Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 25, 2016 | Jun. 30, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | Safety Quick Lighting & Fans Corp. | ||
Entity Central Index Key | 1,598,981 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | No | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 5,312,860 | ||
Entity Common Stock, Shares Outstanding | 43,653,343 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash | $ 450,868 | $ 1,241,487 |
Accounts recievable | 234,309 | 0 |
Inventory | 263,871 | 0 |
Prepaid expenses | 35,769 | 29,643 |
Other current assets | 210 | 0 |
Total current assets | 985,028 | 1