Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended |
Sep. 30, 2013 | |
Document and Entity Information | ' |
Entity Registrant Name | 'Heatwurx, Inc. |
Document Type | '10-Q |
Document Period End Date | 30-Sep-13 |
Amendment Flag | 'false |
Entity Central Index Key | '0001533743 |
Current Fiscal Year End Date | '--12-31 |
Entity Common Stock, Shares Outstanding | 8,046,978 |
Entity Filer Category | 'Smaller Reporting Company |
Entity Current Reporting Status | 'Yes |
Entity Voluntary Filers | 'No |
Entity Well-known Seasoned Issuer | 'No |
Document Fiscal Year Focus | '2013 |
Document Fiscal Period Focus | 'Q3 |
BALANCE_SHEETS_unaudited
BALANCE SHEETS (unaudited) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | |
Current assets: | ' | ' | |
Cash and cash equivalents | $1,001,937 | $1,027,475 | |
Accounts receivable | 24,399 | 30,451 | |
Prepaid expenses and other current assets | 80,092 | 50,368 | |
Inventory | 207,001 | 48,749 | |
Total current assets | 1,313,429 | 1,157,043 | |
Other assets: | ' | ' | |
Equipment, net of depreciation | 386,763 | 316,357 | |
Intangible assets, net of amortization | 2,142,858 | 2,410,715 | |
Total other assets | 2,529,621 | 2,727,072 | |
Total assets | 3,843,050 | 3,884,115 | |
Current liabilities: | ' | ' | |
Accounts payable | 101,394 | 73,172 | |
Accrued liabilities | 165,384 | 112,482 | |
Interest payable | 2,630 | 2,630 | |
Income taxes payable | 75 | 150 | |
Loan payable, current | 40,339 | 27,218 | |
Current portion of senior subordinated notes payable | 1,000,000 | 500,000 | |
Total current liabilities | 1,309,822 | 715,652 | |
Long-term liabilities: | ' | ' | |
Loan payable | 156,198 | 106,158 | |
Senior subordinated notes payable | ' | 500,000 | |
Total long-term liabilities | 156,198 | 606,158 | |
Total liabilities | 1,466,020 | 1,321,810 | |
Commitments and contingencies | ' | ' | |
Stockholders' equity: | ' | ' | |
Preferred stock value | 104 | 286 | |
Common stock value | 805 | 190 | |
Additional paid-in capital | 8,334,863 | 5,992,636 | |
Accumulated deficit during development stage | 5,958,742 | 3,430,807 | |
Total stockholders' equity | 2,377,030 | 2,562,305 | |
Total liabilities and stockholders' equity | $3,843,050 | $3,884,115 | [1] |
[1] | The numbers in this column, for the year ended December 31, 2012, are derived from audited financials. |
BALANCE_SHEETS_Parenthetical
BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 4,500,000 | 3,000,000 |
Preferred Stock, Issued | 1,040,670 | 2,860,000 |
Common Stock, Par Value | $0.00 | $0.00 |
Common Stock, Shares Authorized | 20,000,000 | 20,000,000 |
Common Stock, Issued | 8,046,978 | 1,900,000 |
Preferred Series A | ' | ' |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 600,000 | 600,000 |
Preferred Stock, Issued | 0 | 600,000 |
Liquidation preference | $0 | $568,490 |
Preferred Series B | ' | ' |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 1,500,000 | 1,500,000 |
Preferred Stock, Issued | 212,022 | 1,500,000 |
Liquidation preference | 490,032 | 3,286,685 |
Preferred Series C | ' | ' |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 760,000 | 760,000 |
Preferred Stock, Issued | 101,000 | 760,000 |
Liquidation preference | 220,595 | 1,569,172 |
Preferred Series D | ' | ' |
Preferred Stock, Par Value | $0.00 | $0 |
Preferred Stock, Shares Authorized | 1,500,000 | 0 |
Preferred Stock, Issued | 727,648 | 0 |
Liquidation preference | $2,384,080 | $0 |
STATEMENTS_OF_OPERATIONS_unaud
STATEMENTS OF OPERATIONS (unaudited) (USD $) | 3 Months Ended | 9 Months Ended | 30 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | |
Income Statement | ' | ' | ' | ' | ' |
Equipment sales | $118,728 | $48,558 | $233,928 | $160,194 | $424,073 |
Other revenue | 7,182 | 500 | 8,462 | 500 | 25,996 |
Total revenue | 125,910 | 49,058 | 242,390 | 160,694 | 450,069 |
Costs of goods sold | 80,450 | 33,916 | 154,100 | 100,149 | 287,355 |
Gross profit | 45,460 | 15,142 | 88,290 | 60,545 | 162,714 |
Expenses: | ' | ' | ' | ' | ' |
Selling, general and administrative | 664,425 | 519,171 | 2,066,596 | 1,209,549 | 4,562,162 |
Research and development | 55,465 | 64,072 | 190,451 | 356,212 | 812,259 |
Total expenses | 719,890 | 583,243 | 2,257,047 | 1,565,761 | 5,374,421 |
Loss from operations | -674,430 | -568,101 | -2,168,757 | -1,505,216 | -5,211,707 |
Other Income and Expense: | ' | ' | ' | ' | ' |
Interest income | 989 | 1,047 | 2,023 | 1,838 | 6,854 |
Interest expense | -45,399 | -34,728 | -95,042 | -154,070 | -438,277 |
Total other income and expense | -44,410 | -33,681 | -93,019 | -152,232 | -431,423 |
Loss before income taxes | -718,840 | -601,782 | -2,261,776 | -1,657,448 | -5,643,130 |
Income taxes | ' | -100 | ' | -150 | -281 |
Net loss | -718,840 | -601,882 | -2,261,776 | -1,657,598 | -5,643,411 |
Preferred stock cumulative dividend | 213,760 | 89,705 | 238,596 | 228,939 | 285,719 |
Net loss available to common stockholders | ($932,600) | ($691,587) | ($2,500,372) | ($1,886,537) | ($5,929,130) |
Net loss per common share basic and diluted | ($0.12) | ($0.40) | ($0.62) | ($1.02) | ($2.15) |
Weighted average shares outstanding basic and diluted | 7,837,262 | 1,750,000 | 4,011,974 | 1,845,803 | 2,760,501 |
STATEMENT_OF_CASH_FLOWS_unaudi
STATEMENT OF CASH FLOWS (unaudited) (USD $) | 9 Months Ended | 30 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' | ' |
Net (loss) | ($2,261,776) | ($1,657,598) | ($5,643,411) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' | ' |
Depreciation | 40,774 | 5,450 | 60,481 |
Amortization | 267,857 | ' | 357,142 |
Bad debt expense | ' | 3,500 | 3,500 |
Non-cash expenses exchanged for services | ' | ' | 1,694 |
Stock-based compensation | 67,219 | 430,448 | 736,331 |
Changes in operating assets and liabilities | ' | ' | ' |
Decrease (increase) in receivables | 6,552 | 6,000 | -27,399 |
(Decrease) increase in prepaid and other current assets | -30,224 | -96,349 | -80,592 |
Increase in inventory | -158,252 | -47,815 | -207,001 |
(Decrease) increase in income taxes payable | -75 | 50 | 75 |
Increase in accounts payable | 28,222 | 101,713 | 101,394 |
(Decrease) increase in accrued liabilities | -36,528 | 17,984 | 26,782 |
(Decrease) increase in interest payable | ' | -8,055 | 2,630 |
Cash used in operating activities | -2,076,231 | -1,244,672 | -4,668,374 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' | ' |
Purchases of property and equipment | 111,180 | 319,962 | 448,938 |
Acquisition of business | ' | ' | 2,500,000 |
Cash used in investing activities | -111,180 | -319,962 | -2,948,938 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' | ' |
Proceeds from issuance of senior secured notes payable | 1,000,000 | ' | 2,500,000 |
Repayment of senior secured notes payable | 250,018 | 1,500,000 | 1,750,018 |
Proceeds from issuance of senior subordinated note payable | ' | ' | 1,000,000 |
Proceeds from issuance of common shares | ' | ' | 4,000 |
Proceeds from exercise of options | ' | ' | 300,000 |
Proceeds from issuance of Series A preferred shares | ' | ' | 500,000 |
Proceeds from issuance of Series B preferred shares | ' | ' | 3,000,000 |
Proceeds from issuance of Series C preferred shares | ' | 1,520,000 | 1,520,000 |
Proceeds from issuance of Series D preferred shares | 1,348,730 | ' | 1,348,730 |
Proceeds from loan payable | 83,507 | 142,010 | 225,797 |
Repayment of loan payable | 20,346 | ' | 29,260 |
Cash provided by financing activities | 2,161,873 | 162,010 | 8,619,249 |
Net change in cash and cash equivalents | -25,538 | -1,402,624 | 1,001,937 |
Cash and cash equivalents, beginning of period | 1,027,475 | 2,794,937 | ' |
Cash and cash equivalents, end of period | $1,001,937 | $1,392,313 | $1,001,937 |
Principal_Business_Activities
