Document_and_Entity_Informatio
Document and Entity Information | 18 Months Ended |
Jun. 30, 2014 | |
Document And Entity Information | ' |
Entity Registrant Name | 'Safety Quick Lighting & Fans Corp. |
Entity Central Index Key | '0001598981 |
Document Type | 'S-1 |
Document Period End Date | 30-Jun-14 |
Amendment Flag | 'false |
Current Fiscal Year End Date | '--12-31 |
Is Entity a Well-known Seasoned Issuer? | 'No |
Is Entity a Voluntary Filer? | 'No |
Is Entity's Reporting Status Current? | 'No |
Entity Filer Category | 'Smaller Reporting Company |
Document Fiscal Year Focus | '2014 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current assets: | ' | ' |
Cash | $1,132,974 | $736 |
Prepaid expenses | 40,000 | ' |
Other | ' | 2,500 |
Total current assets | 1,172,974 | 3,236 |
Furniture and Equipment - net | 6,046 | 295 |
Other assets: | ' | ' |
Patent - net | 24,697 | 27,154 |
Debt issue costs - net | 235,211 | ' |
Total other assets | 259,908 | 27,154 |
Total assets | 1,438,928 | 30,685 |
Current liabilities: | ' | ' |
Accounts payable & accrued expenses | 107,380 | 58,011 |
Notes payable - third party | 98,086 | 236,325 |
Notes payable - related party | 26,108 | 133,000 |
Derivative liabilities | 2,751,504 | ' |
Total current liabilities | 2,983,078 | 427,336 |
Long term liabilities: | ' | ' |
Convertible debt - net | 361,245 | ' |
Convertible debt - related parties - net | 50,000 | ' |
Notes payable | 405,117 | 503,209 |
Total long term liabilities | 816,362 | 503,209 |
Total liabilities | 3,799,440 | 930,545 |
Stockholders' deficit: | ' | ' |
Preferred stock: $0 par value, 20,000,000 shares authorized; 0 shares issued and outstanding | ' | ' |
Common stock: $0 par value, 500,000,000 shares authorized; 34,500,000 and 31,133,000 shares issued and outstanding at December 31, 2013 and 2012, respectively | 126,400 | ' |
Additional paid-in capital | 6,068,045 | 5,066,867 |
Accumulated deficit | -8,519,517 | -5,946,182 |
Total Stockholders' deficit | -2,325,072 | -879,315 |
Noncontrolling interest | -35,440 | -20,545 |
Total Deficit | -2,360,512 | -899,860 |
Total liabilities and stockholders' deficit | $1,438,928 | $30,685 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Statement of Financial Position [Abstract] | ' | ' |
Preferred Stock Par Value | $0 | $0 |
Preferred Stock Authorized | 20,000,000 | 20,000,000 |
Preferred Stock Issued | 0 | 0 |
Preferred Stock Outstanding | 0 | 0 |
Common Stock Par Value | $0 | $0 |
Common Stock Authorized | 500,000,000 | 500,000,000 |
Common Stock Issued | 34,500,000 | 31,133,000 |
Common Stock Outstanding | 34,500,000 | 31,133,000 |
Consolidated_Balance_Sheets_Q2
Consolidated Balance Sheets (Q2) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Current assets: | ' | ' |
Cash | ' | $1,132,974 |
Prepaid expenses | ' | 40,000 |
Other | ' | ' |
Total current assets | ' | 1,172,974 |
Furniture and Equipment - net | ' | 6,046 |
Other assets: | ' | ' |
Patent - net | ' | 24,697 |
Debt issue costs - net | ' | 235,211 |
Total assets | ' | 1,438,928 |
Current liabilities: | ' | ' |
Accounts payable & accrued expenses | ' | 107,380 |
Notes payable | ' | 503,203 |
Notes payable - related party | ' | 26,108 |
Derivative liabilities | ' | 2,751,504 |
Total current liabilities | ' | 2,983,078 |
Long term liabilities: | ' | ' |
Convertible debt - net | ' | 361,245 |
Convertible debt - related parties - net | ' | 50,000 |
Notes payable | ' | 405,117 |
Total long term liabilities | ' | 816,362 |
Total liabilities | ' | 3,799,440 |
Stockholders' deficit: | ' | ' |
Preferred stock: $0 par value, 20,000,000 shares authorized; 0 shares issued and outstanding | ' | ' |
Common stock: $0 par value, 500,000,000 shares authorized; 35,500,000 and 34,500,000 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | ' | -126,400 |
Additional paid-in capital | ' | 6,068,045 |
Accumulated deficit | ' | -8,519,517 |
Noncontrolling interest | ' | -35,440 |
Total Stockholders' deficit | ' | -2,325,072 |
Total liabilities and stockholders' deficit | ' | 1,438,928 |
Quarter 2 [Member] | ' | ' |
Current assets: | ' | ' |
Cash | 2,236,051 | 1,132,974 |
Prepaid expenses | 38,104 | 40,000 |
Other | 27,020 | ' |
Total current assets | 2,301,175 | 1,172,974 |
Furniture and Equipment - net | 139,972 | 6,046 |
Other assets: | ' | ' |
Patent - net | 31,984 | 24,697 |
Debt issue costs - net | 241,246 | 235,211 |
Total other assets | 273,230 | 259,908 |
Total assets | 2,714,377 | 1,438,928 |
Current liabilities: | ' | ' |
Accounts payable & accrued expenses | 542,137 | 107,380 |
Deferred rent | 3,846 | ' |
Notes payable | 98,086 | 98,086 |
Notes payable - related party | ' | 26,108 |
Derivative liabilities | 5,130,013 | 2,751,504 |
Total current liabilities | 5,774,082 | 2,983,078 |
Long term liabilities: | ' | ' |
Convertible debt - net | 961,269 | 361,245 |
Convertible debt - related parties - net | 50,000 | 50,000 |
Notes payable | 356,557 | 405,117 |
Total long term liabilities | 1,367,826 | 816,362 |
Total liabilities | 7,141,908 | 3,799,440 |
Stockholders' deficit: | ' | ' |
Preferred stock: $0 par value, 20,000,000 shares authorized; 0 shares issued and outstanding | ' | ' |
Common stock: $0 par value, 500,000,000 shares authorized; 35,500,000 and 34,500,000 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | 127,400 | 126,400 |
Additional paid-in capital | 6,314,064 | 6,068,045 |
Accumulated deficit | -10,805,787 | -8,519,517 |
Total Stockholders' deficit | -4,364,323 | -2,325,072 |
Noncontrolling interest | -63,208 | -35,440 |
Total Stockholders' deficit | -4,427,531 | -2,360,512 |
Total liabilities and stockholders' deficit | $2,714,377 | $1,438,928 |
Consolidated_Balance_Sheets_Pa1
Consolidated Balance Sheets (Parenthetical) (Q2) (Quarter 2 [Member], USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Preferred Stock Par Value | $0 | $0 |
Preferred Stock Authorized | 20,000,000 | 20,000,000 |
Preferred Stock Issued | 0 | 0 |
Preferred Stock Outstanding | 0 | 0 |
Common Stock Par Value | $0 | $0 |
Common Stock Authorized | 500,000,000 | 500,000,000 |
Common Stock Issued | 35,500,000 | 34,500,000 |
Common Stock Outstanding | 35,500,000 | 34,500,000 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Statement [Abstract] | ' | ' |
Sales | ' | $77,646 |
Cost of sales | ' | -85,899 |
Gross loss | ' | -8,253 |
General and administrative expenses | 1,401,435 | 826,367 |
Loss from operations | -1,401,435 | -834,620 |
Other income (expense) | ' | ' |
Interest expense | -171,590 | -35,700 |
Derivative expenses | -1,156,262 | ' |
Change in fair value of embedded derivative liabilities | 34,250 | ' |
Loss on debt extinguishment | -12,731 | ' |
Gain on debt forgiveness | 100,000 | ' |
Total other expense - net | -1,206,333 | -35,700 |
Net loss including noncontrolling interest | -2,607,768 | -870,320 |
Less: net loss attributable to noncontrolling interest | -34,433 | -25,738 |
Net loss attributable to Safety Quick Lighting & Fans Corp. | ($2,573,335) | ($844,582) |
Net loss per share - basic and diluted | -0.08 | -0.03 |
Weighted average number of common shares outstanding during the year - basic and diluted | 32,128,444 | 31,133,000 |
Consolidated_Statements_of_Ope1
Consolidated Statements of Operations (Unaudited) (Q2) (Quarter 2 [Member], USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
General and administrative expenses | $583,281 | $40,912 | $937,828 | $63,725 |
Loss from operations | -583,281 | -40,912 | -937,828 | -63,725 |
Other income (expense) | ' | ' | ' | ' |
Interest expense | -477,616 | -8,694 | -814,248 | -15,455 |
Derivative expenses | -568,485 | ' | 568,485 | ' |
Change in fair value of embedded derivative liabilities | 134,887 | ' | -224,667 | ' |
Other income | ' | ' | ' | ' |
Other expense | -218,143 | ' | -218,144 | ' |
Total other expense - net | -1,129,357 | -8,694 | -1,376,210 | -15,455 |
Net loss including noncontrolling interest | -1,712,638 | -49,606 | -2,314,038 | -79,180 |
Less: net loss attributable to noncontrolling interest | -17,444 | -2,803 | -27,768 | -4,474 |
Net loss attributable to Safety Quick Lighting & Fans Corp. | ($1,695,194) | ($46,803) | ($2,286,270) | ($74,706) |
Net loss per share - basic and diluted | ($0.05) | $0 | ($0.07) | $0 |
Weighted average number of common shares outstanding during the period - basic and diluted | 35,105,787 | 31,133,000 | 34,811,924 | 31,133,000 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities: | ' | ' |
Net loss attributable to Safety Quick Lighting & Fans Corp. | ($2,573,335) | ($844,582) |
Net loss attributable to noncontrolling interest | -34,433 | -25,738 |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Bad debt expense | ' | 22,047 |
Depreciation expense | 262 | 440 |
Amortization of debt issue costs | 11,986 | ' |
Amortization of debt discount | 92,304 | ' |
Amortization of patent | 2,457 | 2,457 |
Change in fair value of derivative liabilities | -34,250 | ' |
Derivative expense | 1,156,262 | ' |
Loss on debt extinguishment | 12,731 | ' |
Gain on debt forgiveness | -100,000 | ' |
Common stock transferred from existing stockholders for services rendered | 562,500 | ' |
Stock issued for services - related party | 125,000 | ' |
Stock options issued for services - related parties | 66,785 | ' |
Imputed interest | ' | 3,386 |
Change in operating assets and liabilities: | ' | ' |
Accounts receivable | ' | 29,497 |
Prepaid expenses | -40,000 | ' |
Inventory | ' | 85,899 |
Other | 2,500 | 2,500 |
Accounts payable & accrued expenses | 63,502 | -66,064 |
Net cash used in operating activities | -685,729 | -790,158 |
Cash flows from investing activities: | ' | ' |
Purchase of property & equipment | -6,013 | ' |
Payment of patent costs | ' | ' |
Net cash used in investing activities | -6,013 | ' |
Cash flows from financing activities: | ' | ' |
Direct issue costs paid | -247,197 | ' |
Proceeds from issuance of convertible notes | 2,000,000 | ' |
Proceeds from note payable | 160,000 | 120,000 |
Proceeds from note payable - related party | 61,655 | 127,000 |
Repayments of notes | -116,331 | -230,106 |
Repayments of notes - related party | -35,547 | ' |
Proceeds from the exercise of warrants | 1,400 | ' |
Members contribution | ' | 774,000 |
Net cash provided by financing activities | 1,823,980 | 790,894 |
Increase cash and cash equivalents | 1,132,238 | 736 |
Cash and cash equivalents at beginning of year | 736 | ' |
Cash and cash equivalents at end of year | 1,132,974 | 736 |
Supplementary disclosure of non-cash financing activities: | ' | ' |
Conversion of note payable and accrued interest to convertible note | 244,133 | ' |
Debt forgiveness - related parties | 83,000 | ' |
Debt discount recorded on convertible debt accounted for as a derivative liability | 1,925,191 | ' |
Reclassification of derivative liability to additional paid-in-capital | 311,709 | ' |
Loss on debt extinguishment - related party | 3,278 | ' |
Sale of 4.5% subsidiary ownership | ' | 5,193 |
Reacquired 4.5% subsidiary ownership | 19,538 | ' |
Cash paid during the year for: | ' | ' |
Interest | ' | 27,896 |
Income taxes | ' | ' |
Consolidated_Statements_of_Cas1
Consolidated Statements of Cash Flows (Unaudited) (Q2) (Quarter 2 [Member], USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Cash flows from operating activities: | ' | ' |
Net loss attributable to Safety Quick Lighting & Fans Corp. | ($2,286,270) | ($74,706) |
Net loss attributable to noncontrolling interest | -27,768 | -4,474 |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation expense | 8,105 | 149 |
Amortization of debt issue costs | 63,909 | ' |
Amortization of debt discount | 579,383 | ' |
Amortization of patent | 1,414 | 1,232 |
Change in fair value of derivative liabilities | -224,667 | ' |
Derivative expense | 568,485 | ' |
Common stock transferred from existing stockholders for services rendered | ' | 125,331 |
Recognition of unvested share compensation - related party | 31,250 | ' |
Imputed interest | ' | ' |
Change in operating assets and liabilities: | ' | ' |
Prepaid expenses | -38,104 | ' |
Other | -27,020 | ' |
Deferred rent | 3,846 | ' |
Accounts payable & accrued expenses | 434,760 | -37,111 |
Net cash used in operating activities | -912,677 | 10,421 |
Cash flows from investing activities: | ' | ' |
Purchase of property & equipment | -142,034 | ' |
Payment of patent costs | -8,700 | ' |
Net cash used in investing activities | -150,734 | ' |
Cash flows from financing activities: | ' | ' |
Direct issue costs paid | -69,944 | ' |
Proceeds from issuance of convertible notes | 2,270,100 | ' |
Proceeds from notes payable | ' | 40,000 |
Proceeds from note payable - related party | ' | 14,729 |
Repayments of notes | -8,560 | -40,045 |
Repayments of notes - related party | -26,108 | -9,500 |
Proceeds from issuance of common stock | 1,000 | ' |
Net cash provided by financing activities | 2,166,488 | 5,184 |
Decrease cash and cash equivalents | 1,103,077 | 15,605 |
Cash and cash equivalents at beginning of year | 1,132,974 | 736 |
Cash and cash equivalents at end of year | 2,236,051 | 16,341 |
Reduction in principal balance of notes from escrow balance | 40,000 | ' |
Debt discount recorded on convertible debt accounted for as a derivative liability | 2,249,459 | ' |
Reclassification of derivative liability to additional paid-in-capital | 214,769 | ' |
Supplementary disclosure of cash flow information | ' | ' |
Interest | ' | ' |
Income taxes | ' | ' |
Consolidated_Shareholders_Equi
Consolidated Shareholders Equity (Unaudited) (USD $) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning Balance, Shares at Dec. 31, 2011 | ' | 31,133,000 | ' | ' | ' | ' |
Beginning Balance, Value at Dec. 31, 2011 | ' | ' | $4,294,675 | ($5,101,600) | ' | ($806,925) |
Stock options issued for services - related parties | ' | ' | ' | ' | ' | ' |
Debt forgiveness - related parties | ' | ' | ' | ' | ' | ' |
Sale of 4.5% interest in subsidiary | ' | ' | 768,807 | ' | 5,193 | 774,000 |
Imputed interest | ' | ' | 3,385 | ' | ' | 3,385 |
Net loss | ' | ' | ' | -844,582 | -25,738 | -870,320 |
Ending Balance, Shares at Dec. 31, 2012 | ' | 31,133,000 | ' | ' | ' | ' |
Ending Balance, Value at Dec. 31, 2012 | ' | ' | 5,066,867 | -5,946,182 | -20,545 | -899,860 |
Stock options issued for services - related parties | ' | ' | 66,785 | ' | ' | 125,000 |
Common stock transferred from existing stockholders for services rendered - ($0.25/share) | ' | ' | 562,500 | ' | ' | 562,500 |
Issuance of shares to reacquire 4.5% ownership in subsidiary, Shares | ' | 1,467,000 | ' | ' | ' | ' |
Issuance of shares to reacquire 4.5% ownership in subsidiary, Value | ' | ' | -19,538 | ' | 19,538 | ' |
Common stock issued for services - related party, Shares ($0.25/share) | ' | 500,000 | ' | ' | ' | ' |
Common stock issued for services - related party, Value ($0.25/share) | ' | 125,000 | ' | ' | ' | 125,000 |
Exercise of stock warrants for cash, Shares | ' | 1,400,000 | ' | ' | ' | ' |
Exercise of stock warrants for cash, Value | ' | 1,400 | ' | ' | ' | 1,400 |
Loss on debt extinguishment - related party | ' | ' | -3,278 | ' | ' | -3,278 |
Reclassification of derivative liability associated with warrants | ' | ' | 311,709 | ' | ' | 311,709 |
Debt forgiveness - related parties | ' | ' | 83,000 | ' | ' | 83,000 |
Net loss | ' | ' | ' | -2,573,335 | -34,433 | -2,607,768 |
Ending Balance, Shares at Dec. 31, 2013 | ' | 34,500,000 | ' | ' | ' | ' |
Ending Balance, Value at Dec. 31, 2013 | ' | 126,400 | 6,068,045 | -8,519,517 | -35,440 | -2,360,512 |
Stock issued for cash, Shares | ' | 1,000,000 | ' | ' | ' | ' |
Stock issued for cash, Value | ' | 1,000 | ' | ' | ' | 1,000 |
Recognition of unvested share compensation - related party | ' | ' | 31,250 | ' | ' | 31,250 |
Common stock transferred from existing stockholders for services rendered - ($0.25/share) | ' | ' | ' | ' | ' | ' |
Reclassification of derivative liability associated with warrants | ' | ' | 214,769 | ' | ' | 214,769 |
Imputed interest | ' | ' | ' | ' | ' | ' |
Net loss | ' | ' | ' | -2,286,270 | -27,768 | -2,314,038 |
Ending Balance, Shares at Jun. 30, 2014 | ' | 35,500,000 | ' | ' | ' | ' |
Ending Balance, Value at Jun. 30, 2014 | ' | $127,400 | $6,314,064 | ($10,805,787) | ($63,208) | ($4,427,531) |
1_Organization_and_Nature_of_O
1. Organization and Nature of Operations | 15 Months Ended |
Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
1. Organization and Nature of Operations | ' |
Note 1 Organization and Nature of Operations | |
Safety Quick Lighting & Fans Corp. (“Company”), a Florida company, converted from an LLC to a C Corporation on November 6, 2012. | |
The Company was originally organized in May 2004 as a limited liability company under the name of Safety Quick Light, LLC (“SQL-LLC”). The Company holds a number of worldwide patents, and has received a variety of final electrical code approvals, including UL-Listing and CSA approval (for the United States and Canadian Markets), and CE (for the European market). | |
The Company’s patented product is a quick-connect, Power-Plug device (that is certified to hold up to 50 pounds) used in light fixtures and ceiling fans. The two-part device consists of a female receptacle which installs into all junction boxes, and a male plug which is pre-installed in the lighting fixtures/ceiling fans. The connection device allows for safe, quick and easy installation of a light fixture and ceiling fan, similar to Plugging-In a table lamp into a wall outlet and eliminating the need to deal with or touch electrical wires. | |
The Company intends to market consumer friendly, energy saving “Plug-In” ceiling fans and light fixtures under the world trusted GE brand. The Company also owns 98.8% of SQL Lighting & Fans LLC (“Subsidiary”). The Subsidiary was incorporated in Florida on April 27, 2011 and is in the business of manufacturing the patented device that the Company owns. |
1_Organization_and_Nature_of_O1
1 Organization and Nature of Operations (Q2) (Quarter 2 [Member]) | 18 Months Ended |
Jun. 30, 2014 | |
Quarter 2 [Member] | ' |
1 Organization and Nature of Operations | ' |
Note 1 Organization and Nature of Operations | |
Safety Quick Lighting & Fans Corp. (“Company”), a Florida company, converted from an LLC to a C Corporation on November 6, 2012. | |
The Company was originally organized in May 2004 as a limited liability company under the name of Safety Quick Light, LLC (“SQL-LLC”). The Company holds a number of worldwide patents, and has received a variety of final electrical code approvals, including UL-Listing and CSA approval (for the United States and Canadian Markets), and CE (for the European market). | |
The Company’s patented product is a quick-connect, Power-Plug device (that is certified to hold up to 50 pounds) used in light fixtures and ceiling fans. The two-part device consists of a female receptacle which installs into all junction boxes, and a male plug which is pre-installed in the lighting fixtures/ceiling fans. The connection device allows for safe, quick and easy installation of a light fixture and ceiling fan, similar to Plugging-In a table lamp into a wall outlet and eliminating the need to deal with or touch electrical wires. | |
The Company’s intends to market consumer friendly, energy saving “Plug-In” ceiling fans and light fixtures under the world trusted GE brand. The Company also owns 98.8% of SQL Lighting & Fans LLC (“Subsidiary”). The Subsidiary was incorporated in Florida on April 27, 2011 and is in the business of manufacturing the patented device that the Company owns. |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 15 Months Ended | ||||
Mar. 31, 2014 | |||||
Accounting Policies [Abstract] | ' | ||||
2. Summary of Significant Accounting Policies | ' | ||||
Note 2 Summary of Significant Accounting Policies | |||||
Basis of Presentation | |||||
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting. | |||||
Use of Estimates | |||||
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. | |||||
Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. | |||||
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates. | |||||
Risks and Uncertainties | |||||
The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. | |||||
The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales. | |||||
Fiscal Year | |||||
The Company’s fiscal year-end is December 31. | |||||
Principles of Consolidation | |||||
The consolidated financial statements include the accounts of Safety Quick Lighting & Fans Corp and its subsidiary, SQL Lighting & Fans LLC. All inter-company accounts and transactions have been eliminated in consolidation. | |||||
Non-Controlling Interest | |||||
In May 2012, in connection with the sale of the Company’s member units in the Subsidiary, the Company’s ownership percentage decreased from 98.8% to 94.35%. The Company then reacquired these member units in June 2013 increasing the ownership percentage from 94.35% back to 98.8%. See Note 10. | |||||
31-Dec-13 | 31-Dec-12 | ||||
Net loss attributable to Safety Quick Lighting and Fans Corp. | $ (2,573,335) | $ (844,582) | |||
Transfers (to) from the noncontrolling interest | |||||
Increase in Safety Quick Lighting and Fans Corp additional paid in capital | - | 5,193 | |||
due to sale of 4.5% ownership in Subsidiary (member units) | |||||
Decrease in Safety Quick Lighting and Fans Corp additional paid in capital | (19,538) | - | |||
due to reacquisition of 4.5% ownership in Subsidiary (member units) | |||||
Net transfers (to) from noncontrolling interst | (19,538) | 5,193 | |||
Change from net loss attributable to Safety Quick Lighting and Fans Corp. | |||||
and transfers (to) from noncontrolling interest | $ (2,592,874) | $ (839,389) | |||
Cash and Cash Equivalents | |||||
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents as of December 31, 2013 and 2012. | |||||
Accounts Receivable and Allowance for Doubtful Accounts | |||||
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. | |||||
The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. | |||||
At December 31, 2013 and 2012, the Company had no accounts receivable. | |||||
In 2013 and 2012, the Company recorded bad debt expense of $0 and $22,047, respectively. | |||||
Inventory | |||||
Inventory will consist of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company will periodically review historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. | |||||
At December 31, 2013 and 2012, the Company had no inventory. | |||||
Valuation of Long-Lived Assets and Identifiable Intangible Assets | |||||
The Company reviews for impairment of long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. In the event of impairment, the asset is written down to its fair market value. | |||||
Property and Equipment | |||||
Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | |||||
Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. | |||||
Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. | |||||
Intangible Asset - Patent | |||||
The Company developed a patent for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are being amortized using the straight-line method over the related 15 year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. | |||||
The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. | |||||
Fair Value of Financial Instruments | |||||
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. | |||||
The following are the hierarchical levels of inputs to measure fair value: | |||||
• | Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. | ||||
• | Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. | ||||
• | Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. | ||||
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments. | |||||
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 6. | |||||
Embedded Conversion Features | |||||
The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature. | |||||
Derivative Financial Instruments | |||||
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, 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 as charges or credits to income. | |||||
For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. | |||||
Beneficial Conversion Feature | |||||
For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount. | |||||
When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt. | |||||
Debt Issue Costs and Debt Discount | |||||
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. | |||||
Original Issue Discount | |||||
For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt. | |||||
Extinguishments of Liabilities | |||||
The Company accounts for extinguishments of liabilities in accordance with ASC 860-10 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. | |||||
Stock-Based Compensation - Employees | |||||
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. | |||||
The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. | |||||
If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties) (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | |||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | |||||
[] | Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term =(vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | ||||
[] | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||
[] | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | ||||
[] | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | ||||
Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest. | |||||
The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations. | |||||
Stock-Based Compensation – Non Employees | |||||
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services | |||||
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). | |||||
Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | |||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | |||||
[] | Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | ||||
[] | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||
[] | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | ||||
[] | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | ||||
Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. | |||||
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. | |||||
Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. | |||||
Revenue Recognition | |||||
The Company derives revenues from the sale of a patented device. | |||||
Revenue is recorded when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) asset is transferred to the customer without further obligation, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured. | |||||
Cost of Sales | |||||
Cost of sales represents costs directly related to the production and third party manufacturing of the Company’s products. | |||||
Product sold is typically shipped directly to the customer from the third party manufacturer; costs associated with shipping and handling is shown as a component of cost of sales. | |||||
Earnings (Loss) Per Share | |||||
Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. | |||||
The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the years ended December 31, 2013 and 2012 the Company reflected net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been anti-dilutive for the period. Therefore, separate computation of diluted earnings (loss) per share is not presented for the years ended December 31, 2013 and 2012. | |||||
The Company has the following common stock equivalents at December 31, 2013 and 2012: | |||||
2013 | 2012 | ||||
Convertible Debt (Exercise price - $0.25/share) | 8,976,532 | - | |||
Stock Warrants (Exercise price - $0.001 - $0.375/share) | 4,338,884 | - | |||
Stock Options (Exercise price - $0.375/share) | 300,000 | - | |||
Unvested stock - Chief Executive Officer | 750,000 | - | |||
Total | 14,365,416 | - | |||
