Consulting fees payable | 20,000 | 20,000 | ||||||
Sterling Pharms Equipment Agreement [Member] | Sterling Facility [Member] | ||||||||
Quarterly fee | $ 12,000 | |||||||
Sterling Pharms Equipment Agreement [Member] | Sterling Pharms, LLC [Member] | ||||||||
Agreement term | 3 years | |||||||
Quarterly fee | $ 16,500 | |||||||
Original Hydro Note [Member] | ||||||||
Repayments of debt | 100,000 | |||||||
Hydro2 Note [Member] | ||||||||
Payable in monthly installments amount | $ 5,000 | |||||||
Annual interest rate on promissory note | 6.00% | |||||||
Maturity date of promissory note | Jul. 18, 2016 | |||||||
Amounts due to shareholders | $ 6,927 | $ 6,927 | 69,383 | |||||
Notes payable, current | 57,398 | |||||||
Long term debt | $ 11,985 | |||||||
Hydro2 Note [Member] | Stephen Keen [Member] | ||||||||
Unsecured promissory note | $ 250,000 | |||||||
Hydro2 Note [Member] | Brandy Keen [Member] | ||||||||
Unsecured promissory note | $ 250,000 |
Promissory Notes (Details Narra
Promissory Notes (Details Narrative) - USD ($) | Aug. 08, 2017 | Feb. 09, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Nov. 09, 2017 | Aug. 07, 2017 |
Interest rate on promissory note | 6.00% | |||||
Proceeds from issuance of notes payable | $ 500,000 | |||||
Amortization of debt discount | 63,157 | $ 1,529,219 | ||||
Promissory Notes [Member] | ||||||
Issued discount | 25,832 | |||||
Amortization of debt discount | $ 49,997 | |||||
Two Accredited Investors [Member] | ||||||
Promissory notes | $ 537,500 | |||||
Number of common stock shares issued for debt | 250,000 | |||||
Proceeds from issuance of notes payable | $ 500,000 | |||||
Issued discount | 37,500 | |||||
Promissory notes, fair value | 461,000 | |||||
Fair value of shares issued | $ 39,000 | |||||
Accredited Investors 1 [Member] | ||||||
Number of common stock shares issued for debt | 2,800,000 | 125,000 | ||||
Accredited Investors 2 [Member] | ||||||
Number of common stock shares issued for debt | 2,800,000 | 125,000 | ||||
Accredited Investors [Member] | ||||||
Number of common stock shares issued for debt | 5,600,000 | |||||
Accredited Investors [Member] | Promissory Notes [Member] | ||||||
Promissory notes, fair value | $ 268,750 | |||||
Shares issued price per share | $ 0.096 | $ 0.135 | ||||
Accrued interest | $ 15,900 |
Promissory Notes - Schedule of
Promissory Notes - Schedule of Loss On Extinguishment of Promissory Notes Payable (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Loss on extinguishment of debt | $ (643,428) | $ (338,241) |
Promissory Notes [Member] | ||
Carrying amount of debt principal converted | 537,500 | |
Carrying amount of debt accrued interest converted | 15,904 | |
Carrying amount of debt unamortized debt discount | (25,832) | |
Total carrying amount of debt | 527,572 | |
Reacquisition price of debt fair value of shares of common stock issued | 756,000 | |
Loss on extinguishment of debt | $ (228,428) |
Convertible Notes (Details Narr
Convertible Notes (Details Narrative) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||
Oct. 31, 2014USD ($)Investment$ / sharesshares | Mar. 31, 2017USD ($)shares | Sep. 30, 2015USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2015USD ($) | Dec. 18, 2015USD ($) | |
Common stock shares, issued | shares | 206,248,522 | 160,744,916 | 160,744,916 | |||||
Convertible promissory notes | $ 780,000 | $ 780,000 | $ 3,350,523 | |||||
Amortization of debt discount | $ 63,157 | 1,529,219 | ||||||
Fair value of warrants | $ 59,000 | 96,106 | ||||||
Warrant Amendment Agreements [Member] | Minimum [Member] | One Original Warrants [Member] | ||||||||
Exercise price of warrants | $ / shares | $ 0.15 | |||||||
Series 2 Convertible Notes [Member] | ||||||||
Number of investment unit offered | Investment | 60 | |||||||
Common stock shares, issued | shares | 250,000 | |||||||
Convertible promissory notes | $ 50,000 | 780,000 | 780,000 | 2,536,250 | ||||
Warrants for the purchase of shares of common stock | shares | 50,000 | |||||||
Note bear interest rate | 10.00% | |||||||
Conversion price per share | $ / shares | $ 0.60 | |||||||
Convertible promissory notes, duration period | 2 years | |||||||
Convertible promissory notes, conversion description | The Series 2 Convertible Notes were convertible after 360 days from the issuance date, at the investors option, into a number of shares of the Companys common stock that was determined by dividing the amount to be converted by the $0.60 conversion price. Additionally, the entire principal amount under the Series 2 Convertible Notes would be automatically converted into common stock at a conversion price equal to the greater of $0.50 per share or 75% of the public offering price per share, without any action by the investor, on the earlier of: (x) the date on which the Company closed on a financing transaction involving the sale of the Companys common stock at a price of no less than $2.00 per share with gross proceeds to the Company of no less than $5,000,000, or (y) the date which is three days after the common stock traded at a volume-weighted-average-price (VWAP) of at least $2.00 per share for a period of 10 consecutive trading days | |||||||
Proceeds from sale of units | $ 2,536,250 | |||||||
Convertible promissory notes principal amount | $ 510,000 | 1,756,250 | ||||||
Accrued interest | $ 134,553 | $ 399,063 | $ 399,063 | |||||
Common shares issued pursuant to conversion of debt and accrued interest, net, shares | shares | 5,001,554 | 5,001,554 | 15,253,089 | |||||
Amortization of debt discount | $ 13,160 | |||||||
Weighted average exercise price | $ / shares | $ 0.45 | $ 0.45 | ||||||
Debt discounts | $ (5,398) | $ (51,208) | $ (51,208) | |||||
Fair value of warrants | $ (59,000) | $ (96,106) | ||||||
Series 2 Convertible Notes [Member] | Payable One [Member] | ||||||||
Convertible promissory notes principal amount | $ 270,000 | |||||||
Accrued interest | 44,150 | |||||||
Repayments of debt | $ 314,150 | |||||||
Series 2 Convertible Notes [Member] | Minimum [Member] | ||||||||
Exercise price of warrants | $ / shares | $ 0.15 | $ 0.15 | ||||||