Principal Business Activities | 3 Months Ended |
Sep. 30, 2013 | |
Notes | ' |
Principal Business Activities | ' |
1. PRINCIPAL BUSINESS ACTIVITIES: | |
Organization and Business - Heatwurx, Inc., a Delaware corporation (“Heatwurx,” or the “Company”), is a development stage, asphalt repair equipment and technology company. Heatwurx was incorporated on March 29, 2011 as Heatwurxaq, Inc. and subsequently changed its name to Heatwurx, Inc. on April 15, 2011. (Note 4) | |
Development Stage - From the date of incorporation, the Company has been in the development stage and therefore is classified as a development stage company. |
Basis_of_Presenation_and_Summa
Basis of Presenation and Summary of Significant Accounting Policies | 3 Months Ended |
Sep. 30, 2013 | |
Notes | ' |
Basis of Presenation and Summary of Significant Accounting Policies: | ' |
2. BASIS OF PRESENATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: | |
Basis of Presentation - These unaudited interim financial statements and related notes are presented in accordance with the accounting principles generally accepted in the United States (“U.S. GAAP”). Accordingly, they do not include all disclosures required in the annual financial statements by U.S. GAAP. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments considered necessary to present fairly in all material respects the financial position as of September 30, 2013. | |
These financial statements should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2012, and have been prepared on a consistent basis with the accounting policies described in Note 2 - Summary of Significant Accounting Policies of the Notes to Financial Statements included in our registration statement on Form S-1/A for the year ended December 31, 2012. Our accounting policies did not change in the third quarter or first nine months of 2013. Operating results for the three months and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any future period. | |
The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. | |
The Company also faces certain risks and uncertainties which are present in many emerging companies regarding product development, future profitability, ability to obtain future capital, protection of patents and property rights, competition, rapid technological change, government regulations, recruiting and retaining key personnel, and third party manufacturing organizations. | |
To date we have relied exclusively on private placements with a small group of investors to finance our business and operations. We have had little revenue since our inception. For the first nine months of 2013, the Company incurred a net loss of $2,261,776 and utilized $2,076,231 in cash flows from operating activities. The Company had cash on hand of approximately $1,002,000 as of September 30, 2013. Successful completion of the Company’s development program and its transition to profitable operations is dependent upon obtaining additional financing adequate to fulfill its development and commercialization activities, and achieve a level of revenues adequate to support the Company’s cost structure. Many of the Company’s objectives to establish profitable business operations rely upon the occurrence of events outside its control; there is no assurance that the Company will be successful in accomplishing these objectives. We cannot assure that additional debt or equity or other funding will be available to us on acceptable terms, if at all. If we fail to obtain additional funding when needed, we would be forced to scale back, or terminate our operations, or seek to merge with or be acquired by another company. | |
The Company has incurred operating losses, accumulated deficit and negative cash flows from operations since inception. As of September 30, 2013, the Company had an accumulated deficit of approximately $5,959,000. The issues described above raise substantial doubt about the Company’s ability to continue as a going concern. Management of the Company intends to address these issues by raising additional capital through a through a private placement of equity. On August 30, 2013, the Company completed its original Series D preferred stock offering with a total of 727,648 units sold at $3.00 per unit for gross proceeds of $1,432,962 in cash and $749,982 from a non-cash conversion of senior secured notes payable. | |
Management anticipates that the Company will require additional funds to continue operations. As of September 30, 2013, we had approximately $1,002,000 cash on hand and were spending approximately $250,000 per month, of which only a minor amount was satisfied by gross proceeds from operations. Beginning in October 2013 through April 2014 we have an obligation to make a series of principal payments totaling $1,000,000 on our current senior subordinated note payable. We anticipate the need to secure funding of up to approximately $3,000,000 over the next twelve months to meet our cash flow requirements and repay our subordinated debt. | |
The accompanying unaudited financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern. | |
Recent Accounting Pronouncements - From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to be material to our financial statements upon adoption. |
Property_and_Equipment
Property and Equipment | 3 Months Ended | ||
Sep. 30, 2013 | |||
Notes | ' | ||
Property and Equipment | ' | ||
3. PROPERTY AND EQUIPMENT: | |||
A summary of the cost of property and equipment, by component, and the related accumulated depreciation is as follows: | |||
September 30, | December 31, | ||
2013 | 2012 | ||
(unaudited) | |||
Computer equipment & software | $20,561 | $14,285 | |
Demo equipment | 426,336 | 321,432 | |
446,897 | 335,717 | ||
Accumulated depreciation | -60,134 | -19,360 | |
$386,763 | $316,357 | ||
Depreciation expense was $14,518 and $40,774 for the three and nine months ended September 30, 2013 and $4,675 and $5,450 for the three and nine months ended September 30, 2012. |
Acquistion
Acquistion | 3 Months Ended |
Sep. 30, 2013 | |
Notes | ' |
Acquistion | ' |
4. ACQUISTION: | |
On April 15, 2011, the Company entered into an Asset Purchase Agreement with an individual who is a founder and a current stockholder. Pursuant to the agreement, the Company purchased the related business and activities of the design, manufacture and distribution of asphalt repair machinery under the Heatwurx brand. The total purchase price was $2,500,000. The purchase price was paid in a $1,500,000 cash payment and the issuance of a senior subordinated note to the seller in the amount of $1,000,000. (Note 5) | |
The business essentially consisted of the investment in research and development of the technology, the patents applied for as a result of the research and development activities and certain business relationships that were in process, but not finalized as of the acquisition date. Collectively, these investments constitute the in-process research and development we refer to as the “asphalt preservation and repair solution.” The Company capitalized $2,500,000 of in-process research and development related to this asphalt preservation and repair solution. As of October 1, 2012, in-process research and development is now classified as developed technology and amortized over its estimated useful life of 7 years. The estimated fair value of the in-process research and development was determined using the income approach. Under the income approach, the expected future cash flows from the asset are estimated and discounted to its net present value at an appropriate risk-adjusted rate of return. As of September 30, 2013, our developed technology intangible asset had a value of $2,142,858, net of accumulated amortization of $357,142. Amortization expense was $89,286 and $267,857 for the three and nine months ended September 30, 2013. | |