On June 1, 2013, the Company executed a 3,113.3:1 forward stock split. All share and per share amounts have been retroactively restated to the earliest period presented. | |||||
Income Tax Provision | |||||
From the inception of SQL-LLC, and through November 6, 2012, the Company was taxed as a pass-through entity (LLC) under the Internal Revenue Code and was not subject to federal and state income taxes; accordingly, no provision had been made. | |||||
The financial statements reflect the Company’s transactions without adjustment, if any, required for income tax purposes for the period from November 7, 2012 to December 31, 2012. The net loss generated by the Company for the period January 1, 2012 to November 6, 2012 has been excluded from the computation of income taxes. | |||||
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. | |||||
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. | |||||
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary. | |||||
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. | |||||
The Company's tax returns are subject to examination by the federal and state tax authorities for the years ended 2012 through 2013. | |||||
Uncertain Tax Positions | |||||
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting periods ended December 31, 2013 and 2012. | |||||
Related Parties | |||||
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. | |||||
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. | |||||
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. | |||||
Contingencies | |||||
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | |||||
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | |||||
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows. | |||||
Subsequent Events | |||||
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. | |||||
Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. | |||||
Recently Issued Accounting Pronouncements | |||||
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. | |||||
Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The ASU states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation. | |||||
The ASU also requires additional disclosures about discontinued operations that will provide more information about the assets, liabilities, income and expenses of discontinued operations. In addition, the ASU requires disclosure of the pre-tax profit or loss attributable to a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. | |||||
The ASU is effective for public business entities for annual periods beginning on or after December 15, 2014, and interim periods within those years. | |||||
In May 2014, the FASB has issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance in this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition.” In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We do not believe the adoption of this update will have a material impact on our financial statements. | |||||
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
2_Summary_of_Significant_Accou1
2 Summary of Significant Accounting Policies (Q2) | 15 Months Ended | 18 Months Ended | ||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||
Quarter 2 [Member] | ||||||||||||||||
2 Summary of Significant Accounting Policies | ' | ' | ||||||||||||||
Note 2 Summary of Significant Accounting Policies | Note 2 Summary of Significant Accounting Policies | |||||||||||||||
Basis of Presentation | Basis of Presentation | |||||||||||||||
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting. | The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is the Company’s opinion, however, that the accompanying unaudited financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. | |||||||||||||||
Use of Estimates | The accompanying unaudited financial statements should be read in conjunction with the Company’s Registration Statement on Form S-1 for the years ended December 31, 2013 and 2012, as filed with the SEC, respectively, which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the years ended December 31, 2013 and 2012, respectively. The financial information as of June 30, 2014, is derived from the audited financial statements presented in our Annual Report on Form S-1 for the year ended December 31, 2013. The interim results for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014, or for any future interim periods. | |||||||||||||||
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. | Use of Estimates | |||||||||||||||
Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. | The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. | |||||||||||||||
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates. | Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. | |||||||||||||||
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates. | ||||||||||||||||
Risks and Uncertainties | ||||||||||||||||
Risks and Uncertainties | ||||||||||||||||
The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. | ||||||||||||||||
The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. | ||||||||||||||||
The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales. | ||||||||||||||||
Fiscal Year | The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold (iii) general economic conditions and (iv)the related volatility of prices pertaining to the cost of sales. | |||||||||||||||
The Company’s fiscal year-end is December 31. | Fiscal Year | |||||||||||||||
Principles of Consolidation | The Company’s fiscal year-end is December 31. | |||||||||||||||
The consolidated financial statements include the accounts of Safety Quick Lighting & Fans Corp and its subsidiary, SQL Lighting & Fans LLC. All inter-company accounts and transactions have been eliminated in consolidation. | Principles of Consolidation | |||||||||||||||
Non-Controlling Interest | The consolidated financial statements include the accounts of Safety Quick Lighting & Fans Corp and its subsidiary, SQL Lighting & Fans LLC. All inter-company accounts and transactions have been eliminated in consolidation. | |||||||||||||||
In May 2012, in connection with the sale of the Company’s member units in the Subsidiary, the Company’s ownership percentage decreased from 98.8% to 94.35%. The Company then reacquired these member units in June 2013 increasing the ownership percentage from 94.35% back to 98.8%. See Note 10. | Cash and Cash Equivalents | |||||||||||||||
31-Dec-13 | 31-Dec-12 | Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents as of June 30, 2014 and December 31, 2013. | ||||||||||||||
Net loss attributable to Safety Quick Lighting and Fans Corp. | $ (2,573,335) | $ (844,582) | Accounts Receivable and Allowance for Doubtful Accounts | |||||||||||||
Transfers (to) from the noncontrolling interest | ||||||||||||||||
Increase in Safety Quick Lighting and Fans Corp additional paid in capital | - | 5,193 | Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. | |||||||||||||
due to sale of 4.5% ownership in Subsidiary (member units) | ||||||||||||||||
Decrease in Safety Quick Lighting and Fans Corp additional paid in capital | (19,538) | - | The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. | |||||||||||||
due to reacquisition of 4.5% ownership in Subsidiary (member units) | ||||||||||||||||
Net transfers (to) from noncontrolling interst | (19,538) | 5,193 | At June 30, 2014 and December 31, 2013, the Company had no accounts receivable. | |||||||||||||
Change from net loss attributable to Safety Quick Lighting and Fans Corp. | ||||||||||||||||
and transfers (to) from noncontrolling interest | $ (2,592,874) | $ (839,389) | The Company recorded bad debt expense of $0 and $0, during the six months ended June 30, 2014 and 2013, respectively. | |||||||||||||
Cash and Cash Equivalents | Inventory | |||||||||||||||
Inventory will consist of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company will periodically review historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. | ||||||||||||||||
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents as of December 31, 2013 and 2012. | ||||||||||||||||
At June 30, 2014 and December 31, 2013, the Company had no inventory. | ||||||||||||||||
Accounts Receivable and Allowance for Doubtful Accounts | Valuation of Long-Lived Assets and Identifiable Intangible Assets | |||||||||||||||
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. | The Company reviews for impairment of long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. In the event of impairment, the asset is written down to its fair market value. | |||||||||||||||
The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. | Property and Equipment | |||||||||||||||
At December 31, 2013 and 2012, the Company had no accounts receivable. | Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | |||||||||||||||
In 2013 and 2012, the Company recorded bad debt expense of $0 and $22,047, respectively. | Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. | |||||||||||||||
Inventory | Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. | |||||||||||||||
Inventory will consist of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company will periodically review historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. | ||||||||||||||||
Intangible Asset - Patent | ||||||||||||||||
At December 31, 2013 and 2012, the Company had no inventory. | ||||||||||||||||
The Company developed a patent for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are being amortized using the straight-line method over the related 15 year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. | ||||||||||||||||
Valuation of Long-Lived Assets and Identifiable Intangible Assets | ||||||||||||||||
The Company reviews for impairment of long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. In the event of impairment, the asset is written down to its fair market value. | The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. | |||||||||||||||
Property and Equipment | ||||||||||||||||
Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | Fair Value of Financial Instruments | |||||||||||||||
Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. | The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. | |||||||||||||||
Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. | The following are the hierarchical levels of inputs to measure fair value: | |||||||||||||||
Intangible Asset - Patent | ● | Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. | ||||||||||||||
● | Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |||||||||||||||
The Company developed a patent for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are being amortized using the straight-line method over the related 15 year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. | ● | Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. | ||||||||||||||
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments. | ||||||||||||||||
The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. | ||||||||||||||||
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 6. | ||||||||||||||||
Fair Value of Financial Instruments | ||||||||||||||||
Embedded Conversion Features | ||||||||||||||||
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. | ||||||||||||||||
The following are the hierarchical levels of inputs to measure fair value: | The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature. | |||||||||||||||
• | Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. | Derivative Financial Instruments | ||||||||||||||
• | Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. | The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, 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 as charges or credits to income. | ||||||||||||||
• | Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. | For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. | ||||||||||||||
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments. | Beneficial Conversion Feature | |||||||||||||||
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 6. | For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount. | |||||||||||||||
Embedded Conversion Features | When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt. | |||||||||||||||
The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature. | Debt Issue Costs and Debt Discount | |||||||||||||||
Derivative Financial Instruments | The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. | |||||||||||||||
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, 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 as charges or credits to income. | Original Issue Discount | |||||||||||||||
For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. | For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt. | |||||||||||||||
Beneficial Conversion Feature | Extinguishments of Liabilities | |||||||||||||||
For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount. | The Company accounts for extinguishments of liabilities in accordance with ASC 860-10 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. | |||||||||||||||
Stock-Based Compensation - Employees | ||||||||||||||||
When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt. | ||||||||||||||||
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. | ||||||||||||||||
Debt Issue Costs and Debt Discount | ||||||||||||||||
The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. | ||||||||||||||||
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. | ||||||||||||||||
If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties) (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||||
Original Issue Discount | ||||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||||
For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt. | ||||||||||||||||
· | Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term =(vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | |||||||||||||||
Extinguishments of Liabilities | · | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||
· | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | |||||||||||||||
The Company accounts for extinguishments of liabilities in accordance with ASC 860-10 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. | · | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | ||||||||||||||
Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest. | ||||||||||||||||
Stock-Based Compensation - Employees | ||||||||||||||||
The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations. | ||||||||||||||||
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. | ||||||||||||||||
Stock-Based Compensation – Non Employees | ||||||||||||||||
The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. | ||||||||||||||||
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services | ||||||||||||||||
If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties) (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||||
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). | ||||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||||
Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||||
[] | Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term =(vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | |||||||||||||||
[] | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||
[] | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | · | Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | |||||||||||||
· | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | |||||||||||||||
[] | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | · | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | |||||||||||||
· | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | |||||||||||||||
Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest. | ||||||||||||||||
Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. | ||||||||||||||||
The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations. | ||||||||||||||||
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. | ||||||||||||||||
Stock-Based Compensation – Non Employees | ||||||||||||||||
Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. | ||||||||||||||||
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services | ||||||||||||||||
Revenue Recognition | ||||||||||||||||
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). | ||||||||||||||||
The Company derives revenues from the sale of a patented device. | ||||||||||||||||
Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||||
Revenue is recorded when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) asset is transferred to the customer without further obligation, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured. | ||||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||||
Cost of Sales | ||||||||||||||||
[] | Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | |||||||||||||||
[] | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | Cost of sales represents costs directly related to the production and third party manufacturing of the Company’s products. | ||||||||||||||
[] | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | Product sold is typically shipped directly to the customer from the third party manufacturer; costs associated with shipping and handling is shown as a component of cost of sales. | ||||||||||||||
[] | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | Earnings (Loss) Per Share | ||||||||||||||
Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. | Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. | |||||||||||||||
The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the periods ended June 30, 2014 and 2013, the Company reflected net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been anti-dilutive for the period. Therefore, separate computation of diluted earnings (loss) per share is not presented for the six months ended June 30, 2014 and 2013. | ||||||||||||||||
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. | ||||||||||||||||
The Company has the following common stock equivalents at June 30, 2014 and 2013: | ||||||||||||||||
Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. | ||||||||||||||||
June 30, | ||||||||||||||||
Revenue Recognition | 2014 | 2013 | ||||||||||||||
The Company derives revenues from the sale of a patented device. | Convertible Debt (Exercise price - $0.25/share) | 18,056,932 | — | |||||||||||||
Stock Warrants (Exercise price - $0.001 - $0.375/share) | 9,728,984 | — | ||||||||||||||
Revenue is recorded when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) asset is transferred to the customer without further obligation, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured. | Stock Options (Exercise price - $0.375/share) | 200,000 | — | |||||||||||||
Total | 27,985,916 | — | ||||||||||||||
Cost of Sales | ||||||||||||||||
Related Parties | ||||||||||||||||
Cost of sales represents costs directly related to the production and third party manufacturing of the Company’s products. | ||||||||||||||||
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. | ||||||||||||||||
Product sold is typically shipped directly to the customer from the third party manufacturer; costs associated with shipping and handling is shown as a component of cost of sales. | ||||||||||||||||
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. | ||||||||||||||||
Earnings (Loss) Per Share | ||||||||||||||||
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. | ||||||||||||||||
Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. | ||||||||||||||||
Contingencies | ||||||||||||||||
The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the years ended December 31, 2013 and 2012 the Company reflected net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been anti-dilutive for the period. Therefore, separate computation of diluted earnings (loss) per share is not presented for the years ended December 31, 2013 and 2012. | ||||||||||||||||
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | ||||||||||||||||
The Company has the following common stock equivalents at December 31, 2013 and 2012: | If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | |||||||||||||||
2013 | 2012 | Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows. | ||||||||||||||
Convertible Debt (Exercise price - $0.25/share) | 8,976,532 | - | Subsequent Events | |||||||||||||
Stock Warrants (Exercise price - $0.001 - $0.375/share) | 4,338,884 | - | ||||||||||||||
Stock Options (Exercise price - $0.375/share) | 300,000 | - | The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. | |||||||||||||
Unvested stock - Chief Executive Officer | 750,000 | - | ||||||||||||||
Total | 14,365,416 | - | Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. | |||||||||||||
On June 1, 2013, the Company executed a 3,113.3:1 forward stock split. All share and per share amounts have been retroactively restated to the earliest period presented. | Recently Issued Accounting Pronouncements | |||||||||||||||
Income Tax Provision | In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. | |||||||||||||||
Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The ASU states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation. | ||||||||||||||||
From the inception of SQL-LLC, and through November 6, 2012, the Company was taxed as a pass-through entity (LLC) under the Internal Revenue Code and was not subject to federal and state income taxes; accordingly, no provision had been made. | ||||||||||||||||
The ASU also requires additional disclosures about discontinued operations that will provide more information about the assets, liabilities, income and expenses of discontinued operations. In addition, the ASU requires disclosure of the pre-tax profit or loss attributable to a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. | ||||||||||||||||
The financial statements reflect the Company’s transactions without adjustment, if any, required for income tax purposes for the period from November 7, 2012 to December 31, 2012. The net loss generated by the Company for the period January 1, 2012 to November 6, 2012 has been excluded from the computation of income taxes. | ||||||||||||||||
The ASU is effective for public business entities for annual periods beginning on or after December 15, 2014, and interim periods within those years. | ||||||||||||||||
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. | ||||||||||||||||
In May 2014, the FASB has issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance in this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition.” In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We do not believe the adoption of this update will have a material impact on our financial statements. | ||||||||||||||||
The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. | ||||||||||||||||
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. | ||||||||||||||||
The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary. | ||||||||||||||||
Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. | ||||||||||||||||
The Company's tax returns are subject to examination by the federal and state tax authorities for the years ended 2012 through 2013. | ||||||||||||||||
Uncertain Tax Positions | ||||||||||||||||
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting periods ended December 31, 2013 and 2012. | ||||||||||||||||
Related Parties | ||||||||||||||||
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. | ||||||||||||||||
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. | ||||||||||||||||
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. | ||||||||||||||||
Contingencies | ||||||||||||||||
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | ||||||||||||||||
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | ||||||||||||||||
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows. | ||||||||||||||||
Subsequent Events | ||||||||||||||||
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. | ||||||||||||||||
Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. | ||||||||||||||||
Recently Issued Accounting Pronouncements | ||||||||||||||||
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. | ||||||||||||||||
Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The ASU states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation. | ||||||||||||||||
The ASU also requires additional disclosures about discontinued operations that will provide more information about the assets, liabilities, income and expenses of discontinued operations. In addition, the ASU requires disclosure of the pre-tax profit or loss attributable to a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. | ||||||||||||||||
The ASU is effective for public business entities for annual periods beginning on or after December 15, 2014, and interim periods within those years. | ||||||||||||||||
In May 2014, the FASB has issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance in this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition.” In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We do not believe the adoption of this update will have a material impact on our financial statements. | ||||||||||||||||
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
3_Furniture_and_Equipment
3. Furniture and Equipment | 15 Months Ended | ||
Mar. 31, 2014 | |||
Property, Plant and Equipment [Abstract] | ' | ||
3. Furniture and Equipment | ' | ||
Note 3 Furniture and Equipment | |||
Property and equipment consisted of the following at December 31, 2013 and 2012: | |||
2013 | 2012 | ||
Office Equipment | $ 12,984 | $ 12,984 | |
Furniture and Fixtures | 6,013 | - | |
Total | 18,997 | 12,984 | |
Less: Accumulated Depreciation | (12,952) | (12,689) | |
Property and Equipment - net | 6,046 | 295 | |
3_Furniture_and_Equipment_Q2
3 Furniture and Equipment (Q2) | 15 Months Ended | 18 Months Ended | ||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||
Quarter 2 [Member] | ||||||||||||
3 Furniture and Equipment | ' | ' | ||||||||||
Note 3 Furniture and Equipment | Note 3 Furniture and Equipment | |||||||||||
Property and equipment consisted of the following at December 31, 2013 and 2012: | Property and equipment consisted of the following at June 30, 2014 and December 31, 2013: | |||||||||||
2013 | 2012 | 30-Jun-14 | December 31, | |||||||||
Office Equipment | $ 12,984 | $ 12,984 | 2014 | 2013 | ||||||||
Furniture and Fixtures | 6,013 | - | ||||||||||
Total | 18,997 | 12,984 | Office Equipment | $ | 136,144 | $ | 12,984 | |||||
Less: Accumulated Depreciation | (12,952) | (12,689) | Furniture and Fixtures | 24,884 | 6,013 | |||||||
Property and Equipment - net | 6,046 | 295 | Total | 161,028 | 18,997 | |||||||
Less: Accumulated Depreciation | (21,056 | ) | (12,951 | ) | ||||||||
Property and Equipment - net | $ | 139,972 | $ | 6,046 | ||||||||
4_Intangible_Assets
4. Intangible Assets | 15 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
4. Intangible Assets | ' | ||||||||
Note 4 Intangible Assets | |||||||||
Prior to 2012, the Company capitalized $36,950 in patent costs related to the lighting technology (see Note 1). | |||||||||
Intangible assets -patents consisted of the following at December 31, 2013 and 2012: | |||||||||
2013 | 2012 | ||||||||
Patents | $ | 36,950 | $ | 36,950 | |||||
Less: Impairment Charges | — | — | |||||||
Less: Accumulated Amortization | (12,253 | ) | (9,796 | ) | |||||
Patents - net | $ | 24,697 | $ | 27,154 | |||||
At December 31, 2013, future amortization of intangible assets is as follows: | |||||||||
Year Ending December 31 | |||||||||
2014 | $ | 2,457 | |||||||
2015 | 2,457 | ||||||||
2016 | 2,457 | ||||||||
2017 | 2,457 | ||||||||
2018 | 2,457 | ||||||||
2019 and Thereafter | 12,411 | ||||||||
$ | 24,697 | ||||||||
Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments and other factors. |
4_Intangible_Assets_Q2
4 Intangible Assets (Q2) | 15 Months Ended | 18 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||||
Quarter 2 [Member] | ||||||||||||||||||
4 Intangible Assets | ' | ' | ||||||||||||||||
Note 4 Intangible Assets | Note 4 Intangible Assets | |||||||||||||||||
Prior to 2012, the Company capitalized $36,950 in patent costs related to the lighting technology (see Note 1). | Intangible assets -patents consisted of the following at June 30, 2014 and December 31, 2013: | |||||||||||||||||
Intangible assets -patents consisted of the following at December 31, 2013 and 2012: | 2014 | 2013 | ||||||||||||||||
2013 | 2012 | Patents | $ | 45,650 | $ | 36,950 | ||||||||||||
Patents | $ | 36,950 | $ | 36,950 | Less: Impairment Charges | — | — | |||||||||||
Less: Impairment Charges | — | — | Less: Accumulated Amortization | (13,666 | ) | (12,253 | ) | |||||||||||
Less: Accumulated Amortization | (12,253 | ) | (9,796 | ) | Patents - net | $ | 31,984 | $ | 24,697 | |||||||||
Patents - net | $ | 24,697 | $ | 27,154 | ||||||||||||||
At June 30, 2014, future amortization of intangible assets is as follows: | ||||||||||||||||||
At December 31, 2013, future amortization of intangible assets is as follows: | ||||||||||||||||||
Year Ending December 31 | ||||||||||||||||||
Year Ending December 31 | 2014 (6 months) | $ | 1,528 | |||||||||||||||
2014 | $ | 2,457 | 2015 | 3,037 | ||||||||||||||
2015 | 2,457 | 2016 | 3,039 | |||||||||||||||
2016 | 2,457 | 2017 | 3,037 | |||||||||||||||
2017 | 2,457 | 2018 | 3,037 | |||||||||||||||
2018 | 2,457 | 2019 and Thereafter | 18,305 | |||||||||||||||
2019 and Thereafter | 12,411 | $ | 31,984 | |||||||||||||||
$ | 24,697 | |||||||||||||||||
Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments and other factors. | ||||||||||||||||||
Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments and other factors. |
5_Debt
5. Debt | 15 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Debt Disclosure [Abstract] | ' | ||||||||||||
5. Debt | ' | ||||||||||||
Note 5 Debt | |||||||||||||
(A) Summary of Debt Transactions | |||||||||||||
At December 31, 2013 and 2012, debt consists of the following: | |||||||||||||
2013 | 2012 | ||||||||||||
Notes payable | $ | 503,203 | $ | 739,534 | |||||||||
Notes payable - related party | 26,108 | 133,000 | |||||||||||
Convertible notes | 2,194,133 | — | |||||||||||
Convertible notes - related party | 50,000 | — | |||||||||||
Less: debt discount | (1,925,191 | ) | — | ||||||||||
Debt - net | 848,253 | 872,534 | |||||||||||
Amortization of debt discount | 92,304 | — | |||||||||||
Less: current portion - notes payable | (98,086 | ) | (236,325 | ) | |||||||||
Less: current portion - notes payable - related party | (26,108 | ) | (133,000 | ) | |||||||||
Long term debt - net | $ | 816,362 | $ | 503,209 | |||||||||
Notes Payable | |||||||||||||
Third Party | Related Party | Totals | |||||||||||
Balance December 31, 2011 | $ | 849,640 | $ | 6,000 | $ | 855,640 | |||||||
Proceeds | 120,000 | 127,000 | 247,000 | ||||||||||
Repayments | (230,106 | ) | — | (230,106 | ) | ||||||||
Balance December 31, 2012 | 739,534 | 133,000 | 872,534 | ||||||||||
Proceeds | 160,000 | 61,655 | 221,655 | ||||||||||
Repayments | (116,331 | ) | (35,547 | ) | (151,878 | ) | |||||||
Conversion of note payable to convertible debt | (180,000 | ) | (50,000 | ) | (230,000 | ) | |||||||
Debt forgiveness | (100,000 | ) | (83,000 | ) | (183,000 | ) | |||||||
Balance December 31, 2013 | $ | 503,203 | $ | 26,108 | $ | 529,311 | |||||||
Convertible Debt - Net | |||||||||||||
The Company has recorded derivative liabilities associated with these convertible debt instruments, as more fully discussed at Notes 6 and 10 (C). | |||||||||||||
Third Party | Related Party | Totals | |||||||||||
Balance December 31, 2012 | $ | — | $ | — | $ | — | |||||||
Proceeds | 2,000,000 | — | 2,000,000 | ||||||||||
Repayments | — | — | — | ||||||||||
Conversion of note payable to convertible debt | 180,000 | 50,000 | 230,000 | ||||||||||
Conversion of accrued interest into convertible debt | 14,133 | — | 14,133 | ||||||||||
Less: gross debt discount recorded | (1,925,191 | ) | — | (1,925,191 | ) | ||||||||
Add: amortization of debt discount | 92,304 | — | 92,304 | ||||||||||
Balance December 31, 2013 | $ | 361,245 | $ | 50,000 | $ | 411,245 | |||||||
In connection with the $2,000,000 convertible debt offering in November 2013, the Company issued 3,672,134 detachable warrants. The notes and warrants were treated as derivative liabilities, see Notes 6 and 10. | |||||||||||||
The Company was required to register the underlying convertible debt shares and warrants within 60 days (January 2014), and for the registration statement to become effective 90 days after this date (April 2014). As of the date of the accompanying report, the registration statement has not yet been filed, which upon filing, must be declared and remain effective. As a result of not filing the registration statement timely, the Company began accruing liquidated damages equal to 2% of the gross proceeds which is equivalent to $40,000 per month each for May and June 2014. The liquidated damages clause is capped at 15% of gross proceeds raised. If the Company fails to pay the liquidated damages, an interest rate of 18% will be applied to the outstanding debt instruments. | |||||||||||||
In the event any of these notes are prepaid prior to maturity, a penalty rate of 10% would apply for any payments occurring between months 12 – 18 and a 5% rate for any payments occurring between 19-24 months. | |||||||||||||
All convertible debt is secured by a 2nd priority lien on all assets of the Company. The Company is subordinate only to a third party bank loan, which is currently included as a component of notes payable ($503,203). | |||||||||||||
(B) Terms of Debt | |||||||||||||
In 2012, all outstanding debt had the following terms: | |||||||||||||
• Unsecured | |||||||||||||
• Due on demand | |||||||||||||
• Interest ranging from 10% - 12% | |||||||||||||
In 2013, all outstanding debt had the following terms: | |||||||||||||
• Unsecured -$26,108 | |||||||||||||
• Secured - $503,203 | |||||||||||||
• Due: | |||||||||||||
• On demand ($26,108 – related party); | |||||||||||||
• Due August 29, 2018 ($503,203 – third party) | |||||||||||||
• Due November 26, 2015 ($2,244,133 – all convertible debt – gross – secured by all assets of the Company) | |||||||||||||
• Interest | |||||||||||||
• Non-interest bearing on notes issued prior to 2013 (see 2012 notes above); or | |||||||||||||
• Ranging from 12% - 15% | |||||||||||||
All convertible debt and related warrants issued with the convertible notes in 2013 were convertible at $0.25 and $0.375/share, respectively; however, given the existence of a ratchet feature, these debt and warrant instruments could potentially carry a lower conversion price in the future in the event any future offering offered a lower per share amount for a conversion. | |||||||||||||
(C) Future Commitments | |||||||||||||
At December 31, 2013, the Company has outstanding debt of $816,362 (See Note 5 (A)). Future minimum repayment obligations are as follows: | |||||||||||||
Year Ended December 31 | |||||||||||||
2014 | $ | 124,194 | |||||||||||
2015 | 2,649,250 | ||||||||||||
Less: unamortized debt discount | (1,832,888 | ) | |||||||||||
Less: current maturities | (124,194 | ) | |||||||||||
Debt - long term | $ | 816,362 |
5_Debt_Q2
5. Debt (Q2) | 15 Months Ended | 6 Months Ended | ||||||||||||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||||||||||||
Quarter 2 [Member] | ||||||||||||||||||||||||||
5. Debt | ' | ' | ||||||||||||||||||||||||
Note 5 Debt | Note 5 Debt | |||||||||||||||||||||||||
(A) Summary of Debt Transactions | (A) Summary of Debt Transactions | |||||||||||||||||||||||||
At December 31, 2013 and 2012, debt consists of the following: | At June 30, 2014 and December 31, 2013, debt consists of the following: | |||||||||||||||||||||||||
2013 | 2012 | 2014 | 2013 | |||||||||||||||||||||||
Notes payable | $ | 503,203 | $ | 739,534 | ||||||||||||||||||||||
Notes payable - related party | 26,108 | 133,000 | Notes payable | $ | 454,646 | $ | 503,203 | |||||||||||||||||||
Convertible notes | 2,194,133 | — | Notes payable - related party | — | 26,108 | |||||||||||||||||||||
Convertible notes - related party | 50,000 | — | Convertible notes | 4,464,233 | 2,194,132 | |||||||||||||||||||||
Less: debt discount | (1,925,191 | ) | — | Convertible notes - related party | 50,000 | 50,000 | ||||||||||||||||||||
Debt - net | 848,253 | 872,534 | Less: debt discount | (4,174,650 | ) | (1,925,191 | ) | |||||||||||||||||||
Amortization of debt discount | 92,304 | — | Debt - net | 794,229 | 848,252 | |||||||||||||||||||||
Less: current portion - notes payable | (98,086 | ) | (236,325 | ) | Amortization of debt discount | 671,683 | 92,304 | |||||||||||||||||||
Less: current portion - notes payable - related party | (26,108 | ) | (133,000 | ) | Less: current portion - notes payable | (98,086 | ) | (98,086 | ) | |||||||||||||||||
Long term debt - net | $ | 816,362 | $ | 503,209 | Less: current portion - notes payable - related party | (0 | ) | (26,108 | ) | |||||||||||||||||
Long term debt - net | $ | 1,367,826 | $ | 816,362 | ||||||||||||||||||||||
Notes Payable | ||||||||||||||||||||||||||
Notes Payable | ||||||||||||||||||||||||||
Third Party | Related Party | Totals | ||||||||||||||||||||||||
Balance December 31, 2011 | $ | 849,640 | $ | 6,000 | $ | 855,640 | Third Party | Related Party | Totals | |||||||||||||||||
Proceeds | 120,000 | 127,000 | 247,000 | |||||||||||||||||||||||
Repayments | (230,106 | ) | — | (230,106 | ) | Balance December 31, 2011 | $ | 849,640 | 6,000 | $ | 855,640 | |||||||||||||||
Balance December 31, 2012 | 739,534 | 133,000 | 872,534 | Proceeds | 120,000 | 127,000 | 247,000 | |||||||||||||||||||
Proceeds | 160,000 | 61,655 | 221,655 | Repayments | (230,106 | ) | — | (230,106 | ) | |||||||||||||||||
Repayments | (116,331 | ) | (35,547 | ) | (151,878 | ) | Balance December 31, 2012 | 739,534 | 133,000 | 872,534 | ||||||||||||||||
Conversion of note payable to convertible debt | (180,000 | ) | (50,000 | ) | (230,000 | ) | Proceeds | 160,000 | 61,655 | 221,655 | ||||||||||||||||
Debt forgiveness | (100,000 | ) | (83,000 | ) | (183,000 | ) | Repayments | (116,331 | ) | (35,547 | ) | (151,878 | ) | |||||||||||||
Balance December 31, 2013 | $ | 503,203 | $ | 26,108 | $ | 529,311 | Conversion of note payable to convertible debt | (180,000 | ) | (50,000 | ) | (230,000 | ) | |||||||||||||
Conversion of note payable to contributed capital | (100,000 | ) | (83,000 | ) | (183,000 | ) | ||||||||||||||||||||
Balance December 31, 2013 | 503,203 | 26,108 | 529,311 | |||||||||||||||||||||||
Convertible Debt - Net | Proceeds | — | — | — | ||||||||||||||||||||||
Repayments | (48,560 | ) | (26,108 | ) | (74,668 | ) | ||||||||||||||||||||
The Company has recorded derivative liabilities associated with these convertible debt instruments, as more fully discussed at Notes 6 and 10 (C). | Conversion of note payable to convertible debt | — | — | — | ||||||||||||||||||||||
Conversion of note payable to contributed capital | — | — | — | |||||||||||||||||||||||
Third Party | Related Party | Totals | Balance June 30, 2014 | $ | 454,643 | $ | — | $ | 454,643 | |||||||||||||||||
Balance December 31, 2012 | $ | — | $ | — | $ | — | ||||||||||||||||||||
Proceeds | 2,000,000 | — | 2,000,000 | |||||||||||||||||||||||
Repayments | — | — | — | Convertible Debt - Net | ||||||||||||||||||||||
Conversion of note payable to convertible debt | 180,000 | 50,000 | 230,000 | |||||||||||||||||||||||
Conversion of accrued interest into convertible debt | 14,133 | — | 14,133 | The Company has recorded derivative liabilities associated with these convertible debt instruments, as more fully discussed at Notes 6 and 10 (C). | ||||||||||||||||||||||
Less: gross debt discount recorded | (1,925,191 | ) | — | (1,925,191 | ) | |||||||||||||||||||||
Add: amortization of debt discount | 92,304 | — | 92,304 | Third Party | Related Party | Totals | ||||||||||||||||||||
Balance December 31, 2013 | $ | 361,245 | $ | 50,000 | $ | 411,245 | Balance December 31, 2012 | $ | — | $ | — | $ | — | |||||||||||||
Proceeds | 2,000,000 | — | 2,000,000 | |||||||||||||||||||||||
In connection with the $2,000,000 convertible debt offering in November 2013, the Company issued 3,672,134 detachable warrants. The notes and warrants were treated as derivative liabilities, see Notes 6 and 10. | Repayments | — | — | — | ||||||||||||||||||||||
Conversion of note payable to convertible debt | 180,000 | 50,000 | 230,000 | |||||||||||||||||||||||
The Company was required to register the underlying convertible debt shares and warrants within 60 days (January 2014), and for the registration statement to become effective 90 days after this date (April 2014). As of the date of the accompanying report, the registration statement has not yet been filed, which upon filing, must be declared and remain effective. As a result of not filing the registration statement timely, the Company began accruing liquidated damages equal to 2% of the gross proceeds which is equivalent to $40,000 per month each for May and June 2014. The liquidated damages clause is capped at 15% of gross proceeds raised. If the Company fails to pay the liquidated damages, an interest rate of 18% will be applied to the outstanding debt instruments. | Conversion of accrued interest into convertible debt | 14,133 | — | 14,133 | ||||||||||||||||||||||
Less: gross debt discount recorded - Day 1 | (1,925,191 | ) | — | (1,925,191 | ) | |||||||||||||||||||||
In the event any of these notes are prepaid prior to maturity, a penalty rate of 10% would apply for any payments occurring between months 12 – 18 and a 5% rate for any payments occurring between 19-24 months. | Add: amortization of debt discount | 92,304 | — | 92,304 | ||||||||||||||||||||||
Balance December 31, 2013 | 361,246 | 50,000 | 411,246 | |||||||||||||||||||||||
All convertible debt is secured by a 2nd priority lien on all assets of the Company. The Company is subordinate only to a third party bank loan, which is currently included as a component of notes payable ($503,203). | Proceeds | 2,270,100 | — | 2,270,100 | ||||||||||||||||||||||
Less: gross debt discount recorded - Day 1 | (2,249,459 | ) | — | (2,249,459 | ) | |||||||||||||||||||||
(B) Terms of Debt | Add: amortization of debt discount | 579,382 | — | 579,382 | ||||||||||||||||||||||
Balance June 30, 2014 | $ | 961,269 | $ | 50,000 | $ | 1,011,269 | ||||||||||||||||||||
In 2012, all outstanding debt had the following terms: | ||||||||||||||||||||||||||
In connection with the $2,000,000 convertible debt offering in November 2013, the Company issued 3,672,134 detachable warrants. The notes and warrants were treated as derivative liabilities, see Notes 6 and 9. | ||||||||||||||||||||||||||
• Unsecured | ||||||||||||||||||||||||||
• Due on demand | The Company was required to register the underlying convertible debt shares and warrants within 60 days (January 2014), and for the registration statement to become effective 90 days after this date (April 2014). The registration statement has not yet been filed, which upon filing, must be declared and remain effective. As a result of not filing the registration statement timely, the Company began accruing liquidated damages equal to 2% of the gross proceeds which is equivalent to $40,000 per month each for May and June 2014. The liquidated damages clause is capped at 15% of gross proceeds raised. If the Company fails to pay the liquidated damages, an interest rate of 18% will be applied to the outstanding debt instruments. | |||||||||||||||||||||||||
• Interest ranging from 10% - 12% | ||||||||||||||||||||||||||
In connection with the $2,270,100 convertible debt offering during the three months ended June 30, 2014, the Company issued 5,390,100 detachable warrants. The notes and warrants were treated as derivative liabilities, see Notes 6 and 9. | ||||||||||||||||||||||||||
In 2013, all outstanding debt had the following terms: | ||||||||||||||||||||||||||
In the event any of these notes are prepaid prior to maturity, a penalty rate of 10% would apply for any payments occurring between months 12 – 18 and a 5% rate for any payments occurring between 19-24 months. | ||||||||||||||||||||||||||
• Unsecured -$26,108 | ||||||||||||||||||||||||||
• Secured - $503,203 | All convertible debt is secured by a 2nd priority lien on all assets of the Company. The Company is subordinate only to a third party bank loan, which is currently included as a component of notes payable ($454,643). | |||||||||||||||||||||||||
• Due: | ||||||||||||||||||||||||||
• On demand ($26,108 – related party); | (B)Terms of Debt | |||||||||||||||||||||||||
• Due August 29, 2018 ($503,203 – third party) | ||||||||||||||||||||||||||
• Due November 26, 2015 ($2,244,133 – all convertible debt – gross – secured by all assets of the Company) | In 2012, all outstanding debt had the following terms: | |||||||||||||||||||||||||
• Interest | • | Unsecured | ||||||||||||||||||||||||
• Non-interest bearing on notes issued prior to 2013 (see 2012 notes above); or | • | Due on demand | ||||||||||||||||||||||||
• Ranging from 12% - 15% | • | Interest ranging from 10% - 12% | ||||||||||||||||||||||||
All convertible debt and related warrants issued with the convertible notes in 2013 were convertible at $0.25 and $0.375/share, respectively; however, given the existence of a ratchet feature, these debt and warrant instruments could potentially carry a lower conversion price in the future in the event any future offering offered a lower per share amount for a conversion. | In 2014 and 2013, all outstanding debt had the following terms: | |||||||||||||||||||||||||
(C) Future Commitments | • | Unsecured -$26,108 | ||||||||||||||||||||||||
• | Secured - $454,643 | |||||||||||||||||||||||||
At December 31, 2013, the Company has outstanding debt of $816,362 (See Note 5 (A)). Future minimum repayment obligations are as follows: | • | Due: | ||||||||||||||||||||||||
• | On demand ($26,108 – related party); | |||||||||||||||||||||||||
Year Ended December 31 | • | Due August 29, 2018 ($454,653 – third party) | ||||||||||||||||||||||||
2014 | $ | 124,194 | • | Due November 26, 2015 ($2,244,133 –convertible debt – gross – secured by all assets of the Company) | ||||||||||||||||||||||
2015 | 2,649,250 | • | Due May 8, 2016 ($2,270,100 –convertible debt – gross – secured by all assets of the Company) | |||||||||||||||||||||||
Less: unamortized debt discount | (1,832,888 | ) | ||||||||||||||||||||||||
Less: current maturities | (124,194 | ) | • | Interest | ||||||||||||||||||||||
Debt - long term | $ | 816,362 | • | Non-interest bearing on notes issued prior to 2013 (see 2012 notes above); or | ||||||||||||||||||||||
• | Ranging from 12% - 15% | |||||||||||||||||||||||||
All convertible debt and related warrants issued with the convertible notes were convertible at $0.25 and $0.375/share, respectively; however, given the existence of a ratchet feature, these debt and warrant instruments could potentially carry a lower conversion price in the future in the event any future offering offered a lower per share amount for a conversion. | ||||||||||||||||||||||||||
In connection with the secured loan of $454,643, the lender required for the Company to hold in escrow $50,000 for required payments through April 2014. As of June 30, 2014, the escrow balance was $0. | ||||||||||||||||||||||||||
In connection with the Notes Offering, the Company entered into Registration Rights Agreements, dated November 26, 2013, May 8, 2014 and June 25, 2014 (the “Registration Rights Agreements”) whereby the Company agreed to prepare and file a registration statement with the SEC within sixty (60) days after execution of the applicable Registration Rights Agreement and to have the registration statement declared effective by the SEC within ninety (90) days thereafter (on day 150). | ||||||||||||||||||||||||||
Because the Company was unable to timely file a registration statement pursuant to the terms of each Registration Rights Agreement noted above, the Company is in default under such Registration Rights Agreements (the “Filing Default Damages”). Pursuant to the Registration Rights Agreement, the Filing Default Damages mandate that the Company shall pay to the Investors, for each thirty (30) day period of such failure and until the filing date of the registration statement and/or the common stock may be sold pursuant to Rule 144, an amount in cash, as partial liquidated damages and not as a penalty, equal to 2% of the aggregate gross proceeds paid by the Investors for these Notes. | ||||||||||||||||||||||||||
The maximum liquidated damages shall be equal to 15% of the aggregate gross proceeds received by the Company in connection with the issuance of the Notes and Warrants. If the Company fails to pay any partial liquidated damages in full within five (5) days of the date payable, the Company shall pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Investors, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. | ||||||||||||||||||||||||||
As of June 30, 2014, as a component of accounts payable and accrued expenses, the Company has accrued penalties totaling $218,143 pertaining to the registration rights agreement. | ||||||||||||||||||||||||||
(C) Future Commitments | ||||||||||||||||||||||||||
At June 30, 2014, the Company has outstanding debt of $1,367,826, net of debt discount (See Note 5 (A)). | ||||||||||||||||||||||||||
Future minimum repayment obligations are as follows: | ||||||||||||||||||||||||||
Year Ended December 31 | ||||||||||||||||||||||||||
2014 | $ | 98,086 | ||||||||||||||||||||||||
2015 | 4,870,793 | |||||||||||||||||||||||||
Less: unamortized debt discount | (3,502,967 | ) | ||||||||||||||||||||||||
Less: current maturities | (98,086 | ) | ||||||||||||||||||||||||
Debt - long term | $ | 1,367,826 | ||||||||||||||||||||||||
6_Derivative_Liabilities
6. Derivative Liabilities | 15 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
6. Derivative Liabilities | ' | ||||||||
Note 6 Derivative Liabilities | |||||||||
The Company identified conversion features embedded within convertible debt and warrants issued in 2013. The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. | |||||||||
As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is summarized as follow: | |||||||||
2013 | 2012 | ||||||||
Fair value at the commitment date - convertible debt | $ | 2,414,585 | $ | — | |||||
Fair value at the commitment date - warrants | 682,809 | — | |||||||
Reclassification of derivative liabilities to additional paid in capital | |||||||||
related to warrants exercised that ceased being a derivative liability | (311,709 | ) | — | ||||||
Fair value mark to market adjustment - converible debt | (28,586 | ) | — | ||||||
Fair value mark to market adjustment - warrants | (5,595 | ) | — | ||||||
Totals | $ | 2,751,504 | $ | — | |||||
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2013: | |||||||||
Commitment Date | Remeasurement Date | ||||||||
Expected dividends | 0 | % | 0 | % | |||||
Expected volatility | 150 | % | 150 | % | |||||
Expected term | 2 - 5 years | 1.9 - 4.68 years | |||||||
Risk free interest rate | 0.29% - 1.68% | 0.38% - 1.75% |
6_Derivative_Liabilities_Q2
6. Derivative Liabilities (Q2) | 15 Months Ended | 6 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||||
Quarter 2 [Member] | ||||||||||||||||||
6. Derivative Liabilities | ' | ' | ||||||||||||||||
Note 6 Derivative Liabilities | Note 6 Derivative Liabilities | |||||||||||||||||
The Company identified conversion features embedded within convertible debt and warrants issued in 2013. The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. | The Company identified conversion features embedded within convertible debt and warrants issued in 2013 and 2014. The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. | |||||||||||||||||
As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is summarized as follow: | As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is summarized as follow: | |||||||||||||||||
2013 | 2012 | Balance - December 31, 2012 | $ | — | ||||||||||||||
Fair value at the commitment date - convertible debt | $ | 2,414,585 | $ | — | Fair value at the commitment date - convertible debt | 2,414,585 | ||||||||||||
Fair value at the commitment date - warrants | 682,809 | — | Fair value at the commitment date - warrants | 682,809 | ||||||||||||||
Reclassification of derivative liabilities to additional paid in capital | Reclassification of derivative liabilities to additional paid in capital | — | ||||||||||||||||
related to warrants exercised that ceased being a derivative liability | (311,709 | ) | — | related to convertible debt that ceased being a derivative liability | (311,709 | ) | ||||||||||||
Fair value mark to market adjustment - converible debt | (28,586 | ) | — | Fair value mark to market adjustment - convertible debt | (28,586 | ) | ||||||||||||
Fair value mark to market adjustment - warrants | (5,595 | ) | — | Fair value mark to market adjustment - warrants | (5,595 | ) | ||||||||||||
Totals | $ | 2,751,504 | $ | — | Balance - December 31, 2013 | 2,751,504 | ||||||||||||
Fair value at the commitment date - convertible debt | 2,817,944 | |||||||||||||||||
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of December 31, 2013: | Fair value mark to market adjustment - convertible debt | (216,017 | ) | |||||||||||||||
Reclassification of derivative liabilities to additional paid in capital | (214,769 | ) | ||||||||||||||||
Commitment Date | Remeasurement Date | Fair value mark to market adjustment - warrants | (8,650 | ) | ||||||||||||||
Balance - June 30, 2014 | $ | 5,130,013 | ||||||||||||||||
Expected dividends | 0 | % | 0 | % | ||||||||||||||
Expected volatility | 150 | % | 150 | % | The fair value at the re-measurement date for the Company’s derivative liabilities were based upon the following management assumptions as of June 30, 2014: | |||||||||||||
Expected term | 2 - 5 years | 1.9 - 4.68 years | ||||||||||||||||
Risk free interest rate | 0.29% - 1.68% | 0.38% - 1.75% | Remeasurement Date | Commitment Date | ||||||||||||||
Expected dividends | 0% | 0% | ||||||||||||||||
Expected volatility | 150% | 150% | ||||||||||||||||
Expected term | 1.41 - 4.99 years | 2 - 5 years | ||||||||||||||||
Risk free interest rate | 0.47% - 1.62$ | 0.40% - 1.68% | ||||||||||||||||
7_Debt_Discount
7. Debt Discount | 15 Months Ended | ||||
Mar. 31, 2014 | |||||
Notes to Financial Statements | ' | ||||
7. Debt Discount | ' | ||||
Note 7 Debt Discount | |||||
The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note. | |||||
The Company recorded a derivative expense of $1,156,193 for 2013. | |||||
The debt discount recorded in 2013 pertains to convertible debt and warrants issued that contain ratchet features that are required to bifurcated and reported at fair value. | |||||
Debt discount is summarized as follows: | |||||
Debt discount - net - December 31, 2012 | $ | — | |||
Debt discount | 1,925,191 | ||||
Accumulated amortization - 2013 | (92,304 | ) | |||
Debt discount - net - December 31, 2013 | $ | 1,832,888 | |||
The Company amortized $92,304 in 2013 to interest expense. |
7_Debt_Discount_Q2
7. Debt Discount (Q2) | 15 Months Ended | 6 Months Ended | ||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||
Quarter 2 [Member] | ||||||||||
7. Debt Discount | ' | ' | ||||||||
Note 7 Debt Discount | Note 7 Debt Discount | |||||||||
The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note. | The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note. | |||||||||