Series 2 Convertible Notes [Member] | Maximum [Member] | ||||||||
Exercise price of warrants | $ / shares | $ 3 | $ 3 | ||||||
Series 2 Convertible Notes [Member] | Note Conversion Agreements [Member] | Minimum [Member] | ||||||||
Conversion price per share | $ / shares | $ 0.09 | |||||||
Series 2 Convertible Notes [Member] | Note Conversion Agreements [Member] | Maximum [Member] | ||||||||
Conversion price per share | $ / shares | $ 0.22 | |||||||
Series 2 Warrants [Member] | ||||||||
Warrants for the purchase of shares of common stock | shares | 2,536,250 | |||||||
Series 2 Warrants [Member] | Warrant Amendment Agreements [Member] | Minimum [Member] | ||||||||
Exercise price of warrants | $ / shares | $ 0.30 | |||||||
Series 2 Warrants [Member] | Warrant Amendment Agreements [Member] | Maximum [Member] | ||||||||
Exercise price of warrants | $ / shares | $ 0.35 | |||||||
Series 3 Warrants [Member] | ||||||||
Warrants for the purchase of shares of common stock | shares | 2,625,000 | 2,625,000 | ||||||
Convertible promissory notes, conversion description | The conversion price of the Series 3 Convertible Notes was equal to 80% of the lowest trading price of the Companys common stock as reported on the OTCQB for the 15 trading days prior to conversion. | |||||||
Proceeds from sale of units | $ 656,250 | |||||||
Warrant term | 5 years | |||||||
Series 3 Convertible Notes [Member] | ||||||||
Convertible promissory notes | 711,000 | |||||||
Note bear interest rate | 10.00% | |||||||
Exercise price of warrants | $ / shares | $ 0.25 | |||||||
Convertible promissory notes principal amount | 711,000 | |||||||
Accrued interest | $ 72,128 | 72,128 | ||||||
Common shares issued pursuant to conversion of debt and accrued interest, net, shares | shares | 15,598,870 | |||||||
Debt face value | $ 711,000 | |||||||
Debt discounts | $ 61,000 | |||||||
Fair value of embedded derivative upon issuance of notes | $ 1,023,881 | |||||||
Fair value of warrants | 246,020 | |||||||
Fair value of the conversion feature | $ 777,861 | |||||||
Series 3 Convertible Notes One [Member] | ||||||||
Note bear interest rate | 11.00% | |||||||
Debt face value | $ 106,000 | |||||||
Series 4 Convertible Notes [Member] | ||||||||
Convertible promissory notes | $ 103,273 | |||||||
Convertible promissory notes principal amount | 103,319 | |||||||
Accrued interest | $ 2,637 | $ 2,637 | $ 3,046 | |||||
Common shares issued pursuant to conversion of debt and accrued interest, net, shares | shares | 2,289,958 | |||||||
Debt face value | $ 100,273 | |||||||
Debt conversion price, percentage | 70.00% |
Convertible Notes - Schedule of
Convertible Notes - Schedule of Convertible Promissory Notes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Convertible promissory notes, Beginning Balance | $ 780,000 | $ 3,350,523 |
Additions | ||
Conversions | (510,000) | (2,570,523) |
Repayments | (270,000) | |
Convertible promissory notes, Ending Balance | 780,000 | |
Discounts and deferred finance charges | (18,560) | |
Convertible notes payable, net | 761,440 | |
Less: current portion | 761,440 | |
Long-term portion | ||
Series 2 Convertible Notes [Member] | ||
Convertible promissory notes, Beginning Balance | 780,000 | 2,536,250 |
Additions | ||
Conversions | (510,000) | (1,756,250) |
Repayments | (270,000) | |
Convertible promissory notes, Ending Balance | 780,000 | |
Series 3 Convertible Notes [Member] | ||
Convertible promissory notes, Beginning Balance | 711,000 | |
Additions | ||
Conversions | (711,000) | |
Repayments | ||
Convertible promissory notes, Ending Balance | ||
Series 4 Convertible Notes [Member] | ||
Convertible promissory notes, Beginning Balance | 103,273 | |
Additions | ||
Conversions | (103,273) | |
Repayments | ||
Convertible promissory notes, Ending Balance |
Convertible Notes - Schedule 56
Convertible Notes - Schedule of Loss on Extinguishment of Notes Payable - Series 2 (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Reacquisition price of debt warrant modification value | $ (59,000) | $ (96,106) |
Loss on extinguishment of debt | (643,428) | (338,241) |
Series 2 Convertible Notes [Member] | ||
Carrying amount of debt principal converted | 510,000 | 1,756,250 |
Carrying amount of debt accrued interest converted | 134,553 | 399,063 |
Carrying amount of debt unamortized debt discount | (5,398) | (51,208) |
Total carrying amount of debt | 639,155 | 2,104,105 |
Reacquisition price of debt fair value of shares of common stock issued | 995,155 | 2,346,240 |
Reacquisition price of debt warrant modification value | 59,000 | 96,106 |
Total reacquisition price of debt | 1,054,155 | 2,442,346 |
Loss on extinguishment of debt | $ (415,000) | $ (338,241) |
Derivative Liabilities (Details
Derivative Liabilities (Details Narrative) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Loss on change in derivative liabilities | $ 338,622 |
Convertible Promissory Note [Member] | |
Loss on change in derivative liabilities | $ 200,083 |
Derivative Liabilities - Schedu
Derivative Liabilities - Schedule of Derivative Liabilities Activity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Derivative liabilities balance, beginning | $ 477,814 | $ 139,192 |
Loss on change in derivative liability, net | 338,622 | |
(Gain) on change in derivative liability, net | (66,934) | 538,705 |
Derivative liabilities balance, ending | $ 410,880 | $ 477,814 |
Commitments and Contingencies59
Commitments and Contingencies (Details Narrative) | Jun. 27, 2017USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($)ft² | Jul. 31, 2017USD ($) |
Internal revenue service, penalties | $ 115,000 | |||
Lease agreement, manufacturing and office space, square feet | ft² | 18,000 | |||
Lease expiration date | Apr. 1, 2017 | |||
Lease security deposit | $ 51,000 | |||
Leasehold improvements received | 7,285 | $ 100,000 | ||
Rent expense | 218,926 | $ 210,957 | ||
Internal Revenue Service Penalties [Member] | ||||
Internal revenue service, penalties | $ 115,000 | |||
New Building Lease [Member] | ||||
Lease expiration date | Aug. 31, 2022 | |||
Lease commenced date | Sep. 29, 2017 | |||