In conjunction with the Asset Purchase Agreement, the Company granted 200,000 performance stock options to a founder of the Company with an exercise price of $0.40 per share and a term of 7 years. Following the effectiveness of the 7 for 1 stock split that was completed in October 2011, the 200,000 performance stock options were exchanged for 1,400,000 performance stock options with an exercise price of $0.057 per share. | |
The performance stock options will vest in full on the occurrence of any the following: (1) The Company achieves total revenue in the twelve month period ended April 2013 of $24,750,000 determined in accordance with U.S. GAAP; (2) the Company achieves total revenue in the twelve month period ended April 2014 of $49,500,000; or (3) the Company achieves total revenue in the twelve month period ended April 2015 of $99,000,000. If the performance stock options do not vest per the aforementioned vesting schedule, the performance stock options will immediately terminate and expire. | |
The performance stock options are being accounted for as contingent consideration and were recognized at its estimated fair value at the acquisition date in the amount of $0. In order for the options to vest, as described above, the Company must achieve certain revenue targets within three years from December 31, 2012. In order to determine the fair value of the options granted, the Company prepared a forecast of the probability that the targets would be achieved, with a focus on the 2013 revenue given the uncertainty of forecasting revenue for years 2014 and 2015 given the Company’s development stage. The Company prepared three scenarios only one of which resulted in the options vesting. The Company’s forecasts indicated a 95% probability that the options would not vest and therefore would have no value. Although the third scenario did result in the options vesting, as the probability was only 5%, the value associated with this scenario was immaterial. |
Notes_Payable
Notes Payable | 3 Months Ended | |
Sep. 30, 2013 | ||
Notes | ' | |
Notes Payable | ' | |
5. NOTES PAYABLE: | ||
Senior Secured Notes Payable - The Company issued senior secured promissory notes totaling $1,000,000 on May 22, 2013. The notes bear interest at a rate of 12% per annum and is payable monthly on the first day of each month. The entire principal balance and all accrued interest were due September 15, 2013. In August, principal in the amount of $749,982 was retired through the issuance of Series D preferred shares. On September 15th the remaining principal in the amount of $250,018 and accrued interest was paid in full. | ||
Senior Subordinated Note Payable - The Company issued a senior subordinated note payable in the amount of $1,000,000 on April 15, 2011 to Richard Giles, a founder, stockholder and former director of the Company. The note bears interest at a rate of 6% per annum and matures on April 15, 2014. The holder of the senior subordinated note has agreed to subordinate to the lenders of the senior secured notes his security interest in our assets granted under the Subordinated Security Agreement dated April 15, 2011. As of September 30, 2013, the note is subject to mandatory principal payments as follows: | ||
Date of Payment | Amount of Payment | |
15-Oct-13 | $250,000 | |
15-Dec-13 | 250,000 | |
15-Feb-14 | 250,000 | |
15-Apr-14 | 250,000 | |
Total principal payments | $1,000,000 | |
Interest on the senior subordinated note payable totaling $2,630 was outstanding at September 30, 2013. See Note 11 for further discussion of the Senior Subordinated Note Payable. | ||
Loan Payable - In September 2012, the Company financed the purchase of equipment used for transport and demonstration of our equipment. The note, in the original amount of $142,290, bears interest at a rate of 2.6% per annum and matures on September 4, 2017. In August 2013, the Company financed the purchase of a truck to transport our equipment used in demonstrations. The loan, in the amount of $83,507, bears interest at a rate of 6.1% per annum and matures on December 1, 2018. | ||
As of September 30, 2013, the loans are subject to mandatory principal payments as follows: | ||
Year ending December 31, | Payments | |
2013 | $8,726 | |
2014 | 42,353 | |
2015 | 44,001 | |
2016 | 45,725 | |
2017 | 37,361 | |
Thereafter | 18,371 | |
Total principal payments | $196,537 | |
Stockholders_Equity_Note
Stockholders' Equity Note | 3 Months Ended | |||
Sep. 30, 2013 | ||||
Notes | ' | |||
Stockholders' Equity Note | ' | |||
6. STOCKHOLDERS’ EQUITY | ||||
Common Stock - The Company has authorized 20,000,000 common shares with a $0.0001 par value. As of September 30, 2013 there were 8,046,978 common shares outstanding. | ||||
Preferred Stock - The Company has authorized 4,500,000 shares of Preferred Stock with a $0.0001 par value. As holders of any series of preferred stock convert into common shares the preferred shares are no longer outstanding and become available for reissuance. As of September 30, 2013 there were 1,040,670 preferred shares outstanding. | ||||
Series A Preferred Stock - As of September 30, 2013 there were no shares of Series A Preferred Stock outstanding. | ||||
During the nine months ended September 30, 2013; 600,000 Series A preferred shares were converted to common shares at a ratio of 7:1. The Series A Preferred Stock ranks senior in liquidation and dividend preferences to the Company’s common stock. Holders of Series A Preferred Stock accrue dividends at the rate per annum of $0.066664. The conversion of Series A preferred shares to common shares resulted in a release of accumulated dividends as of September 30, 2013. | ||||
Series B Preferred Stock - As of September 30, 2013 there were 212,022 shares of Series B Preferred Stock outstanding. | ||||
During the nine months ended September 30, 2013; 1,287,978 Series B preferred shares were converted to common shares. The Series B Preferred Stock ranks senior in liquidation and dividend preferences to the Company’s common stock. Holders of Series B Preferred Stock accrue dividends at the rate per annum of $0.16 per share. The conversion of Series B preferred shares to common shares resulted in a release of $279,875 in accumulated dividends during the nine months ended September 30, 2013. At September 30, 2013, Series B Preferred Stock had dividends accumulated of $65,988. No dividends have been declared, therefore there are no amounts accrued on the balance sheet. | ||||
The holders of the Series B Preferred Stock have conversion rights equivalent to such number of fully paid and non-assessable shares of common stock as is determined by dividing the Series B original issue price of $2.00 by the then applicable conversion price. The conversion ratio is subject to customary anti-dilution adjustments, including in the event that the Company issues equity securities at a price equivalent to or less than the conversion price in effect immediately prior to such issue. | ||||
The holders of Series B Preferred Stock have a liquidation preference over the holders of the Company’s common stock equivalent to the purchase price per share of the Series B Preferred Stock plus any accrued and unpaid dividends, whether or not declared, on the Series B Preferred Stock. A liquidation would be deemed to occur upon the happening of customary events, including transfer of all or substantially all of the Company’s common stock or assets or a merger, or consolidation. The Company believes that such liquidation events are within its control and therefore the Company has classified the Series B Preferred Stock in stockholders’ equity. | ||||