The Company recorded a derivative expense of $1,156,193 for 2013. | The debt discount recorded in 2014 and 2013 pertains to convertible debt and warrants issued that contain ratchet features that are required to bifurcated and reported at fair value. | |||||||||
The debt discount recorded in 2013 pertains to convertible debt and warrants issued that contain ratchet features that are required to bifurcated and reported at fair value. | Debt discount is summarized as follows: | |||||||||
Debt discount is summarized as follows: | Debt discount - net - December 31, 2012 | $ | — | |||||||
Debt discount | 1,925,191 | |||||||||
Debt discount - net - December 31, 2012 | $ | — | Amortization expense - 2013 | (92,301 | ) | |||||
Debt discount | 1,925,191 | Debt discount - net - December 31, 2013 | 1,832,890 | |||||||
Accumulated amortization - 2013 | (92,304 | ) | Debt discount | 2,249,459 | ||||||
Debt discount - net - December 31, 2013 | $ | 1,832,888 | Amortization expense - 2014 | (579,382 | ) | |||||
Debt discount - net - June 30, 2014 | $ | 3,502,967 | ||||||||
The Company amortized $92,304 in 2013 to interest expense. |
8_Debt_Issue_Costs
8. Debt Issue Costs | 15 Months Ended | ||||
Mar. 31, 2014 | |||||
Debt Disclosure [Abstract] | ' | ||||
8. Debt Issue Costs | ' | ||||
Note 8 Debt Issue Costs | |||||
Debt issue costs are summarized as follows: | |||||
Debt issue costs - net - December 31, 2012 | $ | — | |||
Debt issue costs | 247,197 | ||||
Accumulated amortization - 2013 | (11,986 | ) | |||
Debt issue costs - net - December 31, 2013 | $ | 235,211 | |||
During 2013, the Company amortized $11,986 to interest expense. |
8_Debt_Issue_Costs_Q2
8. Debt Issue Costs (Q2) | 15 Months Ended | 6 Months Ended | ||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||
Quarter 2 [Member] | ||||||||||
8. Debt Issue Costs | ' | ' | ||||||||
Note 8 Debt Issue Costs | Note 8 Debt Issue Costs | |||||||||
Debt issue costs are summarized as follows: | Debt issue costs are summarized as follows: | |||||||||
Debt issue costs - net - December 31, 2012 | $ | — | Debt issue costs - net - December 31, 2012 | $ | — | |||||
Debt issue costs | 247,197 | Debt issue costs | 247,197 | |||||||
Accumulated amortization - 2013 | (11,986 | ) | Amortization expense - 2013 | (11,986 | ) | |||||
Debt issue costs - net - December 31, 2013 | $ | 235,211 | Debt issue costs - net - December 31, 2013 | 235,211 | ||||||
Debt issue costs | 69,944 | |||||||||
During 2013, the Company amortized $11,986 to interest expense. | Amortization expense - 2014 | (63,909 | ) | |||||||
Debt issue costs - net - June 30, 2014 | $ | 241,246 | ||||||||
9_Income_Taxes
9. Income Taxes | 15 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
9. Income Taxes | ' | ||||||||
Note 9 Income Taxes | |||||||||
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due. Deferred taxes relate to differences between the basis of assets and liabilities for financial and income tax reporting which will be either taxable or deductible when the assets or liabilities are recovered or settled. | |||||||||
At December 31, 2013, the Company has a net operating loss carry-forward of approximately $477,000 available to offset future taxable income expiring through 2033. Utilization of future net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code. | |||||||||
The valuation allowance at December 31, 2012 was approximately $18,000. The net change in valuation allowance during the year ended December 31, 2013 was an increase of approximately $181,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2013. | |||||||||
The effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2013 and 2012 are approximately as follows: | |||||||||
Net operating loss carryforward | $ | (199,000 | ) | $ | (18,000 | ) | |||
Gross Deferred Tax Assets | (199,000 | ) | (18,000 | ) | |||||
Less Valuation Allowance | 199,000 | 18,000 | |||||||
Total Deferred Tax Assets - Net | $ | — | $ | — | |||||
There was no income tax expense for the years ended December 31, 2013 and 2012 due to the Company’s net losses. | |||||||||
The Company’s tax expense differs from the “expected” tax expense for the years ended December 31, 2013 and 2012, (computed by applying the Federal Corporate tax rate of 34% to loss before taxes and 6% for Georgia State Corporate Taxes, the blended rate used was 37.96%), are approximately as follows: | |||||||||
Computed "expected" tax expense (benefit) - Federal | $ | (875,000 | ) | $ | (16,000 | ) | |||
Computed "expected" tax expense (benefit) - State - Georgia | (102,000 | ) | (2,000 | ) | |||||
Derivative expense | 439,000 | — | |||||||
Loss on debt extinguishment | 5,000 | — | |||||||
Gain on debt forgiveness | 38,000 | ||||||||
Share based payments | 286,000 | — | |||||||
Amortization of patent | 1,000 | — | |||||||
Amortization of debt Issue costs | 5,000 | — | |||||||
Amortization of debt discount | 35,000 | — | |||||||
Change in value of derivitive liability | (13,000 | ) | — | ||||||
Change in valuation allowance | 181,000 | 18,000 | |||||||
$ | — | $ | — |
9_Stockholders_Deficit_Q2
9. Stockholders Deficit (Q2) | 15 Months Ended | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||||||||||||||||||||||||||
Quarter 2 [Member] | ||||||||||||||||||||||||||||||||||||||||
9. Stockholders Deficit | ' | ' | ||||||||||||||||||||||||||||||||||||||
Note 10 Stockholders Deficit | Note 9 Stockholders Deficit | |||||||||||||||||||||||||||||||||||||||
(A) Common Stock | (A) Common Stock | |||||||||||||||||||||||||||||||||||||||
In 2013, the Company issued the following common stock: | In 2014, the Company issued the following common stock: | |||||||||||||||||||||||||||||||||||||||
Transaction Type | Quantity | Valuation | Range of Value per Share | Transaction Type | Quantity | Valuation | Range of Value per Share | |||||||||||||||||||||||||||||||||
Warrants exercised | (1 | ) | 1,400,000 | $ | 1,400 | $ | 0.001 | Recognition of unvested share compensation - Related Party | (1 | ) | — | $ | 31,250 | $ | — | |||||||||||||||||||||||||
Services rendered - related party | (2 | ) | 500,000 | 125,000 | 0.25 | — | $ | 31,250 | $ | — | ||||||||||||||||||||||||||||||
Acquisition of 4.5% interest in subsidiary | (3 | ) | 1,467,000 | 366,750 | 0.25 | |||||||||||||||||||||||||||||||||||
3,367,000 | $ | 493,150 | $ | 0.001 | - | $0.25 | The following is a more detailed description of the Company’s stock issuance from the table above: | |||||||||||||||||||||||||||||||||
The fair value of stock issued was based upon the following: | (1) Services Rendered – Related Party | |||||||||||||||||||||||||||||||||||||||
• | Warrants were exercised for cash under the terms of the agreement at $0.001 per share. | The Company’s Chief Executive Officer received 1,250,000 shares as a sign on bonus. There are no future service requirements and there are no claw back or forfeiture rights associated with this stock grant. The shares are valued based on a recent third party cash offering of convertible debt containing an exercise price of $0.25/share. See Note 10(B) for additional discussion. | ||||||||||||||||||||||||||||||||||||||
• | Services rendered – related party were based upon recent third party cash issuances of convertible debt with a conversion price of $0.25/share. This represented the best evidence of fair value. | |||||||||||||||||||||||||||||||||||||||
• | Acquisition of 4.5% ownership in Subsidiary is deemed a capital transaction since control of the Subsidiary was never lost. Valuation was based upon recent third party cash issuances of convertible debt with a conversion price of $0.25/share. This represented the best evidence of fair value. See #3 below for additional discussion. | (B) Stock Options | ||||||||||||||||||||||||||||||||||||||
The following is a more detailed description of some of the Company’s stock issuances from the table above: | On September 3, 2013, the Company issued 300,000 stock options, having a fair value of $66,785, which was expensed immediately since all stock options vested immediately. These options expire on September 2, 2018 (5 years). All options were granted to Board Directors for services rendered, and included as a component of general and administrative expense, as a result, these grants were considered related party transactions. | |||||||||||||||||||||||||||||||||||||||
(1) Warrants Exercised for Cash | Of the total options granted, 100,000 were cancelled in February 2014 as a Board Director resigned. | |||||||||||||||||||||||||||||||||||||||
In connection with a warrant exercise, a third party paid cash to obtain these shares. | The following is a summary of the Company’s stock option activity: | |||||||||||||||||||||||||||||||||||||||
(2) Services Rendered – Related Party | Weighted Average | Aggregate | ||||||||||||||||||||||||||||||||||||||
Weighted Average | Remaining Contractual Life | Intrinsic | ||||||||||||||||||||||||||||||||||||||
The Company’s Chief Executive Officer received these shares as a sign on bonus. There are no future service requirements and there are no claw back or forfeiture rights associated with this stock grant. The shares are valued based on a recent third party cash offering of convertible debt containing an exercise price of $0.25/share. Also see Note 11. | Options | Exercise Price | (In Years) | Value | ||||||||||||||||||||||||||||||||||||
(3) Acquisition of Subsidiary Ownership Interest | Balance - December 31, 2013 | 300,000 | 0.375 | 4.67 | — | |||||||||||||||||||||||||||||||||||
Granted | — | — | — | — | ||||||||||||||||||||||||||||||||||||
In June 2013, the Company reacquired 4.5% ownership in its subsidiary, which it had previously sold in 2012. The transaction was accounted for as a capital transaction since the parent had control of the Subsidiary at all times. The purchase reflected 4.5% of the Subsidiary being reacquired, which increased the parent’s ownership from 94.35% to 98.8%. The transaction included the valuation of shares issued at $366,750, however, in connection with establishing the valuation adjustment of the noncontrolling interest reacquired, $19,538 represented the net increase to additional paid in capital and reduction of the noncontrolling interest. As a result of this transaction, the noncontrolling interest post repurchase is 1.2%. | Exercised | — | — | — | — | |||||||||||||||||||||||||||||||||||
Forfeited/Cancelled | (100,000 | ) | — | — | — | |||||||||||||||||||||||||||||||||||
(B) Additional Paid in Capital and Other Equity Transactions | Balance - June 30, 2014 - outstanding | 200,000 | 0.375 | 4.18 | — | |||||||||||||||||||||||||||||||||||
The following transactions occurred during the year ended December 31, 2013: | Balance - June 30, 2014 - exercisable | 200,000 | 0.375 | 4.18 | — | |||||||||||||||||||||||||||||||||||
(1) Debt Forgiveness – Related Parties | ||||||||||||||||||||||||||||||||||||||||
(C) Stock Warrants | ||||||||||||||||||||||||||||||||||||||||
Certain existing note holders forgave $83,000. There was no gain or loss on the transaction, rather a charge to additional paid in capital due to being a related party transaction. | ||||||||||||||||||||||||||||||||||||||||
All warrants issued during 2014 and 2013 were accounted for as derivative liabilities as the warrants contained a ratchet feature. See Note 6. | ||||||||||||||||||||||||||||||||||||||||
(2) Modification of Debt (Extinguishment Accounting) | ||||||||||||||||||||||||||||||||||||||||
During 2013, the Company issued 6,738,884 warrants. Of the total warrants granted, 4,338,884 expire 5 years from issuance, while 2,400,000 expired on December 31, 2013. | ||||||||||||||||||||||||||||||||||||||||
A board member and third party agreed to convert an aggregate $244,133 of outstanding conventional debt and accrued interest into convertible debt, under the same terms as the $2,000,000 convertible debt offering occurring in November 2013. | ||||||||||||||||||||||||||||||||||||||||
Of the total warrants granted during 2013, 6,614,801 were granted to third parties, while 124,083 were granted to related parties, consisting of the Company’s Chief Executive Officer. | ||||||||||||||||||||||||||||||||||||||||
The exchange of an outstanding debt instrument for a new debt instrument with the same lender/creditor results in an extinguishment of the old debt instrument if the debt instruments have substantially different terms. Similarly, a modification of the terms of an outstanding debt instrument should be accounted for like, and reported in the same manner as, an extinguishment if the old and new debt instruments have substantially different terms. In addition, the new debt instrument is considered to be substantially different from the old if the modification or exchange eliminates or adds a substantive conversion option. | ||||||||||||||||||||||||||||||||||||||||
During 2014, the Company issued 5,390,100 warrants. The warrants granted expire 5 years from issuance on various dates during 2019. | ||||||||||||||||||||||||||||||||||||||||
As a result, the Company determined a loss on debt extinguishment of $16,009. Of the total loss, $12,731 was recorded to the statement of operations pertaining to a third party; the remaining $3,278 could not be recorded as a loss to the statement of operations due to being a related party transaction, rather, the Company accounted for this loss on extinguishment as a capital transaction and recorded this amount as additional paid in capital. | ||||||||||||||||||||||||||||||||||||||||
Of the total warrants granted during the 6 months ended June 30, 2014, 4,740,100 were granted to third parties, while 650,000 were granted to related parties, consisting of the Company’s Chief Executive Officer. | ||||||||||||||||||||||||||||||||||||||||
(3) Payment of Corporate Expenses by Stockholders | ||||||||||||||||||||||||||||||||||||||||
During 2013, the Company entered into convertible, secured note agreements. As part of these agreements, the Company issued warrants to purchase 3,672,134 shares of common stock. The warrants vest immediately and expire November 26, 2018, with an exercise price of $0.375. | ||||||||||||||||||||||||||||||||||||||||
Existing stockholders transferred shares owned in the Company to pay corporate expenses. The services had a fair value of $562,500, based upon recent third party convertible debt (November 2013 offering) that was sold having a conversion price of $0.25/share. | ||||||||||||||||||||||||||||||||||||||||
During 2013, the Company issued 3,066,750 warrants for services performed. The warrants vest immediately and expire on December 31, 2013 through November 25, 2018, with exercise prices ranging from $0.001 - $0.375. | ||||||||||||||||||||||||||||||||||||||||
The following transactions occurred during the year ended December 31, 2012: | ||||||||||||||||||||||||||||||||||||||||
During 2014, the Company entered into convertible, secured note agreements. As part of these agreements, the Company issued warrants to purchase 5,390,100 shares of common stock. The warrants vest immediately and expire on various dates in 2019, with an exercise price of $0.375. | ||||||||||||||||||||||||||||||||||||||||
Sale of Member Units | ||||||||||||||||||||||||||||||||||||||||
The following is a summary of the Company’s warrant activity: | ||||||||||||||||||||||||||||||||||||||||
Prior to converting to a C Corp (see Note 1), the Subsidiary sold member units for $774,000. The sale reflected 4.5% of the subsidiary being sold, which reduced the parent’s ownership from 98.8% to 94.35%. The transaction was accounted for as a capital transaction since the parent had control of the Subsidiary at all times. The sale resulted in an allocation to the noncontrolling interest valued at $5,193. | ||||||||||||||||||||||||||||||||||||||||
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | ||||||||||||||||||||||||||||||||||||||
(C) Stock Options | ||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2012 | — | $ | — | |||||||||||||||||||||||||||||||||||||
On September 3, 2013, the Company issued 300,000 stock options, having a fair value of $66,785, which was expensed immediately since all stock options vested immediately. These options expire on September 2, 2018 (5 years). All options were granted to Board Directors for services rendered, and included as a component of general and administrative expense, as a result, these grants were considered related party transactions. Of the total options granted, 100,000 were cancelled in 2014 as a Board Director resigned. | Granted | 6,738,884 | 0.242 | 5 | ||||||||||||||||||||||||||||||||||||
Exercised | (1,400,000 | ) | — | |||||||||||||||||||||||||||||||||||||
The Company applied fair value accounting for all share based payment awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes assumptions used in the year ended December 31, 2013 is as follows: | Cancelled/Forfeited | (1,000,000 | ) | — | ||||||||||||||||||||||||||||||||||||
Balance, December 31, 2013 | 4,338,884 | 0.242 | 4.9 | |||||||||||||||||||||||||||||||||||||
Options Granted | 300,000 | Granted | 5,390,100 | 0.375 | 5 | |||||||||||||||||||||||||||||||||||
Grant Date | 3-Sep-13 | Exercised | ||||||||||||||||||||||||||||||||||||||
Exercise Price | $ | 0.375 | Cancelled/Forfeited | — | — | |||||||||||||||||||||||||||||||||||
Expected Dividends | 0 | % | Balance, June 30, 2014 | 9,728,984 | 0.375 | 4.7 | ||||||||||||||||||||||||||||||||||
Expected Volatility | 150 | % | ||||||||||||||||||||||||||||||||||||||
Risk Free Interest Rate | 0.03 | % | In May 2014, the Company received $1,000 in connection with a warrant exercise of 1,000,000 warrants that had been assigned from one investor (originally held 2,400,000 and exercised 1,400,000 in 2013). There is was no additional compensation expense recorded on this transaction. | |||||||||||||||||||||||||||||||||||||
Expected Life of Options | 5 Years | |||||||||||||||||||||||||||||||||||||||
Expected Forfeitures | 0 | % | ||||||||||||||||||||||||||||||||||||||
Fair Value per Stock Option | $ | 0.22 | ||||||||||||||||||||||||||||||||||||||
The following is a summary of the Company’s stock option activity: | ||||||||||||||||||||||||||||||||||||||||
Weighted Average | Aggregate | |||||||||||||||||||||||||||||||||||||||
Weighted Average | Remaining Contractual Life | Intrinsic | ||||||||||||||||||||||||||||||||||||||
Options | Exercise Price | (In Years) | Value | |||||||||||||||||||||||||||||||||||||
Balance - December 31, 2012 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Granted | 300,000 | 0.375 | 5 | — | ||||||||||||||||||||||||||||||||||||
Exercised | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Forfeited/Cancelled | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Balance - December 31, 2013 - outstanding | 300,000 | 0.375 | 4.67 | — | ||||||||||||||||||||||||||||||||||||
Balance - December 31, 2013 - exercisable | 300,000 | 0.375 | 4.67 | — | ||||||||||||||||||||||||||||||||||||
Grant date fair value of options - 2013 | 66,458 | |||||||||||||||||||||||||||||||||||||||
Weighted average grant date fair value - 2013 | 0.22 | |||||||||||||||||||||||||||||||||||||||
(D) Stock Warrants | ||||||||||||||||||||||||||||||||||||||||
All warrants issued during 2013 were accounted for as derivative liabilities as the warrants contained a ratchet feature. See Note 6. | ||||||||||||||||||||||||||||||||||||||||
During 2013, the Company issued 6,738,884 warrants. Of the total warrants granted, 4,338,884 expire 5 years from issuance, while 2,400,000 expired on December 31, 2013. | ||||||||||||||||||||||||||||||||||||||||
Of the total warrants granted, 6,614,801 were granted to third parties, while 124,083 were granted to related parties, consisting of the Company’s Chief Executive Officer. | ||||||||||||||||||||||||||||||||||||||||
During 2013, the Company entered into convertible, secured note agreements. As part of these agreements, the Company issued warrants to purchase 3,672,134 shares of common stock. The warrants vest immediately and expire November 26, 2018, with an exercise price of $0.375. | ||||||||||||||||||||||||||||||||||||||||
During 2013, the Company issued 3,066,750 warrants for services performed. The warrants vest immediately and expire on December 31, 2013 through November 25, 2018, with exercise prices ranging from $0.001 - $0.375. | ||||||||||||||||||||||||||||||||||||||||
The value of the warrants granted for services was $682,809 and was calculated using the below Black-Scholes assumptions below, and was expensed as derivative expense with the offset being recorded to derivative liabilities, since the Company applied the provisions of ASC No. 815, pertaining to the potential settlement in an amount of shares that may not currently exist to settle any potential exercises. Of the total expense, $666,315 was to third parties, while the remaining $16,495 was to related parties. | ||||||||||||||||||||||||||||||||||||||||
The Black-Scholes assumptions used in the computation of derivative expense for year ended December 31, 2013 is as follows: | ||||||||||||||||||||||||||||||||||||||||
Stock price | $ | 0.25 | ||||||||||||||||||||||||||||||||||||||
Exercise price | $ | 0.38 | ||||||||||||||||||||||||||||||||||||||
Expected dividends | 0 | % | ||||||||||||||||||||||||||||||||||||||
Expected volatility | 150 | % | ||||||||||||||||||||||||||||||||||||||
Risk free interest rate | 1.68 | % | ||||||||||||||||||||||||||||||||||||||
Expected term | 5 years | |||||||||||||||||||||||||||||||||||||||
A summary of warrant activity for the Company for the year ended December 31, 2013 is as follows: | ||||||||||||||||||||||||||||||||||||||||
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value | |||||||||||||||||||||||||||||||||||||
Balance - December 31, 2012 | $ | — | ||||||||||||||||||||||||||||||||||||||
Granted | 6,738,884 | 0.24 | 5 | |||||||||||||||||||||||||||||||||||||
Exercised | (1,400,000 | ) | 0.001 | — | ||||||||||||||||||||||||||||||||||||
Cancelled/Forfeited | (1,000,000 | ) | 0.001 | — | ||||||||||||||||||||||||||||||||||||
Balance - December 31, 2013 | 4,338,884 | $ | 0.24 | 4.87 | $ | — | ||||||||||||||||||||||||||||||||||
All warrants are exercisable and fully vested on the grant date. | ||||||||||||||||||||||||||||||||||||||||
In April 2014, the Company received $1,000 in connection with a warrant exercise of 1,000,000 warrants that had been assigned from one investor (originally held 2,400,000 and exercised 1,400,000 in 2013). There is was no additional compensation expense recorded on this transaction. |
10_Stockholders_Deficit
10. Stockholders Deficit | 15 Months Ended | ||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||||
10. Stockholders Deficit | ' | ||||||||||||||||||||
Note 10 Stockholders Deficit | |||||||||||||||||||||
(A) Common Stock | |||||||||||||||||||||
In 2013, the Company issued the following common stock: | |||||||||||||||||||||
Transaction Type | Quantity | Valuation | Range of Value per Share | ||||||||||||||||||
Warrants exercised | (1 | ) | 1,400,000 | $ | 1,400 | $ | 0.001 | ||||||||||||||
Services rendered - related party | (2 | ) | 500,000 | 125,000 | 0.25 | ||||||||||||||||
Acquisition of 4.5% interest in subsidiary | (3 | ) | 1,467,000 | 366,750 | 0.25 | ||||||||||||||||
3,367,000 | $ | 493,150 | $ | 0.001 | - | $0.25 | |||||||||||||||
The fair value of stock issued was based upon the following: | |||||||||||||||||||||
• | Warrants were exercised for cash under the terms of the agreement at $0.001 per share. | ||||||||||||||||||||
• | Services rendered – related party were based upon recent third party cash issuances of convertible debt with a conversion price of $0.25/share. This represented the best evidence of fair value. | ||||||||||||||||||||
• | Acquisition of 4.5% ownership in Subsidiary is deemed a capital transaction since control of the Subsidiary was never lost. Valuation was based upon recent third party cash issuances of convertible debt with a conversion price of $0.25/share. This represented the best evidence of fair value. See #3 below for additional discussion. | ||||||||||||||||||||
The following is a more detailed description of some of the Company’s stock issuances from the table above: | |||||||||||||||||||||
(1) Warrants Exercised for Cash | |||||||||||||||||||||
In connection with a warrant exercise, a third party paid cash to obtain these shares. | |||||||||||||||||||||
(2) Services Rendered – Related Party | |||||||||||||||||||||
The Company’s Chief Executive Officer received these shares as a sign on bonus. There are no future service requirements and there are no claw back or forfeiture rights associated with this stock grant. The shares are valued based on a recent third party cash offering of convertible debt containing an exercise price of $0.25/share. Also see Note 11. | |||||||||||||||||||||
(3) Acquisition of Subsidiary Ownership Interest | |||||||||||||||||||||
In June 2013, the Company reacquired 4.5% ownership in its subsidiary, which it had previously sold in 2012. The transaction was accounted for as a capital transaction since the parent had control of the Subsidiary at all times. The purchase reflected 4.5% of the Subsidiary being reacquired, which increased the parent’s ownership from 94.35% to 98.8%. The transaction included the valuation of shares issued at $366,750, however, in connection with establishing the valuation adjustment of the noncontrolling interest reacquired, $19,538 represented the net increase to additional paid in capital and reduction of the noncontrolling interest. As a result of this transaction, the noncontrolling interest post repurchase is 1.2%. | |||||||||||||||||||||
(B) Additional Paid in Capital and Other Equity Transactions | |||||||||||||||||||||
The following transactions occurred during the year ended December 31, 2013: | |||||||||||||||||||||
(1) Debt Forgiveness – Related Parties | |||||||||||||||||||||
Certain existing note holders forgave $83,000. There was no gain or loss on the transaction, rather a charge to additional paid in capital due to being a related party transaction. | |||||||||||||||||||||
(2) Modification of Debt (Extinguishment Accounting) | |||||||||||||||||||||
A board member and third party agreed to convert an aggregate $244,133 of outstanding conventional debt and accrued interest into convertible debt, under the same terms as the $2,000,000 convertible debt offering occurring in November 2013. | |||||||||||||||||||||
The exchange of an outstanding debt instrument for a new debt instrument with the same lender/creditor results in an extinguishment of the old debt instrument if the debt instruments have substantially different terms. Similarly, a modification of the terms of an outstanding debt instrument should be accounted for like, and reported in the same manner as, an extinguishment if the old and new debt instruments have substantially different terms. In addition, the new debt instrument is considered to be substantially different from the old if the modification or exchange eliminates or adds a substantive conversion option. | |||||||||||||||||||||
As a result, the Company determined a loss on debt extinguishment of $16,009. Of the total loss, $12,731 was recorded to the statement of operations pertaining to a third party; the remaining $3,278 could not be recorded as a loss to the statement of operations due to being a related party transaction, rather, the Company accounted for this loss on extinguishment as a capital transaction and recorded this amount as additional paid in capital. | |||||||||||||||||||||
(3) Payment of Corporate Expenses by Stockholders | |||||||||||||||||||||