New Building Lease [Member] | January 1, 2018 [Member] | ||||
Lease monthly rental value | $ 12,967 | |||
New Building Lease [Member] | August 31, 2018 [Member] | ||||
Lease monthly rental value | $ 18,979 | |||
New Building Lease [Member] | September 1, 2018 [Member] | ||||
Rate of monthly rent increase | 3.00% |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Lease Payments (Details) | Dec. 31, 2017USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 230,025 |
2,019 | 236,926 |
2,020 | 244,034 |
2,021 | 251,355 |
2,022 | 170,888 |
Total future minimum lease payments | $ 1,133,228 |
Preferred and Common Stock (Det
Preferred and Common Stock (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Preferred stock, shares issued | 77,220,000 | 77,220,000 | 77,220,000 | |
Preferred stock, shares outstanding | 77,220,000 | 77,220,000 | 77,220,000 | |
Preferred stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 | |
Principal amount of convertible notes together with accrued interest | $ 1,751,155 | $ 3,235,326 | ||
Employees [Member] | ||||
Common shares issued for compensation | 46,045 | |||
Accredited Investors [Member] | ||||
Number of shares of common stock issued, shares | 14,734,000 | 16,781,250 | ||
Independent Director [Member] | ||||
Number of shares of common stock issued, shares | 700,000 | |||
Independent Directors [Member] | 2017 Equity Plan [Member] | ||||
Number of shares of common stock issued, shares | 216,009 | |||
Directors [Member] | 2017 Equity Plan [Member] | ||||
Common shares issued for compensation | 600,000 | |||
Employee [Member] | ||||
Number of shares of common stock issued, shares | 40,000 | |||
Employee [Member] | 2017 Equity Plan [Member] | Employment Agreement [Member] | ||||
Number of shares of common stock issued, shares | 1,200,000 | |||
Consultant [Member] | 2017 Equity Plan [Member] | ||||
Number of shares of common stock issued, shares | 200,000 | |||
Number of common shares issued for services | 404,485 | |||
Employee [Member] | ||||
Common shares issued for compensation | 40,000 | |||
Series 2 Convertible Notes [Member] | ||||
Number of common stock shares issued for debt | 5,001,554 | 5,001,554 | 15,253,089 | |
Principal amount of convertible notes together with accrued interest | $ 510,000 | $ 1,756,250 | ||
Issuance of common shares in connection with exercises of stock options | 1,493,400 | |||
Promissory Note One [Member] | Two Investors [Member] | ||||
Number of common stock shares issued for debt | 250,000 | |||
Promissory Note Two [Member] | Two Investors [Member] | ||||
Number of common stock shares issued for debt | 5,600,000 | |||
Series 3 and 4 Convertible Notes [Member] | ||||
Number of common stock shares issued for debt | 17,888,828 | |||
Series A preferred stock [Member] | ||||
Preferred stock, shares issued | 77,220,000 | 77,220,000 | 77,220,000 | |
Preferred stock, shares outstanding | 77,220,000 | 77,220,000 | 77,220,000 | |
Preferred stock, par value | $ 0.00001 | $ 0.00001 | $ 0.00001 |
Unit Offerings (Details Narrati
Unit Offerings (Details Narrative) | Dec. 12, 2017USD ($)Number$ / sharesshares | Mar. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017shares | Mar. 31, 2017Number$ / sharesshares |
Private Placement Offering [Member] | ||||
Price per share | $ 0.12 | |||
Conversion stock, description | Each unit consisted of one share of the Companys common stock and one warrant for the purchase of one share of the Companys common stock (Q4 2017 Warrants). | |||
Q1 2017 Warrants [Member] | ||||
Price per share | $ 0.42 | $ 0.42 | ||
Warrant to purchase shares of common stock | shares | 16,312,500 | |||
Exercise price of warrants | 0.26 | $ 0.26 | ||
Consecutive trading days | Number | 5 | |||
Redeem warrant shares at a price | $ 0.01 | $ 0.01 | ||
Q4 2017 Warrants [Member] | ||||
Number of shares of common stock issued, shares | shares | 14,734,000 | |||
Gross proceeds | $ | $ 1,768,080 | |||
Price per share | $ 0.36 | |||
Warrant to purchase shares of common stock | shares | 14,734,000 | |||
Warrants term | 3 years | |||
Exercise price of warrants | $ 0.20 | |||
Consecutive trading days | Number | 5 | |||
Redeem warrant shares at a price | $ 0.01 | |||
Accredited Investors [Member] | ||||
Number of shares of common stock issued, shares | shares | 14,734,000 | 16,781,250 | ||
Securities Purchase Agreement [Member] | Accredited Investors [Member] | ||||
Number of shares of common stock issued, shares | shares | 16,781,250 | |||
Gross proceeds | $ | $ 2,685,000 | |||
Price per share | $ 0.16 | $ 0.16 | ||
Conversion stock, description | Each unit consisted of one share of the Companys common stock and one warrant for the purchase of one share of the Companys common stock (Q1 2017 Warrants) | |||
Securities Purchase Agreement [Member] | One Investors [Member] | ||||
Warrant to purchase shares of common stock | shares | 468,750 | 468,750 |
Equity Issued as Compensation63
Equity Issued as Compensation for Services (Details Narrative) - USD ($) | Jun. 19, 2017 | Jun. 16, 2017 | May 26, 2017 | Mar. 07, 2017 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 21, 2017 |
Compensation Expense Fair Value of Warrants | $ 59,000 | $ 96,106 | ||||||
Gross Proceeds | 4,453,080 | |||||||
Employee [Member] | ||||||||
Number of shares of common stock issued, shares | 40,000 | |||||||
Gross Proceeds | $ 8,840 | |||||||
Director [Member] | ||||||||
Number of shares of common stock issued, shares | 700,000 | |||||||
Gross Proceeds | $ 121,450 | |||||||
Warrant [Member] | ||||||||
Compensation Expense Fair Value of Warrants | $ 189,592 | |||||||
Term of Warrants | 5 years | |||||||
Volatility Rate | 119.96% | |||||||
Quarterly Dividends | 0.00% | |||||||
Risk-free Interest Rate | 1.77% | |||||||
Banker Warrant [Member] | ||||||||
Compensation Expense Fair Value of Warrants | $ 30,687 | |||||||
Term of Warrants | 3 years | |||||||
Volatility Rate | 120.02% | |||||||
Quarterly Dividends | 0.00% | |||||||
Risk-free Interest Rate | 1.52% | |||||||
Letter Agreements [Member] | ||||||||
Common Stock for a Period | 5 years | 5 years | ||||||