The holders of Series B Preferred Stock vote together as a single class with the holders of the Company’s common stock on all action to be taken by the Company’s stockholders. Each share of Series B Preferred Stock entitles the holder to the number of votes equal to the number of shares of common stock into which the shares of the Series B Preferred Stock are convertible into as of the record date for determining stockholders entitled to vote on such matter. | ||||
Series C Preferred Stock - As of September 30, 2013 there were 101,000 shares of Series C Preferred Stock outstanding. | ||||
During the nine months ended September 30, 2013; 659,000 Series C preferred shares were converted to common shares. The Series C Preferred Stock ranks senior in liquidation and dividend preferences to the Company’s common stock. Holders of Series C Preferred Stock accrue dividends at the rate per annum of $0.16 per share. Dividends of $87,127 were paid upon the conversion of Series C preferred shares to common shares. At September 30, 2013, Series C Preferred Stock had dividends accumulated of $27,068. As dividends are accrued and payable quarterly on the Series C Preferred Stock, the Company has dividends payable of $27,068 included in accounts payable as of September 30, 2013. | ||||
The holders of the Series C Preferred Stock have conversion rights equivalent to such number of fully paid and non-assessable shares of common stock as is determined by dividing the Series C original issue price of $2.00 by the then applicable conversion price. The conversion ratio is subject to customary anti-dilution adjustments, including in the event that the Company issues equity securities at a price equivalent to or less than the conversion price in effect immediately prior to such issue. | ||||
The holders of Series C Preferred Stock have a liquidation preference over the holders of the Company’s common stock equivalent to the purchase price per share of the Series C Preferred Stock plus any accrued and unpaid dividends, whether or not declared, on the Series C Preferred Stock. A liquidation would be deemed to occur upon the happening of customary events, including transfer of all or substantially all of the Company’s common stock or assets or a merger, or consolidation. The Company believes that such liquidation events are within its control and therefore the Company has classified the Series C Preferred Stock in stockholders’ equity. | ||||
The holders of Series C Preferred Stock vote together as a single class with the holders of the Company’s common stock on all action to be taken by the Company’s stockholders. Each share of Series C Preferred Stock entitles the holder to the number of votes equal to the number of shares of common stock into which the shares of the Series C Preferred Stock are convertible into as of the record date for determining stockholders entitled to vote on such matter. | ||||
Series D Preferred Stock - As of September 30, 2013 there were 727,648 shares of Series D Preferred Stock outstanding. | ||||
On June 21, 2013, the Company offered 1,500,000 units at $3.00 per unit for potential total proceeds of $4,500,000. On August 30, 2013, the Company completed its offering with a total of 727,648 units sold at $3.00 per unit for gross proceeds of $2,182,944, which consisted of $1,432,962 in cash and $749,982 in a non-cash conversion of senior secured notes payable. The Company paid share issuance costs in the amount of $84,232. Each unit consisted of one share of Series D Preferred Stock and one-half warrant, with each whole warrant exercisable at $3.00 per share. | ||||
Holders of Series D Preferred Stock accrue dividends at the rate per annum of $0.24 per share, payable on a quarterly basis. As dividends are accrued and payable quarterly on the Series D Preferred Stock, the Company has accrued $24,407 for dividends payable in accrued expenses as of September 30, 2013. | ||||
The holders of the Series D Preferred Stock have conversion rights equivalent to such number of fully paid and non-assessable shares of common stock as is determined by dividing the Series D original issue price of $3.00 by the then applicable conversion price. Each Series D Share will convert into one share of our common stock at any time at the option of the holder of the Series D Shares or will be converted at the option of the Company at any time the trading price of our common stock is at least $4.50 per share for ten consecutive trading days. The conversion ratio is subject to anti-dilution adjustments, including in the event that the Company issues equity securities at a price equivalent to or less than the conversion price in effect immediately prior to such issue. We have determined that there is a beneficial conversion feature (“BCF”). The calculated value as of the commitment date of the BCF was $176,729, which represents the difference between the effective conversion price and the stated conversion price multiplied by the total number of shares which may be converted. We have recorded this amount as a deemed dividend as of the date of issuance, August 30, 2013, as the Series D Preferred Stock is immediately convertible. This amount was recorded as a charge against our accumulated deficit in our accompanying balance sheet. | ||||
The holders of Series D Preferred Stock have a liquidation preference over the holders of the Company’s common stock equivalent to the purchase price per share of the Series D Preferred Stock plus any accrued and unpaid dividends, whether or not declared, on the Series D Preferred Stock. A liquidation would be deemed to occur upon the happening of customary events, including transfer of all or substantially all of the Company’s common stock or assets or a merger, or consolidation. The Company believes that such liquidation events are within its control and therefore the Company has classified the Series D Preferred Stock in stockholders’ equity. | ||||
The holders of Series D Preferred Stock vote together as a single class with the holders of the Company’s common stock on all action to be taken by the Company’s stockholders. Each share of Series D Preferred Stock entitles the holder to the number of votes equal to the number of shares of common stock into which the shares of the Series D Preferred Stock are convertible as of the record date for determining stockholders entitled to vote on such matter. | ||||
Each unit includes one-half warrant. Each full warrant grants the right to purchase a share of the Company’s common stock and, as of September 30, 2013, there were warrants to purchase 363,824 shares of common stock outstanding. The warrants will be exercisable by the holders at any time on or after the issuance date of the warrants through and including October 1, 2014. | ||||
Treasury Stock Transaction | ||||
Effective January 26, 2012 two of our founders, including our former Chief Executive Officer, Mr. Larry Griffin, severed their ties with the Company upon execution of a settlement agreement with us. At the time of their departure from the Company, each of them returned 525,000 shares (1,050,000 total) of common stock to the Company for cancellation to assist the Company and provide for a better capitalization to all the investors, and sold their remaining shares to other private individuals with no proceeds going to the Company. The settlement agreement did not provide for payment by us or the founders. | ||||
Stock Options | ||||
Number of | Weighted | Weighted | ||
Options | Average | Average | ||
Exercise Price | Remaining Life | |||
(Years) | ||||