Existing stockholders transferred shares owned in the Company to pay corporate expenses. The services had a fair value of $562,500, based upon recent third party convertible debt (November 2013 offering) that was sold having a conversion price of $0.25/share. | |||||||||||||||||||||
The following transactions occurred during the year ended December 31, 2012: | |||||||||||||||||||||
Sale of Member Units | |||||||||||||||||||||
Prior to converting to a C Corp (see Note 1), the Subsidiary sold member units for $774,000. The sale reflected 4.5% of the subsidiary being sold, which reduced the parent’s ownership from 98.8% to 94.35%. The transaction was accounted for as a capital transaction since the parent had control of the Subsidiary at all times. The sale resulted in an allocation to the noncontrolling interest valued at $5,193. | |||||||||||||||||||||
(C) Stock Options | |||||||||||||||||||||
On September 3, 2013, the Company issued 300,000 stock options, having a fair value of $66,785, which was expensed immediately since all stock options vested immediately. These options expire on September 2, 2018 (5 years). All options were granted to Board Directors for services rendered, and included as a component of general and administrative expense, as a result, these grants were considered related party transactions. Of the total options granted, 100,000 were cancelled in 2014 as a Board Director resigned. | |||||||||||||||||||||
The Company applied fair value accounting for all share based payment awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes assumptions used in the year ended December 31, 2013 is as follows: | |||||||||||||||||||||
Options Granted | 300,000 | ||||||||||||||||||||
Grant Date | 3-Sep-13 | ||||||||||||||||||||
Exercise Price | $ | 0.375 | |||||||||||||||||||
Expected Dividends | 0 | % | |||||||||||||||||||
Expected Volatility | 150 | % | |||||||||||||||||||
Risk Free Interest Rate | 0.03 | % | |||||||||||||||||||
Expected Life of Options | 5 Years | ||||||||||||||||||||
Expected Forfeitures | 0 | % | |||||||||||||||||||
Fair Value per Stock Option | $ | 0.22 | |||||||||||||||||||
The following is a summary of the Company’s stock option activity: | |||||||||||||||||||||
Weighted Average | Aggregate | ||||||||||||||||||||
Weighted Average | Remaining Contractual Life | Intrinsic | |||||||||||||||||||
Options | Exercise Price | (In Years) | Value | ||||||||||||||||||
Balance - December 31, 2012 | — | — | — | — | |||||||||||||||||
Granted | 300,000 | 0.375 | 5 | — | |||||||||||||||||
Exercised | — | — | — | — | |||||||||||||||||
Forfeited/Cancelled | — | — | — | — | |||||||||||||||||
Balance - December 31, 2013 - outstanding | 300,000 | 0.375 | 4.67 | — | |||||||||||||||||
Balance - December 31, 2013 - exercisable | 300,000 | 0.375 | 4.67 | — | |||||||||||||||||
Grant date fair value of options - 2013 | 66,458 | ||||||||||||||||||||
Weighted average grant date fair value - 2013 | 0.22 | ||||||||||||||||||||
(D) Stock Warrants | |||||||||||||||||||||
All warrants issued during 2013 were accounted for as derivative liabilities as the warrants contained a ratchet feature. See Note 6. | |||||||||||||||||||||
During 2013, the Company issued 6,738,884 warrants. Of the total warrants granted, 4,338,884 expire 5 years from issuance, while 2,400,000 expired on December 31, 2013. | |||||||||||||||||||||
Of the total warrants granted, 6,614,801 were granted to third parties, while 124,083 were granted to related parties, consisting of the Company’s Chief Executive Officer. | |||||||||||||||||||||
During 2013, the Company entered into convertible, secured note agreements. As part of these agreements, the Company issued warrants to purchase 3,672,134 shares of common stock. The warrants vest immediately and expire November 26, 2018, with an exercise price of $0.375. | |||||||||||||||||||||
During 2013, the Company issued 3,066,750 warrants for services performed. The warrants vest immediately and expire on December 31, 2013 through November 25, 2018, with exercise prices ranging from $0.001 - $0.375. | |||||||||||||||||||||
The value of the warrants granted for services was $682,809 and was calculated using the below Black-Scholes assumptions below, and was expensed as derivative expense with the offset being recorded to derivative liabilities, since the Company applied the provisions of ASC No. 815, pertaining to the potential settlement in an amount of shares that may not currently exist to settle any potential exercises. Of the total expense, $666,315 was to third parties, while the remaining $16,495 was to related parties. | |||||||||||||||||||||
The Black-Scholes assumptions used in the computation of derivative expense for year ended December 31, 2013 is as follows: | |||||||||||||||||||||
Stock price | $ | 0.25 | |||||||||||||||||||
Exercise price | $ | 0.38 | |||||||||||||||||||
Expected dividends | 0 | % | |||||||||||||||||||
Expected volatility | 150 | % | |||||||||||||||||||
Risk free interest rate | 1.68 | % | |||||||||||||||||||
Expected term | 5 years | ||||||||||||||||||||
A summary of warrant activity for the Company for the year ended December 31, 2013 is as follows: | |||||||||||||||||||||
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value | ||||||||||||||||||
Balance - December 31, 2012 | $ | — | |||||||||||||||||||
Granted | 6,738,884 | 0.24 | 5 | ||||||||||||||||||
Exercised | (1,400,000 | ) | 0.001 | — | |||||||||||||||||
Cancelled/Forfeited | (1,000,000 | ) | 0.001 | — | |||||||||||||||||
Balance - December 31, 2013 | 4,338,884 | $ | 0.24 | 4.87 | $ | — | |||||||||||||||
All warrants are exercisable and fully vested on the grant date. | |||||||||||||||||||||
In April 2014, the Company received $1,000 in connection with a warrant exercise of 1,000,000 warrants that had been assigned from one investor (originally held 2,400,000 and exercised 1,400,000 in 2013). There is was no additional compensation expense recorded on this transaction. |
10_Commitments_Q2
10. Commitments (Q2) (Quarter 2 [Member]) | 6 Months Ended | ||||||
Jun. 30, 2014 | |||||||
Quarter 2 [Member] | ' | ||||||
10. Commitments | ' | ||||||
Note 10 Commitments | |||||||
(A) Licensing and Royalty Agreement | |||||||
In 2011, the Company executed a trademark licensing agreement with General Electric (“GE”), which allows the Company the right to market ceiling light and fan fixtures, with the Company’s Technology installed displaying the GE logo. In addition, The GE trademark license agreement imposes certain manufacturing and quality control conditions that the Company must maintain in order to continue to use the GE logo. | |||||||
The agreement expires on November 30, 2018. | |||||||
The license is non-transferable and cannot be sub licensed. Various termination clauses are applicable, however, none were enforceable as of June 30, 2014 and December 31, 2013, respectively. | |||||||
On August 13, 2014, the Company entered into an amendment pertaining to its royalty obligations. Under the terms of the agreement, the Company will compute royalty liabilities, if any, as follows: | |||||||
Net Sales in Contract Year | Percentage of the Contract Year Net Sales owed to GE | ||||||
$0 - $50,000,000 | 7 | % | |||||
$50,000,001 - $100,000,000 | 6 | % | |||||
$100,000,001 + | 5 | % | |||||
For Net Sales Made | Payment Due Date | ||||||
December 1 - February 28/29 | 26-Mar | ||||||
March 1 - May 30 | 26-Jun | ||||||
June 1 - August 31 | 26-Sep | ||||||
September 1 - November 30 | 26-Dec | ||||||
The term shall carry a royalty minimum of $12,000,000. If licensee does not pay GE a cumulative royalty of $12,000,000 over the term of the agreement, the difference between $12,000,000 and all prior payments would be due on December 31, 2018. | |||||||
(B) Employment Agreement – Chief Executive Officer | |||||||
On November 15, 2013, the Company executed an employment agreement that commenced January 1, 2014 and expires on December 31, 2018. | |||||||
Under the terms of the agreement, the Company granted 1,250,000 shares of common stock, having a fair value of $312,500. 500,000 shares vested on November 15, 2013 (see Note 10 (A) (2); the remaining 750,000 shares vest evenly, (250,000 shares) each on December 31, 2014, 2015 and 2016. | |||||||
The Chief Executive Officer will also receive: | |||||||
• | Annual salary of a minimum $150,000, | ||||||
• | Additional cash compensation based on various thresholds and/or milestones tied to the Company meeting various revenue goals; none of which occurred as of the date of this report; and | ||||||
• | 5 year stock options equal to 1 ½% of quarterly net income, a strike price will be determined on the grant date, which as of the date of this report has not yet occurred. | ||||||
(C) Consulting Agreement | |||||||
On December 1, 2013, the Company executed a 3 year consulting agreement with a Non-Executive Chairman, having the following terms: | |||||||
• | Annual salary of a minimum $150,000; and | ||||||
• | Cash, stock or 5 year stock options (cashless exercise option by holder) equal to ½% of Company’s annual gross revenue (sales less returns and discounts), a strike price will be determined on the grant date, which as of the date of this report has not yet occurred. | ||||||
On June 24, 2014, the Company executed a 2 year consulting agreement at a monthly fee of $6,500 and a one-time issuance of 250,000 stock options with a strike price of $0.375. As of June 30, 2014, the term, vesting provisions and other terms of the options are still being negotiated; as a result, these options are not considered issued and outstanding. | |||||||
(D) Operating Lease | |||||||
In January 2014, the Company executed a 39 month lease for a corporate headquarters. The Company paid a security deposit of $27,020. | |||||||
The minimum rent obligations are approximately as follows: | |||||||
2014 (9 months) | $ | 61,000 | |||||
2015 | 83,000 | ||||||
2016 | 86,000 | ||||||
2017 | 22,000 | ||||||
Total | $ | 252,000 | |||||
11_Commitments
11. Commitments | 15 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
11. Commitments | ' | ||||||
Note 11 Commitments | |||||||
(A) Licensing and Royalty Agreement | |||||||
In 2011, the Company executed a trademark licensing agreement with General Electric (“GE”), which allows the right to market ceiling light and fan fixtures, with the Company’s Technology installed displaying the GE logo. In addition, The GE trademark license agreement imposes certain manufacturing and quality control conditions that the Company must maintain in order to continue to use the GE logo. | |||||||
The license is non-transferable and cannot be sub licensed. Various termination clauses are applicable, however, none were enforceable as of December 31, 2013 or 2012. | |||||||
The license agreement has minimum royalty obligations due from 2015 through 2017 as follows: | |||||||
Year Ended December 31, | |||||||
2014 | $ | — | |||||
2015 | 2,800,000 | ||||||
2016 | 3,300,000 | ||||||
2017 | 3,600,000 | ||||||
Total | $ | 9,700,000 | |||||
The minimum royalty obligations listed above could be higher in the event the Company exceeds the following net sales minimums: | |||||||
2015 | $ | 56,000,000 | |||||
2016 | $ | 66,000,000 | |||||
2017 | $ | 72,000,000 | |||||
The increase is computed by taking the Company’s net sales less the sales minimums and multiplying by 5%. The sales period used to determine the calculation is December 1 of the prior year through November 30 of the current year. | |||||||
During 2013, the Company recorded royalty expense of $400,000 as a component of general and administrative expenses. | |||||||
(B) Employment Agreement – Chief Executive Officer | |||||||
On November 15, 2013, the Company executed an employment agreement that commenced January 1, 2014 and expires on December 31, 2018. | |||||||
Under the terms of the agreement, the Company granted 1,250,000 shares of common stock, having a fair value of $312,500. 500,000 shares vested on November 15, 2013 (see Note 10 (A) (2); the remaining 750,000 shares vest evenly, (250,000 shares) each on December 31, 2014, 2015 and 2016. | |||||||
The Chief Executive Officer will also receive: | |||||||
• | Annual salary of a minimum $150,000, | ||||||
• | Additional cash compensation based on various thresholds and/or milestones tied to the Company meeting various revenue goals; none of which occurred as of the date of this report; and | ||||||
• | 5 year stock options equal to 1 ½% of quarterly net income, a strike price will be determined on the grant date, which as of the date of this report has not yet occurred. | ||||||
(C) Consulting Agreement | |||||||
On December 1, 2013, the Company executed a 3 year consulting agreement with a Non-Executive Chairman, having the following terms: | |||||||
• | Annual salary of a minimum $150,000; and | ||||||
• | Cash, stock or 5 year stock options (cashless exercise option by holder) equal to ½% of Company’s annual gross revenue (sales less returns and discounts), a strike price will be determined on the grant date, which as of the date of this report has not yet occurred. |
11_Going_Concern_Q2
11. Going Concern (Q2) | 15 Months Ended | 6 Months Ended | ||
Mar. 31, 2014 | Jun. 30, 2014 | |||
Quarter 2 [Member] | ||||
11. Going Concern | ' | ' | ||
Note 12 Going Concern | Note 11 Going Concern | |||
As reflected in the accompanying financial statements, the Company had a net loss of $2,573,335 and net cash used in operations of $685,729 for the year ended December 31, 2013; and a working capital deficit and stockholders’ deficit of $1,810,104 and $2,325,072, respectively, at December 31, 2013. These factors raise substantial doubt about the Company's ability to continue as a going concern. | As reflected in the accompanying financial statements, the Company had a net loss of $2,286,270 and net cash used in operations of $912,677 for the 6 months ended June 30, 2014; and a working capital deficit and stockholders’ deficit of $3,472,907 and $4,427,531, respectively, at June 30, 2014. These factors raise substantial doubt about the Company's ability to continue as a going concern. | |||
The ability of the Company to continue its operations is dependent on the successful implementation of Management's plans, which include the ability to generate sufficient funds to support its working capital requirements. In the event the Company fails to generate sufficient funds from its operations, it will be necessary to raise capital through debt and/or equity markets or from other traditional financing sources, including convertible debt and/or other term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur liabilities with certain related parties to sustain the Company’s existence. | The ability of the Company to continue its operations is dependent on Management's plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including convertible debt and/or other term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur liabilities with certain related parties to sustain the Company’s existence. | |||
The Company may require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. | The Company will require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. | |||
The accompanying 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. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. | In response to these problems, management has taken the following actions: | |||
• | seeking additional third party debt and/or equity financing; and | |||
• | continue with the implementation of the business plan | |||
The accompanying 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. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. |
12_Going_Concern
12. Going Concern | 15 Months Ended |
Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
12. Going Concern | ' |
Note 12 Going Concern | |
As reflected in the accompanying financial statements, the Company had a net loss of $2,573,335 and net cash used in operations of $685,729 for the year ended December 31, 2013; and a working capital deficit and stockholders’ deficit of $1,810,104 and $2,325,072, respectively, at December 31, 2013. These factors raise substantial doubt about the Company's ability to continue as a going concern. | |
The ability of the Company to continue its operations is dependent on the successful implementation of Management's plans, which include the ability to generate sufficient funds to support its working capital requirements. In the event the Company fails to generate sufficient funds from its operations, it will be necessary to raise capital through debt and/or equity markets or from other traditional financing sources, including convertible debt and/or other term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur liabilities with certain related parties to sustain the Company’s existence. | |
The Company may require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. | |
The accompanying 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. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. |
12_Subsequent_Events_Q2
12. Subsequent Events (Q2) | 15 Months Ended | 6 Months Ended | ||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||
Quarter 2 [Member] | ||||||||
12. Subsequent Events | ' | ' | ||||||
Note 13 Subsequent Events | Note 12 Subsequent Events | |||||||
The Company has evaluated for subsequent events between the balance sheet date of December 31, 2013 and July 14, 2014, the date the financial statements were available to be issued and concluded that the events or transactions occurring during that period requiring recognition or disclosure have been made. | The Company has evaluated for subsequent events between the balance sheet date of December 31, 2013 and September 15, 2014, the date the financial statements were available to be issued and concluded that the events or transactions occurring during that period requiring recognition or disclosure have been made. | |||||||
(A) Convertible Debt | ||||||||
On May 8, 2014, the Company executed convertible notes totaling $1,400,000. The notes mature on May 8, 2016 and bear an interest rate of 12%. The conversion price is $0.25/share. In connection with this raise, the Company also issued 3,640,000, three year warrants exercisable at $0.375/share. | ||||||||
On June 25, 2014, the Company executed convertible notes totaling $870,100. The notes mature on June 25, 2016 and bear an interest rate of 12%. The conversion price is $0.25/share. In connection with this raise, the Company also issued 1,750,100, three year warrants exercisable at $0.375/share. | ||||||||
In connection with the issuance of these convertible notes and warrants, the Company identified related embedded conversion features in the form ratchet provisions, which are accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions or the exercise of the warrants. | ||||||||
(B) Operating Lease | ||||||||
In January 2014, the Company executed a 39 month lease for a corporate headquarters. The Company paid a security deposit of $27,020. | ||||||||
The minimum rent obligations are approximately as follows: | ||||||||
2014 | $ | 81,000 | ||||||
2015 | 83,000 | |||||||
2016 | 86,000 | |||||||
2017 | 22,000 | |||||||
Total | $ | 272,000 |
13_Subsequent_Events
13. Subsequent Events | 15 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Subsequent Events [Abstract] | ' | ||||||
13. Subsequent Events | ' | ||||||
Note 13 Subsequent Events | |||||||
The Company has evaluated for subsequent events between the balance sheet date of December 31, 2013 and July 14, 2014, the date the financial statements were available to be issued and concluded that the events or transactions occurring during that period requiring recognition or disclosure have been made. | |||||||
(A) Convertible Debt | |||||||
On May 8, 2014, the Company executed convertible notes totaling $1,400,000. The notes mature on May 8, 2016 and bear an interest rate of 12%. The conversion price is $0.25/share. In connection with this raise, the Company also issued 3,640,000, three year warrants exercisable at $0.375/share. | |||||||
On June 25, 2014, the Company executed convertible notes totaling $870,100. The notes mature on June 25, 2016 and bear an interest rate of 12%. The conversion price is $0.25/share. In connection with this raise, the Company also issued 1,750,100, three year warrants exercisable at $0.375/share. | |||||||
In connection with the issuance of these convertible notes and warrants, the Company identified related embedded conversion features in the form ratchet provisions, which are accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions or the exercise of the warrants. | |||||||
(B) Operating Lease | |||||||
In January 2014, the Company executed a 39 month lease for a corporate headquarters. The Company paid a security deposit of $27,020. | |||||||
The minimum rent obligations are approximately as follows: | |||||||
2014 | $ | 81,000 | |||||
2015 | 83,000 | ||||||
2016 | 86,000 | ||||||
2017 | 22,000 | ||||||
Total | $ | 272,000 |
2_Summary_of_Significant_Accou2
2. Summary of Significant Accounting Policies (Policies) | 15 Months Ended | ||||
Mar. 31, 2014 | |||||
Accounting Policies [Abstract] | ' | ||||
Basis of Presentation | ' | ||||
Basis of Presentation | |||||
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting. | |||||
Use of Estimates | ' | ||||
Use of Estimates | |||||
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. | |||||
Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. | |||||
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates. | |||||
Risks and Uncertainties | ' | ||||
Risks and Uncertainties | |||||
The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. | |||||
The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales. | |||||
Fiscal Year | ' | ||||
Fiscal Year | |||||
The Company’s fiscal year-end is December 31. | |||||
Principles of Consolidation | ' | ||||
Principles of Consolidation | |||||
The consolidated financial statements include the accounts of Safety Quick Lighting & Fans Corp and its subsidiary, SQL Lighting & Fans LLC. All inter-company accounts and transactions have been eliminated in consolidation. | |||||
Non-Controlling Interest | ' | ||||
Non-Controlling Interest | |||||
In May 2012, in connection with the sale of the Company’s member units in the Subsidiary, the Company’s ownership percentage decreased from 98.8% to 94.35%. The Company then reacquired these member units in June 2013 increasing the ownership percentage from 94.35% back to 98.8%. See Note 10. | |||||
31-Dec-13 | 31-Dec-12 | ||||
Net loss attributable to Safety Quick Lighting and Fans Corp. | $ (2,573,335) | $ (844,582) | |||
Transfers (to) from the noncontrolling interest | |||||
Increase in Safety Quick Lighting and Fans Corp additional paid in capital | - | 5,193 | |||
due to sale of 4.5% ownership in Subsidiary (member units) | |||||
Decrease in Safety Quick Lighting and Fans Corp additional paid in capital | (19,538) | - | |||
due to reacquisition of 4.5% ownership in Subsidiary (member units) | |||||
Net transfers (to) from noncontrolling interst | (19,538) | 5,193 | |||
Change from net loss attributable to Safety Quick Lighting and Fans Corp. | |||||
and transfers (to) from noncontrolling interest | $ (2,592,874) | $ (839,389) | |||
Cash and Cash Equivalents | ' | ||||
Cash and Cash Equivalents | |||||
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents as of December 31, 2013 and 2012. | |||||
Accounts Receivable and Allowance for Doubtful Accounts | ' | ||||
Accounts Receivable and Allowance for Doubtful Accounts | |||||
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. | |||||
The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. | |||||
At December 31, 2013 and 2012, the Company had no accounts receivable. | |||||
In 2013 and 2012, the Company recorded bad debt expense of $0 and $22,047, respectively. | |||||
Inventory | ' | ||||
Inventory | |||||
Inventory will consist of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company will periodically review historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. | |||||
At December 31, 2013 and 2012, the Company had no inventory. | |||||
Valuation of Long-Lived Assets and Identifiable Intangible Assets | ' | ||||
Valuation of Long-Lived Assets and Identifiable Intangible Assets | |||||
The Company reviews for impairment of long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. In the event of impairment, the asset is written down to its fair market value. | |||||
Property and Equipment | ' | ||||
Property and Equipment | |||||
Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | |||||
Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. | |||||
Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. | |||||
Intangible Asset - Patent | ' | ||||
Intangible Asset - Patent | |||||
The Company developed a patent for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are being amortized using the straight-line method over the related 15 year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. | |||||
The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. | |||||
Fair Value of Financial Instruments | ' | ||||
Fair Value of Financial Instruments | |||||
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. | |||||
Embedded Conversion Features | ' | ||||
Embedded Conversion Features | |||||
The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature. | |||||
Derivative Financial Instruments | ' | ||||
Derivative Financial Instruments | |||||
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, 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 as charges or credits to income. | |||||
For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. | |||||
Beneficial Conversion Feature | ' | ||||
Beneficial Conversion Feature | |||||
For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount. | |||||
When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt. | |||||
Debt Issue Costs and Debt Discount | ' | ||||
Debt Issue Costs and Debt Discount | |||||
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. | |||||
Original Issue Discount | ' | ||||
Original Issue Discount | |||||
For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt. | |||||
Extinguishments of Liabilities | ' | ||||
Extinguishments of Liabilities | |||||
The Company accounts for extinguishments of liabilities in accordance with ASC 860-10 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. | |||||
Stock-Based Compensation - Employees | ' | ||||
Stock-Based Compensation - Employees | |||||
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. | |||||
The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. | |||||
If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties) (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | |||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | |||||
[] | Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term =(vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | ||||
Stock-Based Compensation - Non Employees | ' | ||||
Stock-Based Compensation – Non Employees | |||||
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services | |||||
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). | |||||
Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | |||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | |||||
[] | Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | ||||
Revenue Recognition | ' | ||||
Revenue Recognition | |||||
The Company derives revenues from the sale of a patented device. | |||||
Revenue is recorded when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) asset is transferred to the customer without further obligation, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured. | |||||
Cost of Sales | ' | ||||
Cost of Sales | |||||