Letter Agreements [Member] | Warrant 1 [Member] | ||||||||
Warrant to Purchase Shares of Common Stock | 900,000 | 900,000 | ||||||
Option for a Cashless Exercise Price | $ 0.114 | |||||||
Letter Agreements [Member] | Warrant 2 [Member] | ||||||||
Warrant to Purchase Shares of Common Stock | 460,525 | 460,525 | ||||||
Letter Agreements [Member] | Warrant 3 [Member] | ||||||||
Warrant to Purchase Shares of Common Stock | 460,525 | 460,525 | ||||||
Letter Agreements [Member] | Warrant 2&3 [Member] | ||||||||
Option for a Cashless Exercise Price | $ 0.0005 | |||||||
Letter Agreements [Member] | Banker Warrant [Member] | ||||||||
Warrant to Purchase Shares of Common Stock | 500,000 | |||||||
Common Stock for a Period | 3 years | |||||||
Option for a Cashless Exercise Price | $ 0.35 |
Equity Incentive Plan (Details
Equity Incentive Plan (Details Narrative) | Nov. 07, 2017shares | Nov. 06, 2017USD ($) | Oct. 03, 2017shares | Sep. 06, 2017USD ($)shares | Sep. 02, 2017shares | Aug. 17, 2017Numbershares | Aug. 08, 2017$ / sharesshares | Aug. 07, 2017USD ($) | Aug. 04, 2017shares | Aug. 02, 2017shares | Jul. 07, 2017shares | Mar. 07, 2017USD ($)shares | Mar. 31, 2017$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Mar. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares |
Share based compensation expense | $ | $ 2,139,865 | $ 4,386 | |||||||||||||||
Common shares issued for services rendered, value | $ | 434,325 | ||||||||||||||||
Revenue | $ | $ 7,210,241 | $ 7,579,863 | |||||||||||||||
Number of restricted common stock issued | 189,536 | ||||||||||||||||
Number of shares of common stock issued | $ | $ 4,453,080 | ||||||||||||||||
Restricted Stock [Member] | |||||||||||||||||
Unrecognized compensation expense | $ | $ 938,056 | 938,056 | |||||||||||||||
Share based compensation - time based vesting | $ | 602,356 | ||||||||||||||||
Share based compensation - performance based vesting | $ | 335,700 | ||||||||||||||||
Total intrinsic value of restricted stock unit | $ | $ 20,499 | ||||||||||||||||
2014 Stock Ownership Plan [Member] | |||||||||||||||||
Number of warrants issued to purchase shares of common stock | 6,177,600 | ||||||||||||||||
Common stock purchase price per share | $ / shares | $ 0.00024 | ||||||||||||||||
Number of stock options to purchase shares of common stock | |||||||||||||||||
2017 Equity Incentive Plan [Member] | |||||||||||||||||
Number of shares of common stock issued, shares | 50,000,000 | ||||||||||||||||
Share based compensation expense | $ | $ 1,311,109 | ||||||||||||||||
Debt instrument term | 2 years 2 months 30 days | ||||||||||||||||
Unrecognized compensation expense | $ | 1,102,780 | $ 1,102,780 | |||||||||||||||
2017 Plan [Member] | |||||||||||||||||
Unrecognized compensation expense | $ | $ 6,306 | $ 6,306 | |||||||||||||||
2017 Plan [Member] | Minimum [Member] | |||||||||||||||||
Volatility rate | 115.82% | ||||||||||||||||
Expected term | 1 year 6 months | ||||||||||||||||
Risk-free interest rate | 1.32% | ||||||||||||||||
2017 Plan [Member] | Maximum [Member] | |||||||||||||||||
Volatility rate | 118.20% | ||||||||||||||||
Expected term | 7 years 6 months | ||||||||||||||||
Risk-free interest rate | 2.18% | ||||||||||||||||
2017 Plan [Member] | Restricted Stock [Member] | |||||||||||||||||
Common shares issued for services rendered, value | $ | $ 84,000 | ||||||||||||||||
Number of share awards vested in period | 104,896 | 1,200,000 | |||||||||||||||
Fair value of vesting shares | $ | $ 15,000 | $ 134,280 | |||||||||||||||
2017 Plan [Member] | Restricted Stock [Member] | February 2018 [Member] | |||||||||||||||||
Directors consultant fees | $ | $ 15,000 | ||||||||||||||||
2017 Plan [Member] | Restricted Stock One [Member] | |||||||||||||||||
Number of share awards vested in period | 143,707 | 111,113 | |||||||||||||||
Director fee paid, description | The quarterly director fees are paid 50% in cash and 50% in shares of the Companys common stock, with the number of shares determined based on the closing price of the common stock on the date of issuance. | ||||||||||||||||
Fair value of vesting shares | $ | $ 20,550 | 15,000 | |||||||||||||||
2017 Plan [Member] | Restricted Stock One [Member] | February 2018 [Member] | |||||||||||||||||
Directors consultant fees | $ | $ 12,750 | ||||||||||||||||
2017 Plan [Member] | Restricted Stock Two [Member] | |||||||||||||||||
Number of share awards vested in period | 260,778 | ||||||||||||||||
Fair value of vesting shares | $ | $ 35,205 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options [Member] | |||||||||||||||||
Number of stock options to purchase shares of common stock | 1,800,000 | 12,530,000 | |||||||||||||||
Number of restricted stock units granted | 900,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Options vesting percentage on date of grant | These options vest 50% on date of grant and the remaining 50% on March 1, 2018 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options One [Member] | |||||||||||||||||
Common stock purchase price per share | $ / shares | $ 0.135 | $ 0.135 | |||||||||||||||
Number of stock options to purchase shares of common stock | 1,805,000 | ||||||||||||||||
Options vesting period | 2 years 4 months 24 days | ||||||||||||||||
Stock options to purchase shares have expired | 60,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Two [Member] | |||||||||||||||||
Common stock purchase price per share | $ / shares | 0.121 | $ 0.121 | |||||||||||||||
Number of stock options to purchase shares of common stock | 1,300,000 | ||||||||||||||||
Warrant term | 3 years | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Three [Member] | |||||||||||||||||
Common stock purchase price per share | $ / shares | 0.135 | $ 0.135 | |||||||||||||||
Number of stock options to purchase shares of common stock | 1,200,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Three [Member] | 2017 [Member] | |||||||||||||||||
Number of share awards vested in period | 400,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Revenue | $ | $ 8,000,000 | ||||||||||||||||