Balance, December 31, 2011 | 300,000 | $2.00 | ||
Granted | 872,000 | $2.00 | ||
Exercised | -150,000 | $2.00 | ||
Cancelled | -- | $ -- | ||
Balance, December 31, 2012 | 1,022,000 | $2.00 | 4.3 | |
Granted | 10,000 | $3.00 | ||
Exercised | -- | $ -- | ||
Cancelled | 12,000 | $2.00 | ||
Balance, September 30, 2013 | 1,020,000 | $2.01 | 2.93 | |
Exercisable, December 31, 2012 | 710,000 | $2.00 | ||
Exercisable, September 30, 2013 | 820,000 | $2.00 | ||
On June 20, 2013, the Board of Directors approved the grant of 10,000 options to the Company’s Secretary, in accordance with the terms of the 2011 Equity Incentive Plan, as amended. The Options vest immediately and have an exercise price of $3.00 per share, with an expiration date of five years from the grant date. | ||||
The fair value of each stock option granted was estimated on the date of grant using the Black Scholes option pricing model with the following assumptions: | ||||
30-Sep-13 | ||||
Risk-free interest rate range | 0.62% - 1.31% | |||
Expected life | 5.0 years | |||
Vesting Period | 0 - 4 Years | |||
Expected volatility | 39% | |||
Expected dividend | - | |||
Fair value range of options at grant date | $0.675- $1.077 | |||
The Company recorded stock-based compensation expense of $17,526 and $67,219 during the three and nine months ended September 30, 2013, respectively. The Company recorded stock-based compensation expense of $75,201 and $430,448 during the three and nine months ended September 30, 2012, respectively. | ||||
As of September 30, 2013 there was $125,255 of unrecognized compensation expense related to the issuance of the stock options. | ||||
Performance Stock Options | ||||
There were no performance Stock options granted during the three and six months ended September 30, 2013. | ||||
Number of | Weighted | |||
Options | Average | |||
Exercise | ||||
Price | ||||
Balance, December 31, 2011 | 1,400,000 | $0.06 | ||
Granted | 40,000 | $2.00 | ||
Exercised | -- | $ - | ||
Cancelled | -- | $ - | ||
Balance, September 30, 2013 and December 31, 2012 | 1,440,000 | $0.11 | ||
Exercisable, September 30, 2013 and December 31, 2012 | 40,000 | $2.00 | ||
See Note 4 for further discussion of the performance options. |
Net_Loss_Per_Common_Share
Net Loss Per Common Share | 3 Months Ended | |||||
Sep. 30, 2013 | ||||||
Notes | ' | |||||
Net Loss Per Common Share | ' | |||||
7. NET LOSS PER COMMON SHARE: | ||||||
The Company computes loss per share of common stock using the two-class method required for participating securities. Our participating securities include all series of our convertible preferred stock. Undistributed earnings allocated to these participating securities are added to net loss in determining net loss attributable to common stockholders. Basic and Diluted loss per share are computed by dividing net loss attributable to common stockholder by the weighted-average number of shares of common stock outstanding. | ||||||
Outstanding options were not included in the computation of diluted loss per share because the options' exercise price was greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive. | ||||||
The calculation of the numerator and denominator for basic and diluted net loss per common share is as follows: | ||||||
For the three months | For the nine months | For the period | ||||
ended | ended | from March 29, | ||||
September 30, | September 30, | 2011 (date of inception) | ||||
through | ||||||
September 30, | ||||||
2013 | 2012 | 2013 | 2012 | 2013 | ||
Net Loss | ($718,840) | ($601,882) | ($2,261,776) | ($1,657,598) | ($5,643,411) | |
Basic and diluted: | ||||||
Preferred stock cumulative dividend - Series A | -- | 10,054 | -- | 29,944 | -- | |
Preferred stock cumulative dividend - Series B | 8,551 | 60,328 | 25,373 | 179,672 | 65,988 | |
Preferred stock cumulative dividend - Series C | 4,073 | 19,323 | 12,087 | 19,323 | 18,595 | |
Preferred stock cumulative dividend - Series D | 201,136 | -- | 201,136 | -- | 201,136 | |
Net income available to preferred stockholders | 213,760 | 89,705 | 238,596 | 228,939 | 285,719 | |
Net loss attributable to common stockholders | ($932,600) | ($691,587) | ($2,500,372) | ($1,886,537) | ($5,929,130) | |
Commitments_and_Contingencies_
Commitments and Contingencies Note | 3 Months Ended |
Sep. 30, 2013 | |
Notes | ' |
Commitments and Contingencies Note | ' |
8. COMMITMENTS AND CONTINGENCIES: | |
Lease Commitments - On July 18, 2012, the Company entered into a thirteen month lease for office space for our corporate headquarters located in Greenwood Village, Colorado. Under the terms of the lease agreement, the Company leased approximately 2,244 square feet of general office space. The lease term commenced on July 23, 2012 and was extended through February 28, 2014. | |
Total rent expense for the three and nine months ended September 30, 2013 was $9,228 and $26,867, respectively. Rent expense for the three and nine months ended September 30, 2012 was $6,070 and $12,802, respectively. | |
The Company’s remaining commitment under its current lease term through February 28, 2014 is approximately $16,000. | |
Purchase Commitments - As of September 30, 2013, the Company has a commitment to its manufacturer to purchase equipment totaling approximately $127,000. |
Related_Party_Transactions
Related Party Transactions | 3 Months Ended |
Sep. 30, 2013 | |
Notes | ' |
Related Party Transactions | ' |
9. RELATED PARTY TRANSACTIONS: | |
During the three and nine months ended September 30, 2013, the Company paid consulting fees of $47,400 and $142,200, respectively to Richard Giles, a founder, stockholder and former director of the Company. During the three and nine months ended September 30, 2012 the Company paid consulting fees of $45,000 and $120,500, respectively to Richard Giles. There were no other payments to related parties during the three months ended September 30, 2012. During the nine months ended September 30, 2012 the company also paid consulting fees of $12,500 to Larry Griffin, a founder, and former executive officer of the Company. | |
Mr. Gus Blass III, a member of our board of directors and a stockholder, held $125,000 of the senior secured notes payable in an individual capacity and $125,000 through an entity in which he is a managing member. The senior secured notes payable, principal and interest, were paid in full to Mr. Blass on September 15, 2013. |
Supplemental_Cash_Flow_Informa
Supplemental Cash Flow Information | 3 Months Ended | |||
Sep. 30, 2013 | ||||
Notes | ' | |||
Supplemental Cash Flow Information | ' | |||
10. SUPPLEMENTAL CASH FLOW INFORMATION: | ||||
Nine Months ended | For the period | |||
September 30, | from March 29, | |||
2011 (date of | ||||
inception) | ||||
through | ||||
September 30, | ||||
2013 | 2012 | 2013 | ||
Cash paid for interest | $95,042 | $154,070 | $438,277 | |
Cash paid for income taxes | $100 | $100 | $300 | |
Series C Dividend payable in accounts payable | $27,068 | $ -- | $27,068 | |
Series D Dividend payable in accrued expenses | $24,407 | $ -- | $24,407 | |
Non-Cash investing and financing transactions | ||||
Repayment of senior secured notes payable with issuance of Series D preferred shares | $749,982 | $ -- | $749,982 | |
Subsequent_Events
Subsequent Events | 3 Months Ended |
Sep. 30, 2013 | |
Notes | ' |
Subsequent Events | ' |
11. SUBSEQUENT EVENTS: | |