Cost of sales represents costs directly related to the production and third party manufacturing of the Company’s products. | |||||
Product sold is typically shipped directly to the customer from the third party manufacturer; costs associated with shipping and handling is shown as a component of cost of sales. | |||||
Earnings (Loss) Per Share | ' | ||||
Earnings (Loss) Per Share | |||||
Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. | |||||
The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the years ended December 31, 2013 and 2012 the Company reflected net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been anti-dilutive for the period. Therefore, separate computation of diluted earnings (loss) per share is not presented for the years ended December 31, 2013 and 2012. | |||||
The Company has the following common stock equivalents at December 31, 2013 and 2012: | |||||
2013 | 2012 | ||||
Convertible Debt (Exercise price - $0.25/share) | 8,976,532 | - | |||
Stock Warrants (Exercise price - $0.001 - $0.375/share) | 4,338,884 | - | |||
Stock Options (Exercise price - $0.375/share) | 300,000 | - | |||
Unvested stock - Chief Executive Officer | 750,000 | - | |||
Total | 14,365,416 | - | |||
On June 1, 2013, the Company executed a 3,113.3:1 forward stock split. All share and per share amounts have been retroactively restated to the earliest period presented. | |||||
Income Tax Provision | ' | ||||
Income Tax Provision | |||||
From the inception of SQL-LLC, and through November 6, 2012, the Company was taxed as a pass-through entity (LLC) under the Internal Revenue Code and was not subject to federal and state income taxes; accordingly, no provision had been made. | |||||
The financial statements reflect the Company’s transactions without adjustment, if any, required for income tax purposes for the period from November 7, 2012 to December 31, 2012. The net loss generated by the Company for the period January 1, 2012 to November 6, 2012 has been excluded from the computation of income taxes. | |||||
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. | |||||
Uncertain Tax Positions | ' | ||||
Uncertain Tax Positions | |||||
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting periods ended December 31, 2013 and 2012. | |||||
Related Parties | ' | ||||
Related Parties | |||||
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. | |||||
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. | |||||
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. | |||||
Contingencies | ' | ||||
Contingencies | |||||
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | |||||
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | |||||
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows. | |||||
Subsequent Events | ' | ||||
Subsequent Events | |||||
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. | |||||
Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. | |||||
Recently Issued Accounting Pronouncements | ' | ||||
Recently Issued Accounting Pronouncements | |||||
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. | |||||
Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The ASU states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation. | |||||
The ASU also requires additional disclosures about discontinued operations that will provide more information about the assets, liabilities, income and expenses of discontinued operations. In addition, the ASU requires disclosure of the pre-tax profit or loss attributable to a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. | |||||
The ASU is effective for public business entities for annual periods beginning on or after December 15, 2014, and interim periods within those years. | |||||
In May 2014, the FASB has issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance in this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition.” In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We do not believe the adoption of this update will have a material impact on our financial statements. | |||||
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
2_Summary_of_Significant_Accou3
2 Summary of Significant Accounting Policies (Policies) (Q2) | 15 Months Ended | 18 Months Ended | ||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||
Quarter 2 [Member] | ||||||||||||||||
Basis of Presentation | ' | ' | ||||||||||||||
Basis of Presentation | Basis of Presentation | |||||||||||||||
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting. | The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is the Company’s opinion, however, that the accompanying unaudited financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. | |||||||||||||||
The accompanying unaudited financial statements should be read in conjunction with the Company’s Registration Statement on Form S-1 for the years ended December 31, 2013 and 2012, as filed with the SEC, respectively, which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, for the years ended December 31, 2013 and 2012, respectively. The financial information as of June 30, 2014, is derived from the audited financial statements presented in our Annual Report on Form S-1 for the year ended December 31, 2013. The interim results for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014, or for any future interim periods. | ||||||||||||||||
Use of Estimates | ' | ' | ||||||||||||||
Use of Estimates | Use of Estimates | |||||||||||||||
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. | The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. | |||||||||||||||
Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. | Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. | |||||||||||||||
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates. | ||||||||||||||||
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates. | ||||||||||||||||
Risks and Uncertainties | ' | ' | ||||||||||||||
Risks and Uncertainties | Risks and Uncertainties | |||||||||||||||
The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. | The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. | |||||||||||||||
The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales. | The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold (iii) general economic conditions and (iv)the related volatility of prices pertaining to the cost of sales. | |||||||||||||||
Fiscal Year | ' | ' | ||||||||||||||
Fiscal Year | Fiscal Year | |||||||||||||||
The Company’s fiscal year-end is December 31. | The Company’s fiscal year-end is December 31. | |||||||||||||||
Principles of Consolidation | ' | ' | ||||||||||||||
Principles of Consolidation | Principles of Consolidation | |||||||||||||||
The consolidated financial statements include the accounts of Safety Quick Lighting & Fans Corp and its subsidiary, SQL Lighting & Fans LLC. All inter-company accounts and transactions have been eliminated in consolidation. | The consolidated financial statements include the accounts of Safety Quick Lighting & Fans Corp and its subsidiary, SQL Lighting & Fans LLC. All inter-company accounts and transactions have been eliminated in consolidation. | |||||||||||||||
Cash and Cash Equivalents | ' | ' | ||||||||||||||
Cash and Cash Equivalents | Cash and Cash Equivalents | |||||||||||||||
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents as of December 31, 2013 and 2012. | Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents as of June 30, 2014 and December 31, 2013. | |||||||||||||||
Accounts Receivable and Allowance for Doubtful Accounts | ' | ' | ||||||||||||||
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts | |||||||||||||||
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. | Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. | |||||||||||||||
The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. | The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. | |||||||||||||||
At December 31, 2013 and 2012, the Company had no accounts receivable. | At June 30, 2014 and December 31, 2013, the Company had no accounts receivable. | |||||||||||||||
In 2013 and 2012, the Company recorded bad debt expense of $0 and $22,047, respectively. | The Company recorded bad debt expense of $0 and $0, during the six months ended June 30, 2014 and 2013, respectively. | |||||||||||||||
Inventory | ' | ' | ||||||||||||||
Inventory | Inventory | |||||||||||||||
Inventory will consist of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company will periodically review historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. | Inventory will consist of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company will periodically review historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. | |||||||||||||||
At December 31, 2013 and 2012, the Company had no inventory. | At June 30, 2014 and December 31, 2013, the Company had no inventory. | |||||||||||||||
Valuation of Long-Lived Assets and Identifiable Intangible Assets | ' | ' | ||||||||||||||
Valuation of Long-Lived Assets and Identifiable Intangible Assets | Valuation of Long-Lived Assets and Identifiable Intangible Assets | |||||||||||||||
The Company reviews for impairment of long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. In the event of impairment, the asset is written down to its fair market value. | ||||||||||||||||
The Company reviews for impairment of long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. In the event of impairment, the asset is written down to its fair market value. | ||||||||||||||||
Property and Equipment | ' | ' | ||||||||||||||
Property and Equipment | Property and Equipment | |||||||||||||||
Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | ||||||||||||||||
Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. | ||||||||||||||||
Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. | ||||||||||||||||
Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. | ||||||||||||||||
Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. | ||||||||||||||||
Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. | ||||||||||||||||
Intangible Asset - Patent | ' | ' | ||||||||||||||
Intangible Asset - Patent | Intangible Asset - Patent | |||||||||||||||
The Company developed a patent for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are being amortized using the straight-line method over the related 15 year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. | The Company developed a patent for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are being amortized using the straight-line method over the related 15 year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. | |||||||||||||||
The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. | The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. | |||||||||||||||
Fair Value of Financial Instruments | ' | ' | ||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments | |||||||||||||||
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. | The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. | |||||||||||||||
The following are the hierarchical levels of inputs to measure fair value: | ||||||||||||||||
● | Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. | |||||||||||||||
● | Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |||||||||||||||
● | Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. | |||||||||||||||
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments. | ||||||||||||||||
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 6. | ||||||||||||||||
Embedded Conversion Features | ' | ' | ||||||||||||||
Embedded Conversion Features | ||||||||||||||||
The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature. | ||||||||||||||||
Derivative Financial Instruments | ' | ' | ||||||||||||||
Derivative Financial Instruments | ||||||||||||||||
Derivative Financial Instruments | ||||||||||||||||
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, 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 as charges or credits to income. | ||||||||||||||||
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, 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 as charges or credits to income. | ||||||||||||||||
For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. | ||||||||||||||||
For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. | ||||||||||||||||
Beneficial Conversion Feature | ' | ' | ||||||||||||||
Beneficial Conversion Feature | ||||||||||||||||
For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount. | ||||||||||||||||
When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt. | ||||||||||||||||
Debt Issue Costs and Debt Discount | ' | ' | ||||||||||||||
Debt Issue Costs and Debt Discount | Debt Issue Costs and Debt Discount | |||||||||||||||
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. | The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. | |||||||||||||||
Original Issue Discount | ' | ' | ||||||||||||||
Original Issue Discount | Original Issue Discount | |||||||||||||||
For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt. | For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt. | |||||||||||||||
Extinguishments of Liabilities | ' | ' | ||||||||||||||
Extinguishments of Liabilities | ||||||||||||||||
The Company accounts for extinguishments of liabilities in accordance with ASC 860-10 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. | ||||||||||||||||
Stock-Based Compensation - Employees | ' | ' | ||||||||||||||
Stock-Based Compensation - Employees | ||||||||||||||||
The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. | ||||||||||||||||
The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. | ||||||||||||||||
If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties) (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||||
· | Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term =(vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | |||||||||||||||
· | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | |||||||||||||||
· | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | |||||||||||||||
· | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | |||||||||||||||
Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest. | ||||||||||||||||
The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations. | ||||||||||||||||
Stock-Based Compensation - Non Employees | ' | ' | ||||||||||||||
Stock-Based Compensation – Non Employees | ||||||||||||||||
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services | ||||||||||||||||
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). | ||||||||||||||||
Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | ||||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: | ||||||||||||||||
· | Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. | |||||||||||||||
· | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. | |||||||||||||||
· | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. | |||||||||||||||
· | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. | |||||||||||||||
Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. | ||||||||||||||||
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. | ||||||||||||||||
Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. | ||||||||||||||||
Revenue Recognition | ' | ' | ||||||||||||||
Revenue Recognition | Revenue Recognition | |||||||||||||||
The Company derives revenues from the sale of a patented device. | The Company derives revenues from the sale of a patented device. | |||||||||||||||
Revenue is recorded when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) asset is transferred to the customer without further obligation, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured. | Revenue is recorded when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) asset is transferred to the customer without further obligation, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured. | |||||||||||||||
Cost of Sales | ' | ' | ||||||||||||||
Cost of Sales | Cost of Sales | |||||||||||||||
Cost of sales represents costs directly related to the production and third party manufacturing of the Company’s products. | Cost of sales represents costs directly related to the production and third party manufacturing of the Company’s products. | |||||||||||||||
Product sold is typically shipped directly to the customer from the third party manufacturer; costs associated with shipping and handling is shown as a component of cost of sales. | Product sold is typically shipped directly to the customer from the third party manufacturer; costs associated with shipping and handling is shown as a component of cost of sales. | |||||||||||||||
Earnings (Loss) Per Share | ' | ' | ||||||||||||||
Earnings (Loss) Per Share | Earnings (Loss) Per Share | |||||||||||||||
Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. | Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. | |||||||||||||||
The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the periods ended June 30, 2014 and 2013, the Company reflected net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been anti-dilutive for the period. Therefore, separate computation of diluted earnings (loss) per share is not presented for the six months ended June 30, 2014 and 2013. | ||||||||||||||||
The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the years ended December 31, 2013 and 2012 the Company reflected net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been anti-dilutive for the period. Therefore, separate computation of diluted earnings (loss) per share is not presented for the years ended December 31, 2013 and 2012. | ||||||||||||||||
The Company has the following common stock equivalents at June 30, 2014 and 2013: | ||||||||||||||||
The Company has the following common stock equivalents at December 31, 2013 and 2012: | ||||||||||||||||
June 30, | ||||||||||||||||
2013 | 2012 | 2014 | 2013 | |||||||||||||
Convertible Debt (Exercise price - $0.25/share) | 8,976,532 | - | Convertible Debt (Exercise price - $0.25/share) | 18,056,932 | — | |||||||||||
Stock Warrants (Exercise price - $0.001 - $0.375/share) | 4,338,884 | - | Stock Warrants (Exercise price - $0.001 - $0.375/share) | 9,728,984 | — | |||||||||||
Stock Options (Exercise price - $0.375/share) | 300,000 | - | Stock Options (Exercise price - $0.375/share) | 200,000 | — | |||||||||||
Unvested stock - Chief Executive Officer | 750,000 | - | Total | 27,985,916 | — | |||||||||||
Total | 14,365,416 | - | ||||||||||||||
On June 1, 2013, the Company executed a 3,113.3:1 forward stock split. All share and per share amounts have been retroactively restated to the earliest period presented. | ||||||||||||||||
Related Parties | ' | ' | ||||||||||||||
Related Parties | ||||||||||||||||
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. | ||||||||||||||||
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. | ||||||||||||||||
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. | ||||||||||||||||
Contingencies | ' | ' | ||||||||||||||
Contingencies | Contingencies | |||||||||||||||
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. | |||||||||||||||
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | ||||||||||||||||
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. | ||||||||||||||||
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows. | ||||||||||||||||
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows. | ||||||||||||||||
Subsequent Events | ' | ' | ||||||||||||||
Subsequent Events | Subsequent Events | |||||||||||||||
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. | The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. | |||||||||||||||
Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. | Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. | |||||||||||||||
Recently Issued Accounting Pronouncements | ' | ' | ||||||||||||||
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements | |||||||||||||||
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. | In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this Update change the requirements for reporting discontinued operations in Subtopic 205-20. | |||||||||||||||
Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The ASU states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation. | ||||||||||||||||
Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.” The ASU states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation. | ||||||||||||||||
The ASU also requires additional disclosures about discontinued operations that will provide more information about the assets, liabilities, income and expenses of discontinued operations. In addition, the ASU requires disclosure of the pre-tax profit or loss attributable to a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. | ||||||||||||||||
The ASU also requires additional disclosures about discontinued operations that will provide more information about the assets, liabilities, income and expenses of discontinued operations. In addition, the ASU requires disclosure of the pre-tax profit or loss attributable to a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements. | ||||||||||||||||
The ASU is effective for public business entities for annual periods beginning on or after December 15, 2014, and interim periods within those years. | ||||||||||||||||
The ASU is effective for public business entities for annual periods beginning on or after December 15, 2014, and interim periods within those years. | ||||||||||||||||
In May 2014, the FASB has issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance in this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition.” In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We do not believe the adoption of this update will have a material impact on our financial statements. | ||||||||||||||||
In May 2014, the FASB has issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance in this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition.” In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We do not believe the adoption of this update will have a material impact on our financial statements. | Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. | |||||||||||||||
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
2_Summary_of_Significant_Accou4
2. Summary of Significant Accounting Policies (Tables) | 15 Months Ended | ||||
Mar. 31, 2014 | |||||
Accounting Policies [Abstract] | ' | ||||
Noncontrolling Interest | ' | ||||
31-Dec-13 | 31-Dec-12 | ||||
Net loss attributable to Safety Quick Lighting and Fans Corp. | $ (2,573,335) | $ (844,582) | |||
Transfers (to) from the noncontrolling interest | |||||
Increase in Safety Quick Lighting and Fans Corp additional paid in capital | - | 5,193 | |||
due to sale of 4.5% ownership in Subsidiary (member units) | |||||
Decrease in Safety Quick Lighting and Fans Corp additional paid in capital | (19,538) | - | |||
due to reacquisition of 4.5% ownership in Subsidiary (member units) | |||||
Net transfers (to) from noncontrolling interst | (19,538) | 5,193 | |||
Change from net loss attributable to Safety Quick Lighting and Fans Corp. | |||||
and transfers (to) from noncontrolling interest | $ (2,592,874) | $ (839,389) | |||
Common Stock Equivalents | ' | ||||
2013 | 2012 | ||||
Convertible Debt (Exercise price - $0.25/share) | 8,976,532 | - | |||
Stock Warrants (Exercise price - $0.001 - $0.375/share) | 4,338,884 | - | |||
Stock Options (Exercise price - $0.375/share) | 300,000 | - | |||
Unvested stock - Chief Executive Officer | 750,000 | - | |||
Total | 14,365,416 | - |
2_Summary_of_Significant_Accou5
2 Summary of Significant Accounting Policies (Tables) (Q2) | 15 Months Ended | 18 Months Ended | ||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||
Quarter 2 [Member] | ||||||||||||||||
Common Stock Equivalents | ' | ' | ||||||||||||||
2013 | 2012 | June 30, | ||||||||||||||
2014 | 2013 | |||||||||||||||
Convertible Debt (Exercise price - $0.25/share) | 8,976,532 | - | ||||||||||||||
Stock Warrants (Exercise price - $0.001 - $0.375/share) | 4,338,884 | - | Convertible Debt (Exercise price - $0.25/share) | 18,056,932 | — | |||||||||||
Stock Options (Exercise price - $0.375/share) | 300,000 | - | Stock Warrants (Exercise price - $0.001 - $0.375/share) | 9,728,984 | — | |||||||||||
Unvested stock - Chief Executive Officer | 750,000 | - | Stock Options (Exercise price - $0.375/share) | 200,000 | — | |||||||||||
Total | 14,365,416 | - | Total | 27,985,916 | — |
3_Furniture_and_Equipment_Tabl
3. Furniture and Equipment (Tables) | 15 Months Ended | ||
Mar. 31, 2014 | |||
Property, Plant and Equipment [Abstract] | ' | ||
Furniture and Equipment | ' | ||
2013 | 2012 | ||
Office Equipment | $ 12,984 | $ 12,984 | |
Furniture and Fixtures | 6,013 | - | |
Total | 18,997 | 12,984 | |
Less: Accumulated Depreciation | (12,952) | (12,689) | |
Property and Equipment - net | 6,046 | 295 |
3_Furniture_and_Equipment_Tabl1
3 Furniture and Equipment (Tables) (Q2) | 15 Months Ended | 18 Months Ended | ||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||
Quarter 2 [Member] | ||||||||||||
Furniture and equipment | ' | ' | ||||||||||
2013 | 2012 | 30-Jun-14 | December 31, | |||||||||
Office Equipment | $ 12,984 | $ 12,984 | 2014 | 2013 | ||||||||
Furniture and Fixtures | 6,013 | - | ||||||||||
Total | 18,997 | 12,984 | Office Equipment | $ | 136,144 | $ | 12,984 | |||||
Less: Accumulated Depreciation | (12,952) | (12,689) | Furniture and Fixtures | 24,884 | 6,013 | |||||||
Property and Equipment - net | 6,046 | 295 | Total | 161,028 | 18,997 | |||||||
Less: Accumulated Depreciation | (21,056 | ) | (12,951 | ) | ||||||||
Property and Equipment - net | $ | 139,972 | $ | 6,046 |
4_Intangible_Assets_Tables
4. Intangible Assets (Tables) | 15 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
Intangible Assets - Patents | ' | ||||||||
2013 | 2012 | ||||||||
Patents | $ | 36,950 | $ | 36,950 | |||||
Less: Impairment Charges | — | — | |||||||
Less: Accumulated Amortization | (12,253 | ) | (9,796 | ) | |||||
Patents - net | $ | 24,697 | $ | 27,154 | |||||
Future Amortization of Intangible Assets | ' | ||||||||
Year Ending December 31 | |||||||||
2014 | $ | 2,457 | |||||||
2015 | 2,457 | ||||||||
2016 | 2,457 | ||||||||
2017 | 2,457 | ||||||||
2018 | 2,457 | ||||||||
2019 and Thereafter | 12,411 | ||||||||
$ | 24,697 |
5_Debt_Tables
5. Debt (Tables) | 15 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Debt Disclosure [Abstract] | ' | ||||||||||||
Summary of Debt Transactions | ' | ||||||||||||
2013 | 2012 | ||||||||||||
Notes payable | $ | 503,203 | $ | 739,534 | |||||||||
Notes payable - related party | 26,108 | 133,000 | |||||||||||
Convertible notes | 2,194,133 | — | |||||||||||
Convertible notes - related party | 50,000 | — | |||||||||||
Less: debt discount | (1,925,191 | ) | — | ||||||||||
Debt - net | 848,253 | 872,534 | |||||||||||
Amortization of debt discount | 92,304 | — | |||||||||||
Less: current portion - notes payable | (98,086 | ) | (236,325 | ) | |||||||||
Less: current portion - notes payable - related party | (26,108 | ) | (133,000 | ) | |||||||||
Long term debt - net | $ | 816,362 | $ | 503,209 | |||||||||
Notes Payable | ' | ||||||||||||
Third Party | Related Party | Totals | |||||||||||
Balance December 31, 2011 | $ | 849,640 | $ | 6,000 | $ | 855,640 | |||||||
Proceeds | 120,000 | 127,000 | 247,000 | ||||||||||
Repayments | (230,106 | ) | — | (230,106 | ) | ||||||||
Balance December 31, 2012 | 739,534 | 133,000 | 872,534 | ||||||||||
Proceeds | 160,000 | 61,655 | 221,655 | ||||||||||
Repayments | (116,331 | ) | (35,547 | ) | (151,878 | ) | |||||||
Conversion of note payable to convertible debt | (180,000 | ) | (50,000 | ) | (230,000 | ) | |||||||
Debt forgiveness | (100,000 | ) | (83,000 | ) | (183,000 | ) | |||||||