Amount of new bookings - thresholds - performance based shares | $ | 10,000,000 | ||||||||||||||||
Revenue - thresholds - performance based shares | $ | $ 400,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Three [Member] | 2018 [Member] | |||||||||||||||||
Number of share awards vested in period | 400,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Revenue | $ | $ 18,000,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Three [Member] | 2019 [Member] | |||||||||||||||||
Number of share awards vested in period | 400,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Revenue | $ | $ 25,000,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Four [Member] | |||||||||||||||||
Common stock purchase price per share | $ / shares | 0.121 | $ 0.121 | |||||||||||||||
Number of stock options to purchase shares of common stock | 4,050,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Four [Member] | 2017 [Member] | |||||||||||||||||
Number of share awards vested in period | 800,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Revenue | $ | $ 8,000,000 | ||||||||||||||||
Amount of new bookings - thresholds - performance based shares | $ | 10,000,000 | ||||||||||||||||
Revenue - thresholds - performance based shares | $ | $ 800,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Four [Member] | 2018 [Member] | |||||||||||||||||
Number of share awards vested in period | 1,300,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Revenue | $ | $ 18,000,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Four [Member] | 2019 [Member] | |||||||||||||||||
Number of share awards vested in period | 1,950,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Revenue | $ | $ 25,000,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Five [Member] | |||||||||||||||||
Common stock purchase price per share | $ / shares | 0.112 | $ 0.112 | |||||||||||||||
Number of stock options to purchase shares of common stock | 4,000,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Five [Member] | 2017 [Member] | |||||||||||||||||
Number of share awards vested in period | 750,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Revenue | $ | $ 8,000,000 | ||||||||||||||||
Amount of new bookings - thresholds - performance based shares | $ | 10,000,000 | ||||||||||||||||
Revenue - thresholds - performance based shares | $ | $ 750,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Five [Member] | 2018 [Member] | |||||||||||||||||
Number of share awards vested in period | 1,250,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Revenue | $ | $ 18,000,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Five [Member] | 2019 [Member] | |||||||||||||||||
Number of share awards vested in period | 2,000,000 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Revenue | $ | $ 25,000,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Six [Member] | |||||||||||||||||
Common stock purchase price per share | $ / shares | $ 0.105 | $ 0.105 | |||||||||||||||
Number of stock options to purchase shares of common stock | 175,000 | ||||||||||||||||
Options vesting period | 2 years 2 months 30 days | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Six [Member] | 2017 [Member] | |||||||||||||||||
Number of share awards vested in period | 58,336 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Six [Member] | 2018 [Member] | |||||||||||||||||
Number of share awards vested in period | 58,332 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Six [Member] | 2019 [Member] | |||||||||||||||||
Number of share awards vested in period | 58,332 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Seven [Member] | |||||||||||||||||
Unrecognized compensation expense | $ | $ 863,610 | $ 863,610 | |||||||||||||||
Share based compensation - time based vesting | $ | 96,530 | ||||||||||||||||
Share based compensation - performance based vesting | $ | 767,080 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Eight [Member] | |||||||||||||||||
Share based compensation expense | $ | |||||||||||||||||
Stock options to purchase shares on performance-based | 9,250,000 | ||||||||||||||||
2017 Plan [Member] | Non-Qualified Stock Options Eight [Member] | 2017 [Member] | |||||||||||||||||
Stock options to purchase shares on performance-based | 7,300,000 | ||||||||||||||||
Stock option to purchase - thresholds - performance based | 1,950,000 | ||||||||||||||||
Chief Executive Officer [Member] | |||||||||||||||||
Number of restricted common stock issued | 3,000,000 | ||||||||||||||||
Chief Executive Officer [Member] | 2018 [Member] | |||||||||||||||||
Revenue - thresholds - performance based shares | $ | $ 18,000,000 | ||||||||||||||||
Number of restricted common stock issued | 1,500,000 | ||||||||||||||||
Chief Executive Officer [Member] | 2019 [Member] | |||||||||||||||||
Revenue - thresholds - performance based shares | $ | $ 25,000,000 | ||||||||||||||||
Number of restricted common stock issued | 1,500,000 | ||||||||||||||||
Chief Executive Officer [Member] | Restricted Stock [Member] | |||||||||||||||||
Unvested restricted stock units on performance-based | 3,000,000 | ||||||||||||||||
Chief Executive Officer [Member] | Incentive Stock Bonus Awards [Member] | December 31, 2017 through December 31, 2019 [Member] | |||||||||||||||||
Special bonus, shares | 1,000,000 | ||||||||||||||||
Chief Executive Officer [Member] | Incentive Stock Bonus Awards [Member] | February 13, 2018 [Member] | |||||||||||||||||
Special bonus, shares | 1,000,000 | ||||||||||||||||
Chief Executive Officer [Member] | 2017 Plan [Member] | Restricted Stock [Member] | |||||||||||||||||
Number of common shares issued for services | 600,000 | ||||||||||||||||
Director [Member] | |||||||||||||||||
Number of shares of common stock issued, shares | 700,000 | ||||||||||||||||
Number of shares of common stock issued | $ | $ 121,450 | ||||||||||||||||
Director [Member] | 2017 Plan [Member] | Non-Qualified Stock Options [Member] | |||||||||||||||||
Common stock purchase price per share | $ / shares | $ 0.135 | ||||||||||||||||
Employee [Member] | |||||||||||||||||