In October 2013, the Company initiated a follow-on Series D Preferred stock offering to sell the remaining 772,352 units at $3.00 per unit for up to $2,317,056 gross proceeds. The offering includes an over-allotment of 1,000,000 units for an additional $3,000,000 in potential gross proceeds. If we successfully complete this transaction, we believe the proceeds we will receive will be sufficient to fund our operations, including our expected capital expenditures, through at least June 2014, or at least the next twelve months if all of the over-allotment units are sold. Each unit consists of one share of Series D Preferred Stock and one-half warrant. One warrant entitles the holder to purchase one share of the Company’s common stock. The Company has agreed to file a registration statement within 90 days following the completion of this offering to register the common shares to be issued upon exercise of the warrants. The Company also granted similar registration rights to the holders of common stock to be issued upon exercise of the warrants issued in the prior offering of Series D Preferred shares and warrants which closed on August 30, 2013. As of November 6, 2013 there were no Series D Preferred stock issuances subsequent to the September 30, 2013 reporting date. | |
As of November 6, 2013; 25,022 Series B preferred shares were converted into a total of 25,022 common shares subsequent to September 30, 2013. As of November 6, 2013 there were 8,072,000 common shares outstanding. | |
On October 15, 2013 the Company made the required principal payment of $250,000 on the Senior Subordinated note payable. As of November 6, 2013 the current senior subordinated note payable is $750,000. See Note 5 Notes Payable for further discussion. |
Basis_of_Presenation_and_Summa1
Basis of Presenation and Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 3 Months Ended |
Sep. 30, 2013 | |
Policies | ' |
Basis of Presentation | ' |
Basis of Presentation - These unaudited interim financial statements and related notes are presented in accordance with the accounting principles generally accepted in the United States (“U.S. GAAP”). Accordingly, they do not include all disclosures required in the annual financial statements by U.S. GAAP. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments considered necessary to present fairly in all material respects the financial position as of September 30, 2013. | |
These financial statements should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2012, and have been prepared on a consistent basis with the accounting policies described in Note 2 - Summary of Significant Accounting Policies of the Notes to Financial Statements included in our registration statement on Form S-1/A for the year ended December 31, 2012. Our accounting policies did not change in the third quarter or first nine months of 2013. Operating results for the three months and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any future period. | |
The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. | |
The Company also faces certain risks and uncertainties which are present in many emerging companies regarding product development, future profitability, ability to obtain future capital, protection of patents and property rights, competition, rapid technological change, government regulations, recruiting and retaining key personnel, and third party manufacturing organizations. | |
To date we have relied exclusively on private placements with a small group of investors to finance our business and operations. We have had little revenue since our inception. For the first nine months of 2013, the Company incurred a net loss of $2,261,776 and utilized $2,076,231 in cash flows from operating activities. The Company had cash on hand of approximately $1,002,000 as of September 30, 2013. Successful completion of the Company’s development program and its transition to profitable operations is dependent upon obtaining additional financing adequate to fulfill its development and commercialization activities, and achieve a level of revenues adequate to support the Company’s cost structure. Many of the Company’s objectives to establish profitable business operations rely upon the occurrence of events outside its control; there is no assurance that the Company will be successful in accomplishing these objectives. We cannot assure that additional debt or equity or other funding will be available to us on acceptable terms, if at all. If we fail to obtain additional funding when needed, we would be forced to scale back, or terminate our operations, or seek to merge with or be acquired by another company. | |
The Company has incurred operating losses, accumulated deficit and negative cash flows from operations since inception. As of September 30, 2013, the Company had an accumulated deficit of approximately $5,959,000. The issues described above raise substantial doubt about the Company’s ability to continue as a going concern. Management of the Company intends to address these issues by raising additional capital through a through a private placement of equity. On August 30, 2013, the Company completed its original Series D preferred stock offering with a total of 727,648 units sold at $3.00 per unit for gross proceeds of $1,432,962 in cash and $749,982 from a non-cash conversion of senior secured notes payable. | |
Management anticipates that the Company will require additional funds to continue operations. As of September 30, 2013, we had approximately $1,002,000 cash on hand and were spending approximately $250,000 per month, of which only a minor amount was satisfied by gross proceeds from operations. Beginning in October 2013 through April 2014 we have an obligation to make a series of principal payments totaling $1,000,000 on our current senior subordinated note payable. We anticipate the need to secure funding of up to approximately $3,000,000 over the next twelve months to meet our cash flow requirements and repay our subordinated debt. | |
The accompanying unaudited financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern. |
Basis_of_Presenation_and_Summa2
Basis of Presenation and Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies) | 3 Months Ended |
Sep. 30, 2013 | |
Policies | ' |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements - From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to be material to our financial statements upon adoption. |
Property_and_Equipment_Summary
Property and Equipment: Summary of the cost of property and equipment (Tables) | 3 Months Ended | ||
Sep. 30, 2013 | |||
Tables/Schedules | ' | ||
Summary of the cost of property and equipment | ' | ||
September 30, | December 31, | ||
2013 | 2012 | ||
(unaudited) | |||
Computer equipment & software | $20,561 | $14,285 | |
Demo equipment | 426,336 | 321,432 | |
446,897 | 335,717 | ||
Accumulated depreciation | -60,134 | -19,360 | |
$386,763 | $316,357 |
Notes_Payable_Schedule_of_prin
Notes Payable: Schedule of principal payments, senior subordinated note payable (Tables) | 3 Months Ended | |
Sep. 30, 2013 | ||
Tables/Schedules | ' | |
Schedule of principal payments, senior subordinated note payable | ' | |
Date of Payment | Amount of Payment | |
15-Oct-13 | $250,000 | |
15-Dec-13 | 250,000 | |
15-Feb-14 | 250,000 | |
15-Apr-14 | 250,000 | |
Total principal payments | $1,000,000 |
Notes_Payable_Mandatory_princi
Notes Payable: Mandatory principal payments, loan payable (Tables) | 3 Months Ended | |
Sep. 30, 2013 | ||
Tables/Schedules | ' | |
Mandatory principal payments, loan payable | ' | |
Year ending December 31, | Payments | |
2013 | $8,726 | |
2014 | 42,353 | |
2015 | 44,001 | |
2016 | 45,725 | |
2017 | 37,361 | |
Thereafter | 18,371 | |
Total principal payments | $196,537 |
Stockholders_Equity_Note_Sched
Stockholders' Equity Note: Schedule of Stock Option Activity (Tables) | 3 Months Ended | |||
Sep. 30, 2013 | ||||
Tables/Schedules | ' | |||
Schedule of Stock Option Activity | ' | |||
Number of | Weighted | Weighted | ||
Options | Average | Average | ||