Balance December 31, 2013 | $ | 503,203 | $ | 26,108 | $ | 529,311 | |||||||
Convertible Debt - Net | ' | ||||||||||||
Third Party | Related Party | Totals | |||||||||||
Balance December 31, 2012 | $ | — | $ | — | $ | — | |||||||
Proceeds | 2,000,000 | — | 2,000,000 | ||||||||||
Repayments | — | — | — | ||||||||||
Conversion of note payable to convertible debt | 180,000 | 50,000 | 230,000 | ||||||||||
Conversion of accrued interest into convertible debt | 14,133 | — | 14,133 | ||||||||||
Less: gross debt discount recorded | (1,925,191 | ) | — | (1,925,191 | ) | ||||||||
Add: amortization of debt discount | 92,304 | — | 92,304 | ||||||||||
Balance December 31, 2013 | $ | 361,245 | $ | 50,000 | $ | 411,245 | |||||||
Future Commitments | ' | ||||||||||||
Year Ended December 31 | |||||||||||||
2014 | $ | 124,194 | |||||||||||
2015 | 2,649,250 | ||||||||||||
Less: unamortized debt discount | (1,832,888 | ) | |||||||||||
Less: current maturities | (124,194 | ) | |||||||||||
Debt - long term | $ | 816,362 |
5_Debt_Tables_Q2
5. Debt (Tables) (Q2) | 15 Months Ended | 6 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||||
Quarter 2 [Member] | ||||||||||||||||||
Summary of Debt Transactions | ' | ' | ||||||||||||||||
Year Ended December 31 | 2014 | 2013 | ||||||||||||||||
2014 | $ | 124,194 | ||||||||||||||||
2015 | 2,649,250 | Notes payable | $ | 454,646 | $ | 503,203 | ||||||||||||
Less: unamortized debt discount | (1,832,888 | ) | Notes payable - related party | — | 26,108 | |||||||||||||
Less: current maturities | (124,194 | ) | Convertible notes | 4,464,233 | 2,194,132 | |||||||||||||
Debt - long term | $ | 816,362 | Convertible notes - related party | 50,000 | 50,000 | |||||||||||||
Less: debt discount | (4,174,650 | ) | (1,925,191 | ) | ||||||||||||||
Debt - net | 794,229 | 848,252 | ||||||||||||||||
Amortization of debt discount | 671,683 | 92,304 | ||||||||||||||||
Less: current portion - notes payable | (98,086 | ) | (98,086 | ) | ||||||||||||||
Less: current portion - notes payable - related party | (0 | ) | (26,108 | ) | ||||||||||||||
Long term debt - net | $ | 1,367,826 | $ | 816,362 | ||||||||||||||
Notes Payable | ' | ' | ||||||||||||||||
Third Party | Related Party | Totals | ||||||||||||||||
Balance December 31, 2011 | $ | 849,640 | 6,000 | $ | 855,640 | |||||||||||||
Proceeds | 120,000 | 127,000 | 247,000 | |||||||||||||||
Repayments | (230,106 | ) | — | (230,106 | ) | |||||||||||||
Balance December 31, 2012 | 739,534 | 133,000 | 872,534 | |||||||||||||||
Proceeds | 160,000 | 61,655 | 221,655 | |||||||||||||||
Repayments | (116,331 | ) | (35,547 | ) | (151,878 | ) | ||||||||||||
Conversion of note payable to convertible debt | (180,000 | ) | (50,000 | ) | (230,000 | ) | ||||||||||||
Conversion of note payable to contributed capital | (100,000 | ) | (83,000 | ) | (183,000 | ) | ||||||||||||
Balance December 31, 2013 | 503,203 | 26,108 | 529,311 | |||||||||||||||
Proceeds | — | — | — | |||||||||||||||
Repayments | (48,560 | ) | (26,108 | ) | (74,668 | ) | ||||||||||||
Conversion of note payable to convertible debt | — | — | — | |||||||||||||||
Conversion of note payable to contributed capital | — | — | — | |||||||||||||||
Balance June 30, 2014 | $ | 454,643 | $ | — | $ | 454,643 | ||||||||||||
Convertible Debt, Net | ' | ' | ||||||||||||||||
Third Party | Related Party | Totals | ||||||||||||||||
Balance December 31, 2012 | $ | — | $ | — | $ | — | ||||||||||||
Proceeds | 2,000,000 | — | 2,000,000 | |||||||||||||||
Repayments | — | — | — | |||||||||||||||
Conversion of note payable to convertible debt | 180,000 | 50,000 | 230,000 | |||||||||||||||
Conversion of accrued interest into convertible debt | 14,133 | — | 14,133 | |||||||||||||||
Less: gross debt discount recorded - Day 1 | (1,925,191 | ) | — | (1,925,191 | ) | |||||||||||||
Add: amortization of debt discount | 92,304 | — | 92,304 | |||||||||||||||
Balance December 31, 2013 | 361,246 | 50,000 | 411,246 | |||||||||||||||
Proceeds | 2,270,100 | — | 2,270,100 | |||||||||||||||
Less: gross debt discount recorded - Day 1 | (2,249,459 | ) | — | (2,249,459 | ) | |||||||||||||
Add: amortization of debt discount | 579,382 | — | 579,382 | |||||||||||||||
Balance June 30, 2014 | $ | 961,269 | $ | 50,000 | $ | 1,011,269 | ||||||||||||
Future Minimum Repayment Obligations | ' | ' | ||||||||||||||||
Year Ended December 31 | ||||||||||||||||||
2014 | $ | 98,086 | ||||||||||||||||
2015 | 4,870,793 | |||||||||||||||||
Less: unamortized debt discount | (3,502,967 | ) | ||||||||||||||||
Less: current maturities | (98,086 | ) | ||||||||||||||||
Debt - long term | $ | 1,367,826 |
6_Derivative_Liabilities_Table
6. Derivative Liabilities (Tables) | 15 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
Derivative Liabilities - Fair Value | ' | ||||||||
2013 | 2012 | ||||||||
Fair value at the commitment date - convertible debt | $ | 2,414,585 | $ | — | |||||
Fair value at the commitment date - warrants | 682,809 | — | |||||||
Reclassification of derivative liabilities to additional paid in capital | |||||||||
related to warrants exercised that ceased being a derivative liability | (311,709 | ) | — | ||||||
Fair value mark to market adjustment - converible debt | (28,586 | ) | — | ||||||
Fair value mark to market adjustment - warrants | (5,595 | ) | — | ||||||
Totals | $ | 2,751,504 | $ | — | |||||
Derivative Liabilities - Assumptions | ' | ||||||||
Commitment Date | Remeasurement Date | ||||||||
Expected dividends | 0 | % | 0 | % | |||||
Expected volatility | 150 | % | 150 | % | |||||
Expected term | 2 - 5 years | 1.9 - 4.68 years | |||||||
Risk free interest rate | 0.29% - 1.68% | 0.38% - 1.75% |
6_Derivative_Liabilities_Table1
6. Derivative Liabilities (Tables) (Q2) | 15 Months Ended | 6 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||||
Quarter 2 [Member] | ||||||||||||||||||
Fair Value, Derivative Liabilities | ' | ' | ||||||||||||||||
2013 | 2012 | Balance - December 31, 2012 | $ | — | ||||||||||||||
Fair value at the commitment date - convertible debt | $ | 2,414,585 | $ | — | Fair value at the commitment date - convertible debt | 2,414,585 | ||||||||||||
Fair value at the commitment date - warrants | 682,809 | — | Fair value at the commitment date - warrants | 682,809 | ||||||||||||||
Reclassification of derivative liabilities to additional paid in capital | Reclassification of derivative liabilities to additional paid in capital | — | ||||||||||||||||
related to warrants exercised that ceased being a derivative liability | (311,709 | ) | — | related to convertible debt that ceased being a derivative liability | (311,709 | ) | ||||||||||||
Fair value mark to market adjustment - converible debt | (28,586 | ) | — | Fair value mark to market adjustment - convertible debt | (28,586 | ) | ||||||||||||
Fair value mark to market adjustment - warrants | (5,595 | ) | — | Fair value mark to market adjustment - warrants | (5,595 | ) | ||||||||||||
Totals | $ | 2,751,504 | $ | — | Balance - December 31, 2013 | 2,751,504 | ||||||||||||
Fair value at the commitment date - convertible debt | 2,817,944 | |||||||||||||||||
Fair value mark to market adjustment - convertible debt | (216,017 | ) | ||||||||||||||||
Reclassification of derivative liabilities to additional paid in capital | (214,769 | ) | ||||||||||||||||
Fair value mark to market adjustment - warrants | (8,650 | ) | ||||||||||||||||
Balance - June 30, 2014 | $ | 5,130,013 | ||||||||||||||||
Fair Value Assumptions | ' | ' | ||||||||||||||||
Commitment Date | Remeasurement Date | Remeasurement Date | Commitment Date | |||||||||||||||
Expected dividends | 0 | % | 0 | % | Expected dividends | 0% | 0% | |||||||||||
Expected volatility | 150 | % | 150 | % | Expected volatility | 150% | 150% | |||||||||||
Expected term | 2 - 5 years | 1.9 - 4.68 years | Expected term | 1.41 - 4.99 years | 2 - 5 years | |||||||||||||
Risk free interest rate | 0.29% - 1.68% | 0.38% - 1.75% | Risk free interest rate | 0.47% - 1.62$ | 0.40% - 1.68% |
7_Debt_Discount_Tables
7. Debt Discount (Tables) | 15 Months Ended | ||||
Mar. 31, 2014 | |||||
Notes to Financial Statements | ' | ||||
Debt Discount | ' | ||||
Debt discount - net - December 31, 2012 | $ | — | |||
Debt discount | 1,925,191 | ||||
Accumulated amortization - 2013 | (92,304 | ) | |||
Debt discount - net - December 31, 2013 | $ | 1,832,888 |
7_Debt_Discount_Tables_Q2
7. Debt Discount (Tables) (Q2) (Quarter 2 [Member]) | 6 Months Ended | ||||
Jun. 30, 2014 | |||||
Quarter 2 [Member] | ' | ||||
Debt Discount | ' | ||||
Debt discount - net - December 31, 2012 | $ | — | |||
Debt discount | 1,925,191 | ||||
Amortization expense - 2013 | (92,301 | ) | |||
Debt discount - net - December 31, 2013 | 1,832,890 | ||||
Debt discount | 2,249,459 | ||||
Amortization expense - 2014 | (579,382 | ) | |||
Debt discount - net - June 30, 2014 | $ | 3,502,967 |
8_Debt_Issue_Costs_Tables
8. Debt Issue Costs (Tables) | 15 Months Ended | ||||
Mar. 31, 2014 | |||||
Debt Disclosure [Abstract] | ' | ||||
Debt Issuance Costs | ' | ||||
Debt issue costs - net - December 31, 2012 | $ | — | |||
Debt issue costs | 247,197 | ||||
Accumulated amortization - 2013 | (11,986 | ) | |||
Debt issue costs - net - December 31, 2013 | $ | 235,211 |
8_Debt_Issue_Costs_Tables_Q2
8. Debt Issue Costs (Tables) (Q2) | 15 Months Ended | 6 Months Ended | ||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||
Quarter 2 [Member] | ||||||||||||||
Debt Issue Costs | ' | ' | ||||||||||||
2013 | 2012 | Debt issue costs - net - December 31, 2012 | $ | — | ||||||||||
Notes payable | $ | 503,203 | $ | 739,534 | Debt issue costs | 247,197 | ||||||||
Notes payable - related party | 26,108 | 133,000 | Amortization expense - 2013 | (11,986 | ) | |||||||||
Convertible notes | 2,194,133 | — | Debt issue costs - net - December 31, 2013 | 235,211 | ||||||||||
Convertible notes - related party | 50,000 | — | Debt issue costs | 69,944 | ||||||||||
Less: debt discount | (1,925,191 | ) | — | Amortization expense - 2014 | (63,909 | ) | ||||||||
Debt - net | 848,253 | 872,534 | Debt issue costs - net - June 30, 2014 | $ | 241,246 | |||||||||
Amortization of debt discount | 92,304 | — | ||||||||||||
Less: current portion - notes payable | (98,086 | ) | (236,325 | ) | ||||||||||
Less: current portion - notes payable - related party | (26,108 | ) | (133,000 | ) | ||||||||||
Long term debt - net | $ | 816,362 | $ | 503,209 |
9_Income_Taxes_Tables
9. Income Taxes (Tables) | 15 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Components of Deferred Tax Assets | ' | ||||||||
Net operating loss carryforward | $ | (199,000 | ) | $ | (18,000 | ) | |||
Gross Deferred Tax Assets | (199,000 | ) | (18,000 | ) | |||||
Less Valuation Allowance | 199,000 | 18,000 | |||||||
Total Deferred Tax Assets - Net | $ | — | $ | — | |||||
Tax Expense - Difference from Expected | ' | ||||||||
Computed "expected" tax expense (benefit) - Federal | $ | (875,000 | ) | $ | (16,000 | ) | |||
Computed "expected" tax expense (benefit) - State - Georgia | (102,000 | ) | (2,000 | ) | |||||
Derivative expense | 439,000 | — | |||||||
Loss on debt extinguishment | 5,000 | — | |||||||
Gain on debt forgiveness | 38,000 | ||||||||
Share based payments | 286,000 | — | |||||||
Amortization of patent | 1,000 | — | |||||||
Amortization of debt Issue costs | 5,000 | — | |||||||
Amortization of debt discount | 35,000 | — | |||||||
Change in value of derivitive liability | (13,000 | ) | — | ||||||
Change in valuation allowance | 181,000 | 18,000 | |||||||
$ | — | $ | — |
9_Stockholders_Deficit_Tables_
9. Stockholders Deficit (Tables) (Q2) | 15 Months Ended | 6 Months Ended | ||||||||||||||||||||||||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||||||||||||||||||||||||
Quarter 2 [Member] | ||||||||||||||||||||||||||||||||||||
Common Stock Issuance | ' | ' | ||||||||||||||||||||||||||||||||||
Transaction Type | Quantity | Valuation | Range of Value per Share | |||||||||||||||||||||||||||||||||
Recognition of unvested share compensation - Related Party | (1 | ) | — | $ | 31,250 | $ | — | |||||||||||||||||||||||||||||
— | $ | 31,250 | $ | — | ||||||||||||||||||||||||||||||||
Stock Option Activity | ' | ' | ||||||||||||||||||||||||||||||||||
Third Party | Related Party | Totals | Weighted Average | Aggregate | ||||||||||||||||||||||||||||||||
Balance December 31, 2012 | $ | — | $ | — | $ | — | Weighted Average | Remaining Contractual Life | Intrinsic | |||||||||||||||||||||||||||
Proceeds | 2,000,000 | — | 2,000,000 | Options | Exercise Price | (In Years) | Value | |||||||||||||||||||||||||||||
Repayments | — | — | — | |||||||||||||||||||||||||||||||||
Conversion of note payable to convertible debt | 180,000 | 50,000 | 230,000 | Balance - December 31, 2013 | 300,000 | 0.375 | 4.67 | — | ||||||||||||||||||||||||||||
Conversion of accrued interest into convertible debt | 14,133 | — | 14,133 | Granted | — | — | — | — | ||||||||||||||||||||||||||||
Less: gross debt discount recorded | (1,925,191 | ) | — | (1,925,191 | ) | Exercised | — | — | — | — | ||||||||||||||||||||||||||
Add: amortization of debt discount | 92,304 | — | 92,304 | Forfeited/Cancelled | (100,000 | ) | — | — | — | |||||||||||||||||||||||||||
Balance December 31, 2013 | $ | 361,245 | $ | 50,000 | $ | 411,245 | Balance - June 30, 2014 - outstanding | 200,000 | 0.375 | 4.18 | — | |||||||||||||||||||||||||
Balance - June 30, 2014 - exercisable | 200,000 | 0.375 | 4.18 | — | ||||||||||||||||||||||||||||||||
Warrant Activity | ' | ' | ||||||||||||||||||||||||||||||||||
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value | Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | ||||||||||||||||||||||||||||||
Balance, December 31, 2012 | — | $ | — | |||||||||||||||||||||||||||||||||
Granted | 6,738,884 | 0.242 | 5 | |||||||||||||||||||||||||||||||||
Balance - December 31, 2012 | $ | — | Exercised | (1,400,000 | ) | — | ||||||||||||||||||||||||||||||
Granted | 6,738,884 | 0.24 | 5 | Cancelled/Forfeited | (1,000,000 | ) | — | |||||||||||||||||||||||||||||
Exercised | (1,400,000 | ) | 0.001 | — | Balance, December 31, 2013 | 4,338,884 | 0.242 | 4.9 | ||||||||||||||||||||||||||||
Cancelled/Forfeited | (1,000,000 | ) | 0.001 | — | Granted | 5,390,100 | 0.375 | 5 | ||||||||||||||||||||||||||||
Balance - December 31, 2013 | 4,338,884 | $ | 0.24 | 4.87 | $ | — | Exercised | |||||||||||||||||||||||||||||
Cancelled/Forfeited | — | — | ||||||||||||||||||||||||||||||||||
All warrants are exercisable and fully vested on the grant date. | Balance, June 30, 2014 | 9,728,984 | 0.375 | 4.7 |
10_Stockholders_Deficit_Tables
10. Stockholders Deficit (Tables) | 15 Months Ended | ||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||||||
Common Stock Issued | ' | ||||||||||||||||||||
Transaction Type | Quantity | Valuation | Range of Value per Share | ||||||||||||||||||
Warrants exercised | (1 | ) | 1,400,000 | $ | 1,400 | $ | 0.001 | ||||||||||||||
Services rendered - related party | (2 | ) | 500,000 | 125,000 | 0.25 | ||||||||||||||||
Acquisition of 4.5% interest in subsidiary | (3 | ) | 1,467,000 | 366,750 | 0.25 | ||||||||||||||||
3,367,000 | $ | 493,150 | $ | 0.001 | - | $0.25 | |||||||||||||||
Stock Options, Assumptions Used | ' | ||||||||||||||||||||
Options Granted | 300,000 | ||||||||||||||||||||
Grant Date | 3-Sep-13 | ||||||||||||||||||||
Exercise Price | $ | 0.375 | |||||||||||||||||||
Expected Dividends | 0 | % | |||||||||||||||||||
Expected Volatility | 150 | % | |||||||||||||||||||
Risk Free Interest Rate | 0.03 | % | |||||||||||||||||||
Expected Life of Options | 5 Years | ||||||||||||||||||||
Expected Forfeitures | 0 | % | |||||||||||||||||||
Fair Value per Stock Option | $ | 0.22 | |||||||||||||||||||
Stock Option Activity | ' | ||||||||||||||||||||
Weighted Average | Aggregate | ||||||||||||||||||||
Weighted Average | Remaining Contractual Life | Intrinsic | |||||||||||||||||||
Options | Exercise Price | (In Years) | Value | ||||||||||||||||||
Balance - December 31, 2012 | — | — | — | — | |||||||||||||||||
Granted | 300,000 | 0.375 | 5 | — | |||||||||||||||||
Exercised | — | — | — | — | |||||||||||||||||
Forfeited/Cancelled | — | — | — | — | |||||||||||||||||
Balance - December 31, 2013 - outstanding | 300,000 | 0.375 | 4.67 | — | |||||||||||||||||
Balance - December 31, 2013 - exercisable | 300,000 | 0.375 | 4.67 | — | |||||||||||||||||
Grant date fair value of options - 2013 | 66,458 | ||||||||||||||||||||
Weighted average grant date fair value - 2013 | 0.22 | ||||||||||||||||||||
Warrant Activity | ' | ||||||||||||||||||||
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value | ||||||||||||||||||
Balance - December 31, 2012 | $ | — | |||||||||||||||||||
Granted | 6,738,884 | 0.24 | 5 | ||||||||||||||||||
Exercised | (1,400,000 | ) | 0.001 | — | |||||||||||||||||
Cancelled/Forfeited | (1,000,000 | ) | 0.001 | — | |||||||||||||||||
Balance - December 31, 2013 | 4,338,884 | $ | 0.24 | 4.87 | $ | — | |||||||||||||||
All warrants are exercisable and fully vested on the grant date. |
10_Commitments_Tables_Q2
10. Commitments (Tables) (Q2) | 15 Months Ended | 6 Months Ended | ||||||||||||
Mar. 31, 2014 | Jun. 30, 2014 | |||||||||||||
Quarter 2 [Member] | ||||||||||||||
Licensing and Royalty Agreement | ' | ' | ||||||||||||
Year Ended December 31, | Net Sales in Contract Year | Percentage of the Contract Year Net Sales owed to GE | ||||||||||||
2014 | $ | — | ||||||||||||
2015 | 2,800,000 | $0 - $50,000,000 | 7 | % | ||||||||||
2016 | 3,300,000 | $50,000,001 - $100,000,000 | 6 | % | ||||||||||
2017 | 3,600,000 | $100,000,001 + | 5 | % | ||||||||||
Total | $ | 9,700,000 | ||||||||||||
For Net Sales Made | Payment Due Date | |||||||||||||
December 1 - February 28/29 | 26-Mar | |||||||||||||
March 1 - May 30 | 26-Jun | |||||||||||||
June 1 - August 31 | 26-Sep | |||||||||||||
September 1 - November 30 | 26-Dec | |||||||||||||
Minimum Rent Obligations | ' | ' | ||||||||||||
2014 | $ | 81,000 | 2014 (9 months) | $ | 61,000 | |||||||||
2015 | 83,000 | 2015 | 83,000 | |||||||||||
2016 | 86,000 | 2016 | 86,000 | |||||||||||
2017 | 22,000 | 2017 | 22,000 | |||||||||||
Total | $ | 272,000 | Total | $ | 252,000 |
11_Commitments_Tables
11. Commitments (Tables) | 15 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
Minimum Royalty Obligations | ' | ||||||
Year Ended December 31, | |||||||
2014 | $ | — | |||||
2015 | 2,800,000 | ||||||
2016 | 3,300,000 | ||||||
2017 | 3,600,000 | ||||||
Total | $ | 9,700,000 | |||||
Net Sales Minimum Impacting Minimum Royalty Obligations | ' | ||||||
2015 | $ | 56,000,000 | |||||
2016 | $ | 66,000,000 | |||||
2017 | $ | 72,000,000 |
13_Subsequent_Events_Tables
13. Subsequent Events (Tables) | 15 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Subsequent Events [Abstract] | ' | ||||||
Minimum Rent Obligations | ' | ||||||
2014 | $ | 81,000 | |||||
2015 | 83,000 | ||||||
2016 | 86,000 | ||||||
2017 | 22,000 | ||||||
Total | $ | 272,000 |
2_Summary_of_Significant_Accou6
2. Summary of Significant Accounting Policies - Noncontrolling Interest (Details) (USD $) | 12 Months Ended | 15 Months Ended |
Dec. 31, 2012 | Mar. 31, 2014 | |
Accounting Policies [Abstract] | ' | ' |
Net loss attributable to Safety Quick Lighting and Fans Corp. | ($844,582) | ($2,573,335) |
Increase in Safety Quick Lighting and Fans Corp additional paid in capital due to sale of 4.5% ownership in Subsidiary (member units) | 5,193 | ' |
Decrease in Safety Quick Lighting and Fans Corp additional paid in capital due to reacquisition of 4.5% ownership in Subsidiary (member units) | ' | -19,538 |
Net transfers (to) from noncontrolling interst | 5,193 | -19,538 |
Change from net loss attributable to Safety Quick Lighting and Fans Corp. and transfers (to) from noncontrolling interest | ($839,389) | ($2,592,874) |
1_Organization_and_Nature_of_O2
1 Organization and Nature of Operations (Details Narrative) (Q2) (Quarter 2 [Member]) | 1-May-04 |
Quarter 2 [Member] | ' |
Owned Subsidiary | 98.80% |
2_Summary_of_Significant_Accou7
2. Summary of Significant Accounting Policies - Common Stock Equivalents (Details) (USD $) | 12 Months Ended | 15 Months Ended | |
Dec. 31, 2012 | Mar. 31, 2014 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ' | ' | ' |
Convertible Debt | ' | ' | $8,976,532 |
Stock Warrants | ' | 4,338,884 | ' |
Stock Options | ' | ' | 300,000 |
Unvested stock - Chief Executive Officer | ' | ' | 750,000 |
Total | ' | ' | $14,365,416 |
2_Summary_of_Significant_Accou8
2. Summary of Significant Accounting Policies (Details Narrative) (USD $) | 15 Months Ended | ||||||
Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2013 | 31-May-12 | Jun. 30, 2013 | 31-May-12 | |
Scenario, Previously Reported [Member] | Scenario, Previously Reported [Member] | Scenario, Adjustment [Member] | Scenario, Adjustment [Member] | ||||
Ownership Percentage | ' | ' | ' | 94.35% | 98.80% | 9880.00% | 9435.00% |
Bad Debt Expense | ' | $0 | $22,047 | ' | ' | ' | ' |
Forward Stock Split, Ratio | 3,113.31 | ' | ' | ' | ' | ' | ' |
2_Summary_of_Significant_Accou9
2 Summary of Significant Accounting Policies - Common Stock Equivalents (Details) (Q2) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Jun. 30, 2013 |
Quarter 2 [Member] | Quarter 2 [Member] | |||
Convertible Debt (Exercise price - $0.25/share) | ' | ' | $18,056,932 | ' |
Stock Warrants (Exercise price - $0.001 - $0.375/share) | ' | ' | 9,728,984 | ' |
Stock Options (Exercise price - $0.375/share) | 300,000 | ' | 200,000 | ' |
Total | ' | ' | $27,985,916 | ' |
Recovered_Sheet1
2 Summary of Significant Accounting Policies (Details Narrative) (Q2) (USD $) | 12 Months Ended | 6 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Jun. 30, 2013 | |
Quarter 2 [Member] | Quarter 2 [Member] | |||
Bad debt | ' | $22,047 | $0 | $0 |
3_Furniture_and_Equipment_Furn
3. Furniture and Equipment - Furniture and Equipment (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Furniture and Equipment | $18,997 | $12,984 |
Less: Accumulated Depreciation | -12,952 | -12,689 |
Property and Equipment - net | 6,046 | 295 |
Office Equipment [Member] | ' | ' |
Furniture and Equipment | 12,984 | 12,984 |
Office Equipment [Member] | ' | ' |
Furniture and Equipment | $6,013 | ' |
3_Furniture_and_Equipment_Prop
3. Furniture and Equipment - Property and Equipment (Details) - Quarterly (Q2) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 |
Quarter 2 [Member] | Quarter 2 [Member] | Office Equipment [Member] | Office Equipment [Member] | Office Equipment [Member] | Office Equipment [Member] | |||
Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | |||||
Property and Equipment, Gross | ' | ' | $161,028 | $18,997 | $136,144 | $12,984 | $24,884 | $6,013 |
Less: Accumulated Depreciation | -12,952 | -12,689 | -21,056 | -12,951 | ' | ' | ' | ' |
Property and Equipment - net | ' | ' | $139,972 | $6,046 | ' | ' | ' | ' |
4_Intangible_Assets_Intangible
4. Intangible Assets - Intangible Assets - Patents (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ' |
Patents | $36,950 | $36,950 |
Less: Impairment Charges | ' | ' |
Less: Accumulated Amortization | -12,253 | -9,796 |
Patents - net | $24,697 | $27,154 |
4_Intangible_Assets_Future_Amo
4. Intangible Assets - Future Amortization of Intangible Assets (Details) (USD $) | Dec. 31, 2013 |
Goodwill and Intangible Assets Disclosure [Abstract] | ' |
2014 | $2,457 |
2015 | 2,457 |
2016 | 2,457 |
2017 | 2,457 |
2018 | 2,457 |
2019 and Thereafter | 12,411 |
Total | $24,697 |
4_Intangible_Assets_Details_Na
4. Intangible Assets (Details Narrative) (USD $) | Dec. 31, 2011 |
Goodwill and Intangible Assets Disclosure [Abstract] | ' |
Capitalized Patent Costs | $36,950 |
4_Intangible_Assets_Intangible1
4. Intangible Assets - Intangible Assets (Details) - Quarterly (Q2) (Quarter 2 [Member], USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Quarter 2 [Member] | ' | ' |
Patents | $45,650 | $36,950 |
Less: Impairment Charges | ' | ' |
Less: Accumulated Amortization | -13,666 | -12,253 |
Patents - net | $31,984 | $24,697 |
4_Intangible_Assets_Amortizati
4 Intangible Assets - Amortization of Intangible Assets (Details) - Quarterly (Q2) (Quarter 2 [Member], USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Quarter 2 [Member] | ' |
2014 (6 months) | $1,528 |
2015 | 3,037 |
2016 | 3,039 |
2017 | 3,037 |
2018 | 3,037 |
2019 and Thereafter | 18,305 |
Total | $31,984 |
5_Debt_Summary_of_Debt_Transac
5. Debt - Summary of Debt Transactions (Details) (USD $) | 12 Months Ended | |||
Dec. 31, 2013 | Dec. 31, 2012 | Jun. 25, 2014 | 8-May-14 | |
Debt Disclosure [Abstract] | ' | ' | ' | ' |
Notes payable | $503,203 | $739,534 | ' | ' |
Notes payable - related party | 26,108 | 133,000 | ' | ' |
Convertible notes | 2,194,133 | ' | 870,100 | 1,400,000 |
Convertible notes - related party | 50,000 | ' | ' | ' |
Less: debt discount | -1,925,191 | ' | ' | ' |
Debt - net | 848,253 | 872,534 | ' | ' |
Amortization of debt discount | 92,304 | ' | ' | ' |
Less: current portion - notes payable | -98,086 | -236,325 | ' | ' |
Less: current portion - notes payable - related party | -26,108 | -133,000 | ' | ' |
Long term debt - net | $816,362 | $503,209 | ' | ' |
5_Debt_Notes_Payable_Details
5. Debt - Notes Payable (Details) (USD $) | 12 Months Ended | 15 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | |
Beginning Balance, Notes Payable | $872,534 | $855,640 | $872,534 |
Proceeds | ' | 247,000 | 221,655 |
Repayments | ' | -230,106 | -151,878 |
Conversion of note payable to convertible debt | ' | ' | 230,000 |
Debt forgiveness | 83,000 | ' | ' |
Ending Balance, Notes Payable | ' | 872,534 | ' |
Third-Party Payor [Member] | ' | ' | ' |
Beginning Balance, Notes Payable | 739,534 | 849,640 | 739,534 |
Proceeds | 160,000 | 120,000 | ' |
Repayments | -116,331 | -230,106 | ' |
Conversion of note payable to convertible debt | 180,000 | ' | ' |
Debt forgiveness | -100,000 | ' | ' |
Ending Balance, Notes Payable | 503,203 | 739,534 | ' |
Related Party [Member] | ' | ' | ' |
Beginning Balance, Notes Payable | 133,000 | 6,000 | 133,000 |
Proceeds | 61,655 | 127,000 | ' |
Repayments | -35,547 | ' | ' |
Conversion of note payable to convertible debt | 50,000 | ' | ' |
Debt forgiveness | -83,000 | ' | ' |
Ending Balance, Notes Payable | $26,108 | $133,000 | ' |
5_Debt_Convertible_Debt_Net_De
5. Debt - Convertible Debt - Net (Details) (USD $) | 12 Months Ended | 15 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | |
Beginning Balance, Convertible Debt | ' | ' | ' |
Proceeds | 2,000,000 | ' | ' |
Repayments | ' | ' | ' |
Conversion of note payable to convertible debt | ' | ' | 230,000 |
Conversion of accrued interest into convertible debt | ' | ' | 14,133 |
Less: gross debt discount recorded | ' | ' | -1,925,191 |
Add: amortization of debt discount | ' | ' | 92,304 |
Ending Balance, Convertible Debt | ' | ' | ' |
Third-Party Payor [Member] | ' | ' | ' |
Beginning Balance, Convertible Debt | ' | ' | ' |
Proceeds | 2,000,000 | ' | ' |
Repayments | ' | ' | ' |
Conversion of note payable to convertible debt | 180,000 | ' | ' |
Conversion of accrued interest into convertible debt | 14,133 | ' | ' |
Less: gross debt discount recorded | -1,925,191 | ' | ' |
Add: amortization of debt discount | 92,304 | ' | ' |
Ending Balance, Convertible Debt | 361,245 | ' | ' |
Related Party [Member] | ' | ' | ' |
Beginning Balance, Convertible Debt | ' | ' | ' |
Proceeds | ' | ' | ' |
Repayments | ' | ' | ' |
Conversion of note payable to convertible debt | 50,000 | ' | ' |
Conversion of accrued interest into convertible debt | ' | ' | ' |
Less: gross debt discount recorded | ' | ' | ' |
Add: amortization of debt discount | ' | ' | ' |
Ending Balance, Convertible Debt | $50,000 | ' | ' |
5_Debt_Future_Commitments_Deta
5. Debt - Future Commitments (Details) (USD $) | 15 Months Ended | ||
Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Debt Disclosure [Abstract] | ' | ' | ' |