Number of shares of common stock issued, shares | 40,000 | ||||||||||||||||
Number of restricted common stock issued | 700,000 | 13,100,000 | |||||||||||||||
Number of shares of common stock issued | $ | $ 8,840 | ||||||||||||||||
Employee [Member] | 2017 Plan [Member] | Non-Qualified Stock Options One [Member] | |||||||||||||||||
Stock options to purchase shares have expired | 285,000 | ||||||||||||||||
Employee [Member] | 2017 Plan [Member] | Non-Qualified Stock Options One [Member] | 2017 [Member] | |||||||||||||||||
Number of share awards vested in period | 661,672 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Employee [Member] | 2017 Plan [Member] | Non-Qualified Stock Options One [Member] | 2018 [Member] | |||||||||||||||||
Number of share awards vested in period | 571,665 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Employee [Member] | 2017 Plan [Member] | Non-Qualified Stock Options One [Member] | 2019 [Member] | |||||||||||||||||
Number of share awards vested in period | 571,663 | ||||||||||||||||
Options exercise period | 10 years | ||||||||||||||||
Directors [Member] | 2017 Plan [Member] | |||||||||||||||||
Share based compensation expense | $ | $ 166,187 | ||||||||||||||||
Former Chief Executive Officer [Member] | |||||||||||||||||
Number of restricted common stock issued | 9,000,000 | ||||||||||||||||
Number of installments | Number | 12 | ||||||||||||||||
Per unit installment of restricted stock | 750,000 | ||||||||||||||||
Previous Chief Executive Officer [Member] | February 2018 [Member] | |||||||||||||||||
Number of restricted common stock issued | 2,250,000 | ||||||||||||||||
Previous Chief Executive Officer [Member] | January 2018 [Member] | |||||||||||||||||
Number of restricted common stock issued | 2,250,000 | ||||||||||||||||
Previous Chief Executive Officer [Member] | March 2018 [Member] | |||||||||||||||||
Number of restricted common stock issued | 2,250,000 | ||||||||||||||||
Employees, Directors and Consultants [Member] | |||||||||||||||||
Number of restricted common stock issued | 765,055 | ||||||||||||||||
Stock Options [Member] | Chief Executive Officer [Member] | 2014 Stock Ownership Plan [Member] | |||||||||||||||||
Common stock purchase price per share | $ / shares | $ 0.00024 | $ 0.00024 | |||||||||||||||
Number of stock options to purchase shares of common stock | 3,088,800 | ||||||||||||||||
Number of restricted stock units granted | 3,000,000 | ||||||||||||||||
Employee [Member] | Second Quarter 2018 [Member] | |||||||||||||||||
Number of restricted common stock issued | 400,000 | ||||||||||||||||
Employee [Member] | Incentive Stock Bonus Awards [Member] | |||||||||||||||||
Share based compensation expense | $ | $ 364,483 | ||||||||||||||||
Unrecognized compensation expense | $ | $ 605,917 | $ 605,917 | |||||||||||||||
Number of share awards vested in period | 1,560,000 | ||||||||||||||||
Total intrinsic value of restricted stock unit | $ | $ 374,400 | ||||||||||||||||
Employee [Member] | Incentive Stock Bonus Awards [Member] | December 31, 2017 through December 31, 2019 [Member] | |||||||||||||||||
Special bonus, shares | 560,000 | ||||||||||||||||
Employee [Member] | Incentive Stock Bonus Awards [Member] | February 13, 2018 [Member] | |||||||||||||||||
Special bonus, shares | 560,000 | ||||||||||||||||
Employee [Member] | 2017 Plan [Member] | Non-Qualified Stock Options Seven [Member] | |||||||||||||||||
Number of share awards vested in period | 189,536 | ||||||||||||||||
Three Other Employee [Member] | Incentive Stock Bonus Awards [Member] | |||||||||||||||||
Special bonus, shares | 4,000,000 | ||||||||||||||||
Consulting Agreement [Member] | |||||||||||||||||
Share based compensation expense | $ | $ 20,499 | ||||||||||||||||
Number of restricted common stock issued | 200,000 | 66,666 | 700,000 | 66,667 | 66,667 |
Equity Incentive Plan - Schedul
Equity Incentive Plan - Schedule of Stock Option Activity Vesting (Details) | 12 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
2014 Stock Plan [Member] | |
Number of Options, Outstanding Beginning | 6,177,600 |
Number of Options, Granted | |
Number of Options, Exercised | |
Number of Options, Forfeited/Cancelled | |
Number of Options, Expired | (6,177,600) |
Number of Options, Outstanding Ending | |
Number of Options, Exercisable | |
Weighted Average Exercise Price, Outstanding Beginning | $ / shares | $ 0.00024 |
Weighted Average Exercise Price, Granted | $ / shares | |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited/Cancelled | $ / shares | |
Weighted Average Exercise Price, Expired | $ / shares | $ 0.00024 |
Weighted Average Exercise Price, Outstanding Ending | $ / shares | |
Weighted Average Remaining Contractual Term, Outstanding Beginning | 2 months 12 days |
Weighted Average Remaining Contractual Term, Granted | 0 years |
Weighted Average Remaining Contractual Term, Forfeited/Cancelled | 0 years |
Weighted Average Remaining Contractual Term, Expired | 0 years |
Aggregate Intrinsic Value, Outstanding Beginning | $ | $ 1,155,211 |
Aggregate Intrinsic Value, Outstanding Ending | $ | |
2017 Equity Plan [Member] | Director [Member] | |
Number of Options, Outstanding Beginning | |
Number of Options, Granted | 1,800,000 |
Number of Options, Exercised | |
Number of Options, Forfeited/Cancelled | (900,000) |
Number of Options, Expired | |
Number of Options, Outstanding Ending | 900,000 |
Number of Options, Exercisable | 450,000 |
Number of Options, Outstanding vested and Expected to vest Ending | 900,000 |
Weighted Average Exercise Price, Outstanding Beginning | $ / shares | |
Weighted Average Exercise Price, Granted | $ / shares | 0.135 |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited/Cancelled | $ / shares | 0.135 |
Weighted Average Exercise Price, Expired | $ / shares | |
Weighted Average Exercise Price, Outstanding Ending | $ / shares | 0.135 |
Weighted Average Exercise Price, Exercisable Ending | $ / shares | 0.135 |
Weighted Average Exercise Price, Outstanding vested and Expected to vest Ending | $ / shares | $ 0.135 |
Weighted Average Remaining Contractual Term, Outstanding Ending | 9 years 7 months 6 days |