Exercise Price | Remaining Life | |||
(Years) | ||||
Balance, December 31, 2011 | 300,000 | $2.00 | ||
Granted | 872,000 | $2.00 | ||
Exercised | -150,000 | $2.00 | ||
Cancelled | -- | $ -- | ||
Balance, December 31, 2012 | 1,022,000 | $2.00 | 4.3 | |
Granted | 10,000 | $3.00 | ||
Exercised | -- | $ -- | ||
Cancelled | 12,000 | $2.00 | ||
Balance, September 30, 2013 | 1,020,000 | $2.01 | 2.93 | |
Exercisable, December 31, 2012 | 710,000 | $2.00 | ||
Exercisable, September 30, 2013 | 820,000 | $2.00 |
Stockholders_Equity_Note_Sched1
Stockholders' Equity Note: Schedule of Stock Option Valuation Assumptions (Tables) | 3 Months Ended | ||
Sep. 30, 2013 | |||
Tables/Schedules | ' | ||
Schedule of Stock Option Valuation Assumptions | ' | ||
30-Sep-13 | |||
Risk-free interest rate range | 0.62% - 1.31% | ||
Expected life | 5.0 years | ||
Vesting Period | 0 - 4 Years | ||
Expected volatility | 39% | ||
Expected dividend | - | ||
Fair value range of options at grant date | $0.675- $1.077 |
Stockholders_Equity_Note_Sched2
Stockholders' Equity Note: Schedule of Performance Stock Option Activity (Tables) | 3 Months Ended | |||
Sep. 30, 2013 | ||||
Tables/Schedules | ' | |||
Schedule of Performance Stock Option Activity | ' | |||
Number of | Weighted | |||
Options | Average | |||
Exercise | ||||
Price | ||||
Balance, December 31, 2011 | 1,400,000 | $0.06 | ||
Granted | 40,000 | $2.00 | ||
Exercised | -- | $ - | ||
Cancelled | -- | $ - | ||
Balance, September 30, 2013 and December 31, 2012 | 1,440,000 | $0.11 | ||
Exercisable, September 30, 2013 and December 31, 2012 | 40,000 | $2.00 |
Net_Loss_Per_Common_Share_Sche
Net Loss Per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Tables) | 3 Months Ended | |||||
Sep. 30, 2013 | ||||||
Tables/Schedules | ' | |||||
Schedule of Earnings Per Share, Basic and Diluted | ' | |||||
For the three months | For the nine months | For the period | ||||
ended | ended | from March 29, | ||||
September 30, | September 30, | 2011 (date of inception) | ||||
through | ||||||
September 30, | ||||||
2013 | 2012 | 2013 | 2012 | 2013 | ||
Net Loss | ($718,840) | ($601,882) | ($2,261,776) | ($1,657,598) | ($5,643,411) | |
Basic and diluted: | ||||||
Preferred stock cumulative dividend - Series A | -- | 10,054 | -- | 29,944 | -- | |
Preferred stock cumulative dividend - Series B | 8,551 | 60,328 | 25,373 | 179,672 | 65,988 | |
Preferred stock cumulative dividend - Series C | 4,073 | 19,323 | 12,087 | 19,323 | 18,595 | |
Preferred stock cumulative dividend - Series D | 201,136 | -- | 201,136 | -- | 201,136 | |
Net income available to preferred stockholders | 213,760 | 89,705 | 238,596 | 228,939 | 285,719 | |
Net loss attributable to common stockholders | ($932,600) | ($691,587) | ($2,500,372) | ($1,886,537) | ($5,929,130) |
Supplemental_Cash_Flow_Informa1
Supplemental Cash Flow Information: Schedule of Cash Flow, Supplemental Disclosures (Tables) | 3 Months Ended | |||
Sep. 30, 2013 | ||||
Tables/Schedules | ' | |||
Schedule of Cash Flow, Supplemental Disclosures | ' | |||
Nine Months ended | For the period | |||
September 30, | from March 29, | |||
2011 (date of | ||||
inception) | ||||
through | ||||
September 30, | ||||
2013 | 2012 | 2013 | ||
Cash paid for interest | $95,042 | $154,070 | $438,277 | |
Cash paid for income taxes | $100 | $100 | $300 | |
Series C Dividend payable in accounts payable | $27,068 | $ -- | $27,068 | |
Series D Dividend payable in accrued expenses | $24,407 | $ -- | $24,407 | |
Non-Cash investing and financing transactions | ||||
Repayment of senior secured notes payable with issuance of Series D preferred shares | $749,982 | $ -- | $749,982 |
Basis_of_Presenation_and_Summa3
Basis of Presenation and Summary of Significant Accounting Policies: Basis of Presentation (Details) (USD $) | 3 Months Ended | 9 Months Ended | 30 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | |
Details | ' | ' | ' | ' | ' |
Net loss during period | $718,840 | $601,882 | $2,261,776 | $1,657,598 | $5,643,411 |
Cash flows utilized in operating activities | ' | ' | 2,076,231 | ' | ' |
Cash on hand | 1,002,000 | ' | 1,002,000 | ' | 1,002,000 |
Accumulated deficit | $5,959,000 | ' | $5,959,000 | ' | $5,959,000 |
Property_and_Equipment_Summary1
Property and Equipment: Summary of the cost of property and equipment (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Property, Plant and Equipment, Gross | $446,897 | $335,717 |
Accumulated depreciation | -60,134 | -19,360 |
Equipment, net of depreciation | 386,763 | 316,357 |
Computer Equipment | ' | ' |
Property, Plant and Equipment, Gross | 20,561 | 14,285 |
Demo equipment | ' | ' |
Property, Plant and Equipment, Gross | $426,336 | $321,432 |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | 3 Months Ended | 9 Months Ended | 30 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | |
Details | ' | ' | ' | ' | ' |
Depreciation expense | $14,518 | $4,675 | $40,774 | $5,450 | $60,481 |
Acquistion_Details
Acquistion (Details) (Asset Purchase Agreement, USD $) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2013 | Apr. 15, 2011 | |
Asset Purchase Agreement | ' | ' | ' |
Total purchase price | ' | ' | $2,500,000 |
Cash payment | ' | ' | 1,500,000 |
Issuance of senior subordinated note (value) | ' | ' | 1,000,000 |
Developed technology intangible asset (value) | 2,142,858 | 2,142,858 | ' |
Developed technology intangible asset (accumulated amortizaton) | 357,142 | 357,142 | ' |
Developed technology intangible asset (amortization expense) | $89,286 | $267,857 | ' |
Performance stock options granted | ' | ' | 1,400,000 |
Performance stock options, exercise price | ' | ' | $0.06 |
Notes_Payable_Details
Notes Payable (Details) (USD $) | 1 Months Ended | 1 Months Ended | 0 Months Ended | ||||||
Aug. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Aug. 31, 2013 | 22-May-13 | Oct. 15, 2013 | Nov. 06, 2013 | Sep. 30, 2013 | Apr. 15, 2011 | |
Loan Payable Due | Loan Payable Due | Senior Secured Notes Payable | Senior Secured Notes Payable | Senior Secured Notes Payable | Senior Subordinated Note Payable | Senior Subordinated Note Payable | Senior Subordinated Note Payable | Senior Subordinated Note Payable | |
Total amount of notes outstanding | ' | $142,290 | ' | ' | $1,000,000 | ' | $750,000 | ' | $1,000,000 |
Note interest rate | ' | 2.60% | ' | ' | 12.00% | ' | ' | ' | 6.00% |
Amount of debt retired | ' | ' | ' | 749,982 | ' | ' | ' | ' | ' |
Repayment of notes payable | ' | ' | 250,018 | ' | ' | 250,000 | ' | ' | ' |
Interest due | ' | ' | ' | ' | ' | ' | ' | 2,630 | ' |
Loan (financed purchase of truck) | $83,507 | ' | ' | ' | ' | ' | ' | ' | ' |
Notes_Payable_Schedule_of_prin1
Notes Payable: Schedule of principal payments, senior subordinated note payable (Details) (Senior Subordinated Note Payable, USD $) | Apr. 15, 2014 | Feb. 15, 2014 | Dec. 15, 2013 | Oct. 15, 2013 |
Senior Subordinated Note Payable | ' | ' | ' | ' |
Mandatory principal payments due | $250,000 | $250,000 | $250,000 | $250,000 |
Notes_Payable_Mandatory_princi1
Notes Payable: Mandatory principal payments, loan payable (Details) (Loan Payable Due, USD $) | Sep. 30, 2013 |
Loan Payable Due | ' |
Mandatory principal loan payments, 2013 | $8,726 |
Mandatory principal loan payments, 2014 | 42,353 |
Mandatory principal loan payments, 2015 | 44,001 |
Mandatory principal loan payments, 2016 | 45,725 |
Mandatory principal loan payments, 2017 | 37,361 |
Mandatory principal loan payments, AFTER 2017 | 18,371 |
Total principal payments | $196,537 |
Stockholders_Equity_Note_Detai
Stockholders' Equity Note (Details) (USD $) | 3 Months Ended | 9 Months Ended | 9 Months Ended | 2 Months Ended | 3 Months Ended | ||||||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Jun. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Aug. 30, 2013 | Sep. 30, 2013 | Jun. 21, 2013 | Jan. 26, 2012 | |
Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Series D Preferred Stock | Series D Preferred Stock | Treasury Stock Transaction | |||||||
Common stock authorized | 20,000,000 | ' | 20,000,000 | ' | ' | 20,000,000 | ' | ' | ' | ' | ' | ' | ' |
Common stock par value | $0.00 | ' | $0.00 | ' | ' | $0.00 | ' | ' | ' | ' | ' | ' | ' |
Common stock outstanding | 8,046,978 | ' | 8,046,978 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Preferred stock authorized | 4,500,000 | ' | 4,500,000 | ' | 4,500,000 | 3,000,000 | ' | ' | ' | ' | ' | ' | ' |
Preferred stock par value | $0.00 | ' | $0.00 | ' | $0.00 | $0.00 | ' | ' | ' | ' | ' | ' | ' |
Preferred stock outstanding | 1,040,670 | ' | 1,040,670 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Preferred shares converted to common shares | ' | ' | ' | ' | ' | ' | 600,000 | 1,287,978 | 659,000 | ' | ' | ' | ' |
Conversion ratio | ' | ' | ' | ' | ' | ' | 'converted to common shares at a ratio of 7:1 | ' | ' | ' | ' | ' | ' |
Annual dividend rate | ' | ' | ' | ' | ' | ' | $0.07 | $0.16 | $0.16 | ' | ' | ' | ' |
Shares outstanding | ' | ' | ' | ' | ' | ' | ' | 212,022 | 101,000 | ' | 727,648 | ' | ' |
Accumulated dividends released | ' | ' | ' | ' | ' | ' | ' | $279,875 | ' | ' | ' | ' | ' |
Accumulated dividends | ' | ' | ' | ' | ' | ' | ' | 65,988 | 27,068 | ' | 24,407 | ' | ' |
Original issue price per share | ' | ' | ' | ' | ' | ' | ' | $2 | $2 | ' | $3 | ' | ' |
Dividends paid | ' | ' | ' | ' | ' | ' | ' | ' | 87,127 | ' | ' | ' | ' |
Units offered (Common Stock and Warrants) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,500,000 | ' |
Units offered (Common Stock and Warrants), price per unit | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $3 | ' |
Units offered (Common Stock and Warrants), potential proceeds | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4,500,000 | ' |
Units sold during offering | ' | ' | ' | ' | ' | ' | ' | ' | ' | 727,648 | ' | ' | ' |
Gross proceeds from units sold in offering | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,182,944 | ' | ' | ' |
Issuance costs | ' | ' | ' | ' | ' | ' | ' | ' | ' | 84,232 | ' | ' | ' |
Beneficial conversion feature (BCF) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 176,729 | ' | ' |
Common stock returned for cancellation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,050,000 |
Stock-based compensation expense | 17,526 | 75,201 | 67,219 | 430,448 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrecognized compensation expense | $125,255 | ' | $125,255 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stockholders_Equity_Note_Sched3
Stockholders' Equity Note: Schedule of Stock Option Activity (Details) (USD $) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | |
Details | ' | ' | ' |
Number of options outstanding | 1,020,000 | 1,022,000 | 300,000 |
Weighted average exercise price, options outstanding | $2.01 | $2 | $2 |
Number of options granted | 10,000 | 872,000 | ' |
Weighted average exercise price, options granted | $3 | $2 | ' |
Number of options exercised | ' | 150,000 | ' |
Weighted average exercise price, options exercised | ' | $2 | ' |
Weighted average remaining life (in years), options outstanding | 2.93 | 4.3 | ' |
Number of options cancelled | 12,000 | ' | ' |
Weighted average exercise price, options cancelled | $2 | ' | ' |
Number of options exercisable | 820,000 | 710,000 | ' |
Weighted average exercise price, options exercisable | $2 | $2 | ' |
Stockholders_Equity_Note_Sched4
Stockholders' Equity Note: Schedule of Performance Stock Option Activity (Details) (USD $) | 21 Months Ended | |
Sep. 30, 2013 | Dec. 31, 2011 | |
Details | ' | ' |
Performance Stock options outstanding | 1,440,000 | 1,400,000 |
Weighted average exercise price, performance stock options outstanding | $0.11 | $0.06 |
Performance Stock options granted during period | 40,000 | ' |
Weighted average exercise price, performance stock options granted | $2 | ' |
Performance Stock options exercisable | 40,000 | ' |
Weighted average exercise price, performance stock options exercisable | $2 | ' |
Net_Loss_Per_Common_Share_Sche1
Net Loss Per Common Share: Schedule of Earnings Per Share, Basic and Diluted (Details) (USD $) | 3 Months Ended | 9 Months Ended | 30 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | |
Net income (loss) | ($718,840) | ($601,882) | ($2,261,776) | ($1,657,598) | ($5,643,411) |
Net income (loss) available to preferred stockholders | 213,760 | 89,705 | 238,596 | 228,939 | 285,719 |
Net income (loss) to common shareholders | -932,600 | -691,587 | -2,500,372 | -1,886,537 | -5,929,130 |
Series A Dividend | ' | ' | ' | ' | ' |
Cumulative dividend | ' | 10,054 | ' | 29,944 | ' |
Series B Dividend | ' | ' | ' | ' | ' |
Cumulative dividend | 8,551 | 60,328 | 25,373 | 179,672 | 65,988 |
Series C Dividend | ' | ' | ' | ' | ' |
Cumulative dividend | 4,073 | 19,323 | 12,087 | 19,323 | 18,595 |
Series D Dividend | ' | ' | ' | ' | ' |
Cumulative dividend | $201,136 | ' | $201,136 | ' | $201,136 |
Commitments_and_Contingencies_1
Commitments and Contingencies Note (Details) (USD $) | 3 Months Ended | 9 Months Ended | 19 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Feb. 28, 2014 | |
Details | ' | ' | ' | ' | ' |
Lease commitment, terms | ' | ' | ' | ' | 'Company leased approximately 2,244 square feet of general office space |
Total rent expense | $9,228 | $6,070 | $26,867 | $12,802 | ' |
Remaining commitment under current lease | 16,000 | ' | 16,000 | ' | ' |
Commitment to purchase equipment | $127,000 | ' | $127,000 | ' | ' |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Richard Giles | ' | ' | ' | ' |
Related party consulting fees | $47,400 | $45,000 | $142,200 | $120,500 |
Larry Griffin | ' | ' | ' | ' |
Related party consulting fees | ' | ' | ' | 12,500 |
Gus Blass III (individually) | ' | ' | ' | ' |
Repayment of related party notes payable | ' | ' | 125,000 | ' |
Gus Blass III (entity) | ' | ' | ' | ' |
Repayment of related party notes payable | ' | ' | $125,000 | ' |
Supplemental_Cash_Flow_Informa2
Supplemental Cash Flow Information: Schedule of Cash Flow, Supplemental Disclosures (Details) (USD $) | 9 Months Ended | 30 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | |
Details | ' | ' | ' |
Cash paid for interest | $95,042 | $154,070 | $438,277 |
Cash paid for income taxes | 100 | 100 | 300 |
Series C Dividend payable in accounts payable | 27,068 | ' | 27,068 |
Series D Dividend payable in accrued expenses | 24,407 | ' | 24,407 |
Repayment of senior secured notes payable with Series D preferred shares | $749,982 | ' | $749,982 |
Subsequent_Events_Details
Subsequent Events (Details) (USD $) | Sep. 30, 2013 | Oct. 15, 2013 | Nov. 06, 2013 | Apr. 15, 2011 | Nov. 06, 2013 | Oct. 01, 2013 |
Senior Subordinated Note Payable | Senior Subordinated Note Payable | Senior Subordinated Note Payable | Subsequent Event | Subsequent Event | ||
Units offered (Common Stock and Warrants) | ' | ' | ' | ' | ' | 772,352 |
Units offered (Common Stock and Warrants), price per unit | ' | ' | ' | ' | ' | $3 |
Units offered (Common Stock and Warrants), potential proceeds | ' | ' | ' | ' | ' | $2,317,056 |
Over-allotment of units offered | ' | ' | ' | ' | ' | 1,000,000 |
Over-allotment of units offered, potential proceeds | ' | ' | ' | ' | ' | 3,000,000 |
Common shares converted from preferred | ' | ' | ' | ' | 25,022 | ' |
Common stock outstanding | 8,046,978 | ' | ' | ' | 8,072,000 | ' |
Repayment of notes payable | ' | 250,000 | ' | ' | ' | ' |
Total amount of notes outstanding | ' | ' | $750,000 | $1,000,000 | ' | ' |