Future Minimum Repayment Obligation, Year One | $124,194 | ' | ' |
Future Minimum Repayment Obligation, Year Two | 2,649,250 | ' | ' |
Less: unamortized debt discount | ' | 1,832,888 | ' |
Less: current maturities | ' | -124,194 | ' |
Debt - long term | ' | $816,362 | $503,209 |
5_Debt_Details_Narrative
5. Debt (Details Narrative) (USD $) | 1 Months Ended | 12 Months Ended | 15 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2014 | 31-May-14 | Dec. 31, 2012 | Mar. 31, 2014 | Nov. 26, 2015 | Jun. 25, 2014 | 8-May-14 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Aug. 29, 2018 | |
Minimum [Member] | Maximum [Member] | Related Party [Member] | Third-Party Payor [Member] | Third-Party Payor [Member] | |||||||||
Detachable Warrents Issued | 1,750,100 | 3,640,000 | ' | 3,672,134 | ' | ' | ' | ' | ' | ' | 124,083 | 6,614,801 | ' |
Component of Notes Payable - Third Party Bank Loan | ' | ' | ' | ' | ' | ' | ' | ($503,203) | ' | ' | ' | ' | ' |
Interest Rate Range, Minimum | ' | ' | 10.00% | 12.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest Rate Range, Maximum | ' | ' | 12.00% | 15.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt, Unsecured | ' | ' | ' | ' | ' | ' | ' | -26,108 | ' | ' | ' | ' | ' |
Debt, Secured | ' | ' | ' | ' | ' | ' | ' | 503,203 | ' | ' | ' | ' | ' |
Debt, Due | ' | ' | ' | ' | -2,244,133 | ' | ' | ' | ' | ' | -26,108 | ' | -503,203 |
Conversion Price Per Share | ' | ' | ' | ' | ' | $0.25 | $0.25 | ' | $0.25 | $0.38 | ' | ' | ' |
Debt Outstanding | ' | ' | ' | ' | ' | ' | ' | $816,362 | ' | ' | ' | ' | ' |
5_Debt_Summary_of_Debt_Transac1
5. Debt - Summary of Debt Transactions (Details) (Q2) (USD $) | Jun. 25, 2014 | 8-May-14 | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 | Jun. 30, 2014 | Dec. 31, 2013 |
Quarter 2 [Member] | Quarter 2 [Member] | ||||||
Notes payable | ' | ' | ' | $872,534 | $855,640 | $454,646 | $503,203 |
Notes payable - related party | ' | ' | 26,108 | 133,000 | ' | ' | 26,108 |
Convertible notes | 870,100 | 1,400,000 | 2,194,133 | ' | ' | 4,464,233 | 2,194,132 |
Convertible notes - related party | ' | ' | 50,000 | ' | ' | 50,000 | 50,000 |
Less: debt discount | ' | ' | -1,925,191 | ' | ' | -4,174,650 | -1,925,191 |
Debt - net | ' | ' | 848,253 | 872,534 | ' | 794,229 | 848,252 |
Amortization of debt discount | ' | ' | ' | ' | ' | 671,683 | 92,304 |
Less: current portion - notes payable | ' | ' | -98,086 | -236,325 | ' | -98,086 | -98,086 |
Less: current portion - notes payable - related party | ' | ' | -26,108 | -133,000 | ' | 0 | -26,108 |
Long term debt - net | ' | ' | $816,362 | $503,209 | ' | $1,367,826 | $816,362 |
5_Debt_Notes_Payable_Details_Q
5. Debt - Notes Payable (Details) (Q2) (USD $) | 12 Months Ended | 15 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Third Party [Member] | Third Party [Member] | Third Party [Member] | Related Party [Member] | Related Party [Member] | Related Party [Member] | ||||
Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | ||||||||
Beginning Balance, Notes Payable | ' | ' | ' | $529,311 | $872,534 | $872,534 | $855,640 | $503,203 | $739,534 | $849,640 | $26,108 | $133,000 | $6,000 |
Proceeds | ' | 247,000 | 221,655 | ' | 40,000 | 221,655 | 247,000 | ' | 160,000 | 120,000 | ' | 61,655 | 127,000 |
Repayments | 160,000 | 120,000 | ' | -74,668 | ' | -151,878 | -230,106 | -48,560 | -116,331 | -230,106 | -26,108 | -35,547 | ' |
Conversion of note payable to convertible debt | ' | ' | 244,133 | ' | ' | -230,000 | ' | ' | -180,000 | ' | ' | -50,000 | ' |
Conversion of note payable to contributed capital | ' | ' | ' | ' | ' | -183,000 | ' | ' | -100,000 | ' | ' | -83,000 | ' |
Ending Balance, Notes Payable | ' | ' | ' | $454,643 | ' | $529,311 | $872,534 | $454,643 | $503,203 | $739,534 | ' | $26,108 | $133,000 |
5_Debt_Convertible_Debt_Net_De1
5. Debt - Convertible Debt, Net (Details) (Q2) (USD $) | 12 Months Ended | 15 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended |
Dec. 31, 2012 | Mar. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | |
Quarter 2 [Member] | Quarter 2 [Member] | Third Party [Member] | Third Party [Member] | Related Party [Member] | Related Party [Member] | |||
Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | |||||
Beginning Balance, Derivative Liabilities | ' | ' | $411,246 | ' | $361,246 | ' | $50,000 | ' |
Proceeds | ' | ' | 2,270,100 | 2,000,000 | 2,270,100 | 2,000,000 | ' | ' |
Repayments | ' | ' | ' | ' | ' | ' | ' | ' |
Conversion of note payable to convertible debt | ' | ' | ' | 230,000 | ' | 180,000 | ' | 50,000 |
Conversion of accrued interest into convertible debt | ' | ' | ' | 14,133 | ' | 14,133 | ' | ' |
Less: gross debt discount recorded - Day 1 | ' | ' | -2,249,459 | -1,925,191 | -2,249,459 | -1,925,191 | ' | ' |
Add: amortization of debt discount | ' | 5,000 | 579,382 | 92,304 | 579,382 | 92,304 | ' | ' |
Ending Balance | ' | ' | $1,011,269 | $411,246 | $961,269 | $361,246 | $50,000 | $50,000 |
5_Debt_Future_Minimum_Repaymen
5. Debt - Future Minimum Repayment Obligations (Details) (Q2) (USD $) | 15 Months Ended | 6 Months Ended | ||||
Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | ||||
2014 | $124,194 | ' | ' | $98,086 | ' | ' |
2015 | 2,649,250 | ' | ' | 4,870,793 | ' | ' |
Less: unamortized debt discount | ' | 1,832,888 | ' | 3,502,967 | 1,832,890 | ' |
Less: current maturities | ' | -124,194 | ' | -98,086 | ' | ' |
Debt - long term | ' | ' | ' | $1,367,826 | ' | ' |
5_Debt_Details_Narrative_Q2
5. Debt (Details Narrative) (Q2) (USD $) | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2014 | Dec. 31, 2013 | Aug. 29, 2018 | 8-May-16 | Nov. 26, 2015 | |
Unsecured Debt | ' | -26,108 | ' | ' | ' |
Secured Debt | ' | 503,203 | ' | ' | ' |
Debt Due on Demand | ' | ' | ' | ' | -2,244,133 |
Quarter 2 [Member] | ' | ' | ' | ' | ' |
Detachable Warrants Issued | 5,390,100 | 3,672,134 | ' | ' | ' |
Convertible Debt Terms | ' | 'The Company was required to register the underlying convertible debt shares and warrants within 60 days (January 2014), and for the registration statement to become effective 90 days after this date (April 2014). The registration statement has not yet been filed, which upon filing, must be declared and remain effective. As a result of not filing the registration statement timely, the Company began accruing liquidated damages equal to 2% of the gross proceeds which is equivalent to $40,000 per month each for May and June 2014. The liquidated damages clause is capped at 15% of gross proceeds raised. If the Company fails to pay the liquidated damages, an interest rate of 18% will be applied to the outstanding debt instruments. | ' | ' | ' |
In the event any of these notes are prepaid prior to maturity, a penalty rate of 10% would apply for any payments occurring between months 12 – 18 and a 5% rate for any payments occurring between 19-24 months. | |||||
Subordinate Debt | 454,643 | ' | ' | ' | ' |
Unsecured Debt | 26,108 | ' | ' | ' | ' |
Secured Debt | 454,643 | ' | ' | ' | ' |
Debt Due on Demand | 26,108 | ' | 454,653 | 2,270,100 | 2,244,133 |
Penalties Pertaining to Registration Rights Agreement | 218,143 | ' | ' | ' | ' |
Outstanding Debt, Net of Debt Discount | $1,367,826 | ' | ' | ' | ' |
6_Derivative_Liabilities_Deriv
6. Derivative Liabilities - Derivative Liabilities - Fair Value (Details) (USD $) | 12 Months Ended | 15 Months Ended | |
Dec. 31, 2012 | Mar. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ' | ' | ' |
Fair value at the commitment date - convertible debt | ' | ' | $2,414,585 |
Fair value at the commitment date - warrants | ' | ' | 682,809 |
Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability | ' | ' | -311,709 |
Fair value mark to market adjustment - convertible debt | ' | -28,586 | ' |
Fair value mark to market adjustment - warrants | ' | ($5,595) | ' |
6_Derivative_Liabilities_Deriv1
6. Derivative Liabilities - Derivative Liabilities - Assumptions (Details) | 15 Months Ended | 12 Months Ended | |||
Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | |
Commitment Date [Member] | Commitment Date [Member] | Remeasurement Date [Member] | Remeasurement Date [Member] | ||
Minimum [Member] | Maximum [Member] | Minimum [Member] | Maximum [Member] | ||
Expected dividends | 0.00% | 0.00% | ' | 0.00% | ' |
Expected volatility | 150.00% | 150.00% | ' | 150.00% | ' |
Expected term | ' | '2 years | '5 years | '1 year 11 months | '4 years 4 months |
Risk free interest rate | 0.03% | 0.29% | 1.68% | 0.38% | 1.75% |
6_Derivative_Liabilities_Fair_
6. Derivative Liabilities - Fair Value, Derivative Liabilities (Details) (Q2) (USD $) | 12 Months Ended | 15 Months Ended | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2012 | Mar. 31, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | |
Quarter 2 [Member] | Quarter 2 [Member] | ||||
Beginning Balance | ' | ' | ' | $2,751,504 | ' |
Fair value at the commitment date - convertible debt | ' | ' | 2,414,585 | 2,817,944 | 2,414,585 |
Fair value at the commitment date - warrants | ' | ' | 682,809 | ' | 682,809 |
Reclassification of derivative liabilities to additional paid in capital | ' | ' | ' | -214,769 | ' |
Related to convertible debt that ceased being a derivative liability | ' | -28,586 | ' | 2,249,459 | -311,709 |
Fair value mark to market adjustment - convertible debt | ' | ' | ' | -216,017 | -28,586 |
Fair value mark to market adjustment - warrants | ' | ' | ' | -8,650 | -5,595 |
Ending Balance | ' | ' | ' | $5,130,013 | $2,751,504 |
6_Derivative_Liabilities_Fair_1
6. Derivative Liabilities - Fair Value Assumptions (Details) (Q2) | 15 Months Ended | 6 Months Ended | |||||
Mar. 31, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | |
Remeasurement Date | Remeasurement Date | Remeasurement Date | Commitment Date | Commitment Date | Commitment Date | ||
Quarter 2 [Member] | Minimum [Member] | Maximum [Member] | Quarter 2 [Member] | Minimum [Member] | Maximum [Member] | ||
Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | ||||
Expected dividends | 0.00% | 0.00% | ' | ' | 0.00% | ' | ' |
Expected volatility | 150.00% | 150.00% | ' | ' | 150.00% | ' | ' |
Expected term | ' | ' | '1 year 5 months | '5 years | ' | '2 years | '5 years |
Risk free interest rate | 0.03% | ' | 0.47% | 1.62% | ' | 0.40% | 1.68% |
7_Debt_Discount_Debt_Discount_
7. Debt Discount - Debt Discount (Details) (USD $) | 15 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ' | ' |
Beginning Balance, Debt Discount | ' | $1,832,888 |
Debt discount | 1,925,191 | ' |
Accumulated amortization | -92,304 | ' |
Ending Balance, Debt Discount | ' | $1,832,888 |
7_Debt_Discount_Details_Narrat
7. Debt Discount (Details Narrative) (USD $) | 12 Months Ended | 15 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | |
Notes to Financial Statements | ' | ' | ' |
Derivative Expense | ' | ' | $1,156,193 |
Interest Expense, Amortized | $92,304 | ' | ' |
7_Debt_Discount_Debt_Discount_1
7. Debt Discount - Debt Discount (Details) (Q2) (USD $) | 12 Months Ended | 15 Months Ended | 6 Months Ended | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |
Quarter 2 [Member] | Quarter 2 [Member] | ||||
Beginning Balance, Debt Discount | ' | ' | ' | $1,832,890 | ' |
Debt discount | 92,304 | ' | ' | 2,249,459 | 1,925,191 |
Amortization expense | ' | ' | 35,000 | -579,382 | -92,301 |
Ending Balance, Debt Discount | $1,832,888 | ' | ' | $3,502,967 | $1,832,890 |
8_Debt_Issue_Costs_Debt_Issuan
8. Debt Issue Costs - Debt Issuance Costs (Details) (USD $) | 15 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | |
Debt Disclosure [Abstract] | ' | ' |
Debt issue costs - net | ' | $235,211 |
Debt issue costs | 247,197 | ' |
Accumulated amortization | -11,986 | ' |
Debt issue costs - net | ' | $235,211 |
8_Debt_Issue_Costs_Details_Nar
8. Debt Issue Costs (Details Narrative) (USD $) | 15 Months Ended |
Mar. 31, 2014 | |
Debt Disclosure [Abstract] | ' |
Debt Issuance Costs, Amortized | $11,986 |
8_Debt_Issue_Costs_Debt_Issue_
8. Debt Issue Costs - Debt Issue Costs (Details) (Q2) (USD $) | 15 Months Ended | 6 Months Ended | 12 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | |
Quarter 2 [Member] | Quarter 2 [Member] | |||
Debt issue costs - net | ' | $235,211 | $235,211 | ' |
Debt issue costs | 247,197 | ' | 69,944 | 247,197 |
Amortization expense | ' | ' | -63,909 | -11,986 |
Debt issue costs - net | ' | $235,211 | $241,246 | $235,211 |
9_Income_Taxes_Components_of_D
9. Income Taxes - Components of Deferred Tax Assets (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Income Tax Disclosure [Abstract] | ' | ' |
Net operating loss carryforward | ($199,000) | ($18,000) |
Gross Deferred Tax Assets | -199,000 | -18,000 |
Less Valuation Allowance | 199,000 | 18,000 |
Total Deferred Tax Assets - Net | ' | ' |
9_Income_Taxes_Tax_Expense_Dif
9. Income Taxes - Tax Expense - Difference from Expected (Details) (USD $) | 12 Months Ended | 15 Months Ended |
Dec. 31, 2012 | Mar. 31, 2014 | |
Income Tax Disclosure [Abstract] | ' | ' |
Computed ""expected"" tax expense (benefit) - Federal | ($16,000) | ($875,000) |
Computed ""expected"" tax expense (benefit) - State - Georgia | -2,000 | -102,000 |
Derivative expense | ' | 439,000 |
Loss on debt extinguishment | ' | 5,000 |
Gain on debt forgiveness | ' | 38,000 |
Share based payments | ' | 286,000 |
Amortization of patent | ' | 1,000 |
Amortization of debt Issue costs | ' | 5,000 |
Amortization of debt discount | ' | 35,000 |
Change in value of derivitive liability | ' | -13,000 |
Change in valuation allowance | $18,000 | $181,000 |
9_Income_Taxes_Details_Narrati
9. Income Taxes (Details Narrative) (USD $) | 12 Months Ended | 15 Months Ended | |
Dec. 31, 2012 | Mar. 31, 2014 | Dec. 31, 2013 | |
Income Tax Disclosure [Abstract] | ' | ' | ' |
Net Operating Loss Carry-forward | ($18,000) | ' | $477,000 |
Valuation Allowance | 18,000 | ' | ' |
Change in Valuation Allowance | $18,000 | $181,000 | ' |
9_Stockholders_Deficit_Common_
9. Stockholders Deficit - Common Stock Issuance (Details) (Q2) (USD $) | 15 Months Ended | 6 Months Ended |
Mar. 31, 2014 | Jun. 30, 2014 | |
Quarter 2 [Member] | ||
Quantity | 3,367,000 | ' |
Valuation | $493,150 | $31,250 |
Range of Value per Share | ' | ' |
9_Stockholders_Deficit_Stock_O
9. Stockholders Deficit - Stock Option Activity (Details) (Q2) (USD $) | 15 Months Ended | 6 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |
Quarter 2 [Member] | Quarter 2 [Member] | ||
Beginning Balance, Options | ' | 200,000 | 300,000 |
Beginning Balance, Weighted Average Exercise Price | ' | $0.38 | $0.38 |
Beginning Balance, Weighted Average Remaining Contractual Life (In Years) | '4 years 8 months | '4 years 2 months | '4 years 8 months |
Options Granted | 300,000 | ' | ' |
Options Granted, Weighted Average Exercise Price | $0.38 | ' | ' |
Options Granted, Weighted Average Remaining Contract (In Years) | '5 years | ' | ' |
Options Exercised | ' | ' | ' |
Options Forfeited/Cancelled | ' | ' | -100,000 |
Options Forfeited/Cancelled, Exercise Price | ' | ' | ' |
Ending Balance, Options Outstanding | ' | 200,000 | 200,000 |
Ending Balance, Weighted Average Exercise Price, Options Outstanding | ' | $0.38 | $0.38 |
Ending Balance, Options Exercisable | ' | ' | ' |
Ending Balance, Options Exercisable, Exercise Price | ' | ' | ' |
9_Stockholders_Deficit_Warrant
9. Stockholders Deficit - Warrant Activity (Details) (Q2) (USD $) | 15 Months Ended | 6 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | |
Quarter 2 [Member] | Quarter 2 [Member] | ||
Beginning Balance, Warrants | ' | 4,338,884 | ' |
Warrants Granted | 6,738,884 | 5,390,100 | 6,738,884 |
Warrants Granted, Weighted Average Exercise Price | $0.24 | $0.38 | $0.24 |
Warrants Granted, Weighted Average Remaining Contractual Life (in Years) | '5 years | '5 years | '5 years |
Warrants Exercised | -1,400,000 | 1,000,000 | -1,400,000 |
Warrants Exercised, Weighted Average Exercise Price | $0.00 | ' | ' |
Warrants Cancelled/Forfeited | -1,000,000 | ' | -1,000,000 |
Warrants Cancelled/Forfeited, Weighted Average Exercise Price | $0.00 | ' | ' |
Ending Balance, Warrants Outstanding | ' | 9,728,984 | 4,338,884 |
Ending Balance, Warrants, Weighted Average Exercise Price | ' | $0.38 | $0.24 |
Ending Balance, Warrants, Weighted Average Remaining Contractual Life (in Years) | '4 years 10 months | '4 years 8 months | '5 years |
9_Stockholders_Deficit_Details
9. Stockholders Deficit (Details Narrative) (Q2) (USD $) | 12 Months Ended | 15 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2014 | Mar. 31, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2018 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 | Dec. 31, 2013 | |
Quarter 2 [Member] | Quarter 2 [Member] | Equity Option [Member] | Warrant [Member] | Warrant [Member] | Warrant [Member] | Warrant [Member] | Warrant [Member] | Warrant [Member] | Warrant [Member] | Convertible Warrant [Member] | Convertible Warrant [Member] | Services Rendered Related Party [Member] | Warrants for Services [Member] | ||||
Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Third Party [Member] | Third Party [Member] | Related Party [Member] | Related Party [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | ||||||
Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | Quarter 2 [Member] | ||||||||||||||
Compensation, Sign On Bonus | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,250,000 | ' |
Exercise Price Per Share | ' | ' | $0.38 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.38 | $0.38 | $0.25 | $0.00 |
Stock Options Issued | ' | ' | ' | ' | ' | 300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock Options Issued, Fair Value | ' | ' | ' | ' | ' | $66,785 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock Options, Cancelled | ' | 100,000 | ' | ' | ' | 100,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants Issued, Shares | ' | ' | ' | ' | ' | ' | 5,390,100 | ' | 6,738,884 | 4,740,100 | 6,614,801 | 650,000 | 124,083 | 5,390,100 | 3,672,134 | ' | 3,066,750 |
Warrants Expired, Shares | 4,338,884 | ' | 2,400,000 | ' | ' | ' | ' | 4,338,884 | 2,400,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants Exercised, Shares | ' | ' | -1,400,000 | 1,000,000 | -1,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants Exercised, Value | ' | ' | ' | $1,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
10_Stockholders_Deficit_Common
10. Stockholders Deficit - Common Stock Issued (Details) (USD $) | 15 Months Ended | 12 Months Ended | ||||
Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | |
Minimum [Member] | Maximum [Member] | Warrants Exercised | Services Rendered - Related Party | Acquisition of 4.5% interest in subsidiary | ||
Quantity | 3,367,000 | ' | ' | 1,400,000 | 500,000 | 1,467,000 |
Valuation | $493,150 | ' | ' | $1,400 | $125,000 | $366,750 |
Range of Value per Share | ' | $0.00 | $0.25 | $0.00 | $0.25 | $0.25 |
10_Stockholders_Deficit_Stock_
10. Stockholders Deficit - Stock Options, Assumptions Used (Details) (USD $) | 15 Months Ended |
Mar. 31, 2014 | |
Equity [Abstract] | ' |
Options Granted | 300,000 |
Grant Date | 3-Sep-13 |
Exercise Price | $0.38 |
Expected Dividends | 0.00% |
Expected Volatility | 150.00% |
Risk Free Interest Rate | 0.03% |
Expected Life of Options | '5 years |
Expected Forfeitures | 0 |
Fair Value per Stock Option | $0.22 |
10_Stockholders_Deficit_Stock_1
10. Stockholders Deficit - Stock Option Activity (Details) (USD $) | 15 Months Ended |
Mar. 31, 2014 | |
Equity [Abstract] | ' |
Beginning Balance, Options | ' |
Beginning Balance, Weighted Average Exercise Price | ' |
Options Granted | 300,000 |
Options Granted, Weighted Average Exercise Price | $0.38 |
Options Granted, Weighted Average Remaining Contract (In Years) | '5 years |
Options Exercised | ' |
Options Forfeited/Cancelled | ' |
Ending Balance, Weighted Average Remaining Contract (In Years), Options Outstanding | '4 years 8 months |
Ending Balance, Weighted Average Remaining Contract (In Years), Options Exercisable | '4 years 8 months |
Grant date fair value of options | $66,458 |
Weighted average grant date fair value | $0.22 |
10_Stockholders_Deficit_Warran
10. Stockholders Deficit - Warrant Activity (Details) (USD $) | 15 Months Ended |
Mar. 31, 2014 | |
Equity [Abstract] | ' |
Beginning Balance, Warrants | ' |
Warrants Granted | 6,738,884 |
Warrants Granted, Weighted Average Exercise Price | $0.24 |
Warrants Granted, Weighted Average Remaining Contractual Life (in Years) | '5 years |
Warrants Exercised | -1,400,000 |
Warrants Exercised, Weighted Average Exercise Price | $0.00 |
Warrants Cancelled/Forfeited | -1,000,000 |
Warrants Cancelled/Forfeited, Weighted Average Exercise Price | $0.00 |
Ending Balance, Warrants, Weighted Average Remaining Contractual Life (in Years) | '4 years 10 months |
10_Stockholders_Deficit_Detail
10. Stockholders Deficit (Details Narrative) (USD $) | 1 Months Ended | 6 Months Ended | 12 Months Ended | 15 Months Ended | |||||||
Jun. 30, 2014 | 31-May-14 | Jun. 30, 2013 | Jun. 30, 2014 | Dec. 31, 2018 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Jun. 25, 2014 | 8-May-14 | |
Shares Acquired, Value | ' | ' | $366,750 | ' | ' | ' | ' | ' | ' | ' | ' |
Net Increase to Additional Paid in Capital | ' | ' | 19,538 | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Forgiveness | ' | ' | ' | ' | ' | ' | 83,000 | ' | ' | ' | ' |
Debt Converted, Value | ' | ' | ' | ' | ' | ' | ' | ' | 244,133 | ' | ' |
Loss on Debt Extinguishment | ' | ' | ' | ' | ' | ' | -3,278 | ' | -3,278 | ' | ' |
Stock Issued for Services, Value | ' | ' | ' | ' | ' | ' | 562,500 | ' | ' | ' | ' |
Stock Issued, Price Per Share | ' | ' | ' | ' | ' | ' | $0.25 | ' | ' | ' | ' |
Sale of Member Units, Value | ' | ' | ' | ' | ' | ' | ' | 774,000 | ' | ' | ' |
Allocation to Noncontrolling Interest | ' | ' | ' | ' | ' | ' | -35,440 | 5,193 | ' | ' | ' |
Options Cancelled | ' | ' | ' | ' | ' | 100,000 | ' | ' | ' | ' | ' |
Warrants Issued | 1,750,100 | 3,640,000 | ' | ' | ' | ' | ' | ' | 3,672,134 | ' | ' |
Expired Warrants | ' | ' | ' | ' | 4,338,884 | ' | ' | ' | 2,400,000 | ' | ' |
Warrants, Exercise Price | ' | ' | ' | ' | ' | ' | $0.38 | ' | ' | $0.38 | $0.38 |
Warrants Issued, Value | ' | ' | ' | ' | ' | ' | ' | ' | 682,809 | ' | ' |
Warrant Consideration Recieved | ' | ' | ' | ' | ' | 1,000 | ' | ' | ' | ' | ' |
Warrants Exercised | ' | ' | ' | ' | ' | 1,000,000 | ' | ' | ' | ' | ' |
Minimum [Member] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants, Exercise Price | ' | ' | ' | ' | ' | ' | $0.00 | ' | ' | ' | ' |
Maximum [Member] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants, Exercise Price | ' | ' | ' | ' | ' | ' | $0.38 | ' | ' | ' | ' |
Services 2 [Member] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants Issued | ' | ' | ' | ' | ' | ' | 3,066,750 | ' | ' | ' | ' |
Convertible Debt [Member] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants Issued | ' | ' | ' | ' | ' | ' | 3,672,134 | ' | ' | ' | ' |
Third-Party Payor [Member] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Forgiveness | ' | ' | ' | ' | ' | ' | -100,000 | ' | ' | ' | ' |
Loss on Debt Extinguishment | ' | ' | ' | ' | ' | ' | 12,731 | ' | ' | ' | ' |
Warrants Issued | ' | ' | ' | ' | ' | ' | 6,614,801 | ' | ' | ' | ' |
Warrants Issued, Value | ' | ' | ' | ' | ' | ' | 666,315 | ' | ' | ' | ' |
Related Party [Member] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Forgiveness | ' | ' | ' | ' | ' | ' | -83,000 | ' | ' | ' | ' |
Loss on Debt Extinguishment | ' | ' | ' | ' | ' | ' | 3,278 | ' | ' | ' | ' |
Warrants Issued | ' | ' | ' | ' | ' | ' | 124,083 | ' | ' | ' | ' |
Warrants Issued, Value | ' | ' | ' | ' | ' | ' | 16,495 | ' | ' | ' | ' |
Director [Member] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock Issued for Services, Value | ' | ' | ' | ' | ' | ' | $66,785 | ' | ' | ' | ' |
Stock Issued for Services, Shares | ' | ' | ' | ' | ' | ' | 300,000 | ' | ' | ' | ' |
Warrants Issued | ' | ' | ' | ' | ' | ' | 6,738,884 | ' | ' | ' | ' |
10_Commitments_Minimum_Rent_Ob
10. Commitments - Minimum Rent Obligations (Details) (Q2) (USD $) | Dec. 31, 2013 | Jun. 30, 2014 |
Quarter 2 [Member] | ||
2014 (9 months) | $81,000 | $61,000 |
2015 | 83,000 | 83,000 |
2016 | 86,000 | 86,000 |
2017 | 22,000 | 22,000 |
Total | $272,000 | $252,000 |
10_Commitments_Details_Narrati
10. Commitments (Details Narrative) (Q2) (USD $) | 6 Months Ended | 12 Months Ended | 6 Months Ended | |
Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | Jun. 30, 2014 | |
Quarter 2 [Member] | Chief Executive Officer [Member] | Chief Executive Officer [Member] | Office [Member] | |
Quarter 2 [Member] | Quarter 2 [Member] | |||
Royalty Information | 'The term shall carry a royalty minimum of $12,000,000. If licensee does not pay GE a cumulative royalty of $12,000,000 over the term of the agreement, the difference between $12,000,000 and all prior payments would be due on December 31, 2018. | ' | ' | ' |
Shares Granted | ' | 1,250,000 | 1,250,000 | 250,000 |
Shares Granted, Value | $1,000 | $312,500 | $312,500 | ' |
Annual Salary | ' | 150,000 | 150,000 | ' |
Security Deposit Paid | 27,020 | ' | ' | ' |
Monthly Consulting Fee | ' | ' | ' | $6,500 |
11_Commitments_Minimum_Royalty
11. Commitments - Minimum Royalty Obligations (Details) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2014 | ' |
2015 | 2,800,000 |
2016 | 3,300,000 |
2017 | 3,600,000 |
Total | $9,700,000 |
11_Commitments_Net_Sales_Minim
11. Commitments - Net Sales Minimum Impacting Minimum Royalty Obligations (Details) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2015 | $56,000,000 |
2016 | 66,000,000 |
2017 | $72,000,000 |
11_Commitments_Details_Narrati
11. Commitments (Details Narrative) (USD $) | 15 Months Ended | 12 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2013 | |
Chief Executive Officer [Member] | Officer [Member] | ||
Royalty Expense | $400,000 | ' | ' |
Shares Granted | ' | 1,250,000 | ' |
Shares Granted, Value | ' | 312,500 | ' |
Annual Salary | ' | $150,000 | $150,000 |
11_Going_Concern_Details_Narra
11. Going Concern (Details Narrative) (Q2) (USD $) | 15 Months Ended | 6 Months Ended | |||
Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Jun. 30, 2014 | Dec. 31, 2013 | |
Quarter 2 [Member] | Quarter 2 [Member] | ||||
Net Loss | ' | ' | ' | ($601,399) | ' |
Net Cash Used in Operations | 685,729 | ' | ' | 321,818 | ' |
Working Capital Deficit | ' | ' | ' | 2,291,849 | ' |
Total Stockholders' deficit | ' | ($2,325,072) | ($879,315) | ($4,427,531) | ($2,360,512) |
12_Going_Concern_Details_Narra
12. Going Concern (Details Narrative) (USD $) | 6 Months Ended | 12 Months Ended | 15 Months Ended | |
Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ' | ' | ' |
Net Loss | ($2,314,038) | ($2,607,768) | ($870,320) | ($2,607,768) |
Net Cash Used in Operations | ' | ' | ' | 685,729 |
Working Capital Deficit | ' | 1,810,104 | ' | ' |
Total Stockholders' deficit | ' | ($2,325,072) | ($879,315) | ' |
13_Subsequent_Events_Minimum_R
13. Subsequent Events - Minimum Rent Obligations (Details) (USD $) | Dec. 31, 2013 |
Subsequent Events [Abstract] | ' |
2014 | $81,000 |
2015 | 83,000 |
2016 | 86,000 |
2017 | 22,000 |
Total | $272,000 |
13_Subsequent_Events_Details_N
13. Subsequent Events (Details Narrative) (USD $) | 1 Months Ended | 15 Months Ended | |||||
Jun. 30, 2014 | 31-May-14 | Mar. 31, 2014 | Jun. 25, 2014 | 8-May-14 | Dec. 31, 2013 | Dec. 31, 2012 | |
Subsequent Events [Abstract] | ' | ' | ' | ' | ' | ' | ' |
Convertible Notes Issued | ' | ' | ' | $870,100 | $1,400,000 | $2,194,133 | ' |
Convertible Notes Payable, Interest Rate | ' | ' | ' | 1200.00% | 1200.00% | ' | ' |
Convertible Note Payable, Conversion Price | ' | ' | ' | $0.25 | $0.25 | ' | ' |
Warrants Issued | 1,750,100 | 3,640,000 | 3,672,134 | ' | ' | ' | ' |
Warrant Exercise Price | ' | ' | ' | $0.38 | $0.38 | $0.38 | ' |