Weighted Average Remaining Contractual Term, Vested and Exercisable | 9 years 7 months 6 days |
Weighted Average Remaining Contractual Term, Performance options based on 2018 and 2019 revenue thresholds Ending | 9 years 7 months 6 days |
Aggregate Intrinsic Value, Outstanding Ending | $ | $ 94,500 |
Aggregate Intrinsic Value, Exercisable | $ | 47,250 |
Aggregate Intrinsic Value, Outstanding vested and Expected to vest | $ | $ 94,500 |
2017 Equity Plan [Member] | Employee [Member] | |
Number of Options, Outstanding Beginning | |
Number of Options, Granted | 12,530,000 |
Number of Options, Exercised | |
Number of Options, Forfeited/Cancelled | (2,235,000) |
Number of Options, Expired | (60,000) |
Number of Options, Outstanding Ending | 10,235,000 |
Number of Options, Exercisable | 1,885,008 |
Number of Options, Outstanding vested and Expected to vest Ending | 2,935,000 |
Number of Options, Performance options based on 2018 and 2019 revenue thresholds Ending | 7,300,000 |
Weighted Average Exercise Price, Outstanding Beginning | $ / shares | |
Weighted Average Exercise Price, Granted | $ / shares | 0.121 |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited/Cancelled | $ / shares | 0.122 |
Weighted Average Exercise Price, Expired | $ / shares | 0.135 |
Weighted Average Exercise Price, Outstanding Ending | $ / shares | 0.121 |
Weighted Average Exercise Price, Exercisable Ending | $ / shares | 0.124 |
Weighted Average Exercise Price, Outstanding vested and Expected to vest Ending | $ / shares | 0.127 |
Weighted Average Exercise Price, Performance options based on 2018 and 2019 revenue thresholds Ending | $ / shares | $ 0.119 |
Weighted Average Remaining Contractual Term, Outstanding Ending | 8 years 8 months 12 days |
Weighted Average Remaining Contractual Term, Vested and Exercisable | 4 years 6 months |
Weighted Average Remaining Contractual Term, Outstanding vested and expected to vest, December 31, 2017 | 6 years 4 months 24 days |
Weighted Average Remaining Contractual Term, Performance options based on 2018 and 2019 revenue thresholds Ending | 9 years 8 months 12 days |
Aggregate Intrinsic Value, Outstanding Ending | $ | $ 1,218,375 |
Aggregate Intrinsic Value, Exercisable | $ | 217,876 |
Aggregate Intrinsic Value, Outstanding vested and Expected to vest | $ | 331,625 |
Aggregate Intrinsic Value, Performance options based on 2018 and 2019 revenue thresholds Ending | $ | $ 886,750 |
Equity Incentive Plan - Sched66
Equity Incentive Plan - Schedule of Stock Option Activity Non-Vesting (Details) - 2017 Equity Plan [Member] | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Director [Member] | |
Number of Options Unvested, beginning | shares | |
Number of Options, Granted | shares | 1,800,000 |
Number of Options, Vested | shares | (450,000) |
Number of Options, Forfeited | shares | (900,000) |
Number of Options, Unvested, ending | shares | |
Number of Options, Expected to Vest | shares | 450,000 |
Weighted Average Grant Date Fair Value, Granted | $ / shares | $ 0.123 |
Weighted Average Grant Date Fair Value, Vested | $ / shares | 0.123 |
Weighted Average Grant Date Fair Value, Forfeited | $ / shares | 0.123 |
Weighted Average Grant Date Fair Value, ending | $ / shares | 0.123 |
Aggregated Intrinsic Value, Nonvested Ending | $ / shares | $ 52,470 |
Employee [Member] | |
Number of Options Unvested, beginning | shares | |
Number of Options, Granted | shares | 12,530,000 |
Number of Options, Vested | shares | (1,885,008) |
Number of Options, Forfeited | shares | (2,235,000) |
Number of Options, Unvested, ending | shares | (60,000) |
Number of Options, Expected to Vest | shares | 8,349,992 |
Weighted Average Grant Date Fair Value, beginning | $ / shares | |
Weighted Average Grant Date Fair Value, Granted | $ / shares | 0.103 |
Weighted Average Grant Date Fair Value, Vested | $ / shares | 0.082 |
Weighted Average Grant Date Fair Value, Forfeited | $ / shares | 0.109 |
Weighted Average Grant Date Fair Value, ending | $ / shares | 0.122 |
Weighted Average Grant Date Fair Value, Expected to Vest | $ / shares | 0.107 |
Aggregated Intrinsic Value, Nonvested Ending | $ / shares | $ 1,000,499 |
Equity Incentive Plan - Sched67
Equity Incentive Plan - Schedule of Restricted Stock Units (Details) - 2017 Equity Plan [Member] - Employees, Directors and Consultants [Member] | 12 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Number of Units Unvested, beginning | |
Number of Units, Awarded | 14,000,000 |
Number of Units, Vested | (200,000) |
Number of Units, Forfeited | |
Number of Units, Unvested, ending | 13,800,000 |
Number of Units, Expected to Vest | 10,800,000 |
Number of Untits, Performance Units - uncertain vesting | 3,000,000 |
Weighted Average Grant Date Fair Value, Granted | $ / shares | $ 0.122 |
Weighted Average Grant Date Fair Value, Vested | $ / shares | 0.103 |
Weighted Average Grant Date Fair Value, ending | $ / shares | 0.122 |
Weighted Average Grant Date Fair Value, Expected to Vest | $ / shares | 0.125 |
Weighted Average Grant Dtae Fair Value, Performance Units - uncertain vesting | $ / shares | $ 0.112 |
Aggregated Intrinsic Value, Outstanding Ending | $ | $ 3,312,000 |
Aggregated Intrinsic Value, Nonvested Ending | $ / shares | $ 2,592,000 |
Aggregated Intrinsic Value, Performance Units - uncertain vesting | $ | $ 720,000 |
Equity Incentive Plan - Sched68
Equity Incentive Plan - Schedule of Incentive Stock Bonus (Details) - 2017 Equity Plan [Member] - Employees, Directors and Consultants [Member] | 12 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Weighted Average Grant Date Fair Value, Granted | $ 0.122 |
Weighted Average Grant Date Fair Value, Vested | 0.103 |
Weighted Average Grant Date Fair Value, ending | 0.122 |
Weighted Average Grant Date Fair Value, Expected to Vest | $ 0.125 |
Aggregated Intrinsic Value, Outstanding Ending | $ | $ 3,312,000 |
Aggregated Intrinsic Value, Nonvested Ending | $ 2,592,000 |
Incentive Stock Bonus Awards [Member] | |
Number of Options Unvested, beginning | shares | |
Number of Options, Granted | shares | 8,600,000 |
Number of Options, Vested | shares | (1,560,000) |
Number of Options, Forfeited | shares | |
Number of Options, Unvested, ending | shares | 7,040,000 |
Number of Options, Expected to Vest | shares | 7,040,000 |
Weighted Average Grant Date Fair Value, beginning | |
Weighted Average Grant Date Fair Value, Granted | 0.113 |
Weighted Average Grant Date Fair Value, Vested | 0.113 |
Weighted Average Grant Date Fair Value, Forfeited | |
Weighted Average Grant Date Fair Value, ending | 0.113 |
Weighted Average Grant Date Fair Value, Expected to Vest | $ 0.113 |
Aggregated Intrinsic Value, Outstanding Ending | $ | $ 1,689,600 |
Aggregated Intrinsic Value, Nonvested Ending | $ 1,689,600 |
Income Tax (Details Narrative)
Income Tax (Details Narrative) - USD ($) | Dec. 22, 2017 | Dec. 31, 2017 |
Reduction in deferred tax assets | $ 1,177,000 | |
Net operating loss carry forward amount | $ 10,848,000 | |
Net operating loss expiration term | 2034 through 2037 | |
Percentage of ownership change | 50.00% | |
Penalties and interest | $ 115,000 | |
January 1, 2018 [Member] | ||
Reduction federal Corporate income tax | 21.00% |
Income Taxes - Schedule of Comp
Income Taxes - Schedule of Components of Provision for Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Current Taxes | ||
U.S. Federal | ||
U.S. State | ||
International | ||
Current taxes | ||
Deferred Taxes | ||
U.S. Federal | ||
U.S. State | ||
International | ||
Deferred taxes | ||
Provision for income taxes |
Income Taxes - Schedule of U.S.
Income Taxes - Schedule of U.S. Federal Statutory Income Tax Rate and Reported Provision for Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Expected income tax (benefit) expense at the federal statutory rate | $ (1,535,000) | $ (1,021,000) |
State taxes, net of federal benefits | (109,000) | (92,000) |
Permanent differences | 225,000 | 50,000 |
Other, net | (8,000) | 122,000 |
Change due to U.S. tax reform | 1,177,000 | |
Change in valuation allowance | 250,000 | 941,000 |
Reported income tax (benefit) expense |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Net operating losses | $ 2,706,000 | $ 2,735,000 |
Equity compensation | 274,000 | |
Other deferred tax assets | 263,000 | 297,000 |
Total deferred tax assets | 3,243,000 | 3,032,000 |
Other deferred tax liabilities | (39,000) | |
Total deferred tax liabilities | (39,000) | |
Net deferred tax assets before valuation allowance | 2,993,000 | |
Less valuation allowance | (3,243,000) | (2,993,000) |
Net deferred tax assets |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Mar. 22, 2018 | Feb. 13, 2018 | Mar. 07, 2017 | Mar. 23, 2018 | Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 |
Number of restricted common stock shares issued | 189,536 | ||||||
Number of restricted common stock shares issued, value | $ 744,556 | ||||||
Revenue | 7,210,241 | $ 7,579,863 | |||||
Payments to purchase equipment | 183,783 | $ 18,189 | |||||
Sterling Facility [Member] | |||||||
Payments of additional equipment | $ 23,580 | 7,687 | |||||
Quarterly fee | 16,500 | ||||||
Payments to purchase equipment | $ 78,310 | ||||||
Director [Member] | |||||||
Number of common shares issued under plan | 700,000 | ||||||
2017 Equity Incentive Plan [Member] | Director [Member] | |||||||
Number of stock options vested | (450,000) | ||||||
Subsequent Event [Member] | |||||||
Number of restricted common stock shares issued | 800,000 | ||||||
Subsequent Event [Member] | Sterling Facility [Member] | |||||||
Payments of additional equipment | $ 7,687 | ||||||
Quarterly fee | $ 18,330 | ||||||
Agreement term | 3 years | ||||||
Payments to purchase equipment | $ 81,827 | ||||||
Subsequent Event [Member] | Restricted Stock Units (RSUs) [Member] | 2018 Revenue [Member] | |||||||
Number of restricted stock units granted | 200,000 | ||||||
Number of non qualified stock options granted to purchase common shares | 1,000,000 | ||||||
Stock options exercise price per share | $ 0.283 | ||||||
Number of stock options vested | 400,000 | ||||||
Revenue | $ 18,000,000 | ||||||
Subsequent Event [Member] | Restricted Stock Units (RSUs) [Member] | 2019 Revenue [Member] | |||||||
Number of stock options vested | 600,000 | ||||||
Revenue | $ 25,000,000 | ||||||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | |||||||
Number of common shares issued under plan | 2,250,000 | ||||||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | November 1, 2017 to February 13, 2018 [Member] | |||||||
Number of common shares issued for services | 158,658 | ||||||
Cash fees | $ 44,900 | ||||||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | Former Employee [Member] | |||||||
Number of non-qualified stock options exercised | 25,000 | ||||||
Proceeds from stock options exercised | $ 3,375 | ||||||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | Independent Directors [Member] | |||||||
Number of non-qualified stock options exercised | 53,004 | ||||||
Cash director fees | $ 15,000 | ||||||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | Director [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
Number of common shares issued under plan | 700,000 | ||||||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | Employees [Member] | Restricted Stock Units (RSUs) [Member] | |||||||
Number of common shares issued under plan | 700,000 | ||||||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | Consultant [Member] | |||||||
Number of common shares issued for services | 173,675 | ||||||
Subsequent Event [Member] | 2017 Equity Incentive Plan [Member] | CEO and Another Employee [Member] | |||||||
Number of common shares issued under plan | 1,560,000 | ||||||
Subsequent Event [Member] | Series 2 Warrants [Member] | |||||||
Number of restricted common stock shares issued | 100,000 | ||||||
Number of restricted common stock shares issued, value | $ 15,000 | ||||||
Subsequent Event [Member] | Warrant One and Warrant Two [Member] | |||||||
Number of restricted common stock shares issued | 1,039,079 | ||||||
Subsequent Event [Member] | Series 3 Warrants [Member] | |||||||
Number of restricted common stock shares issued | 1,168,540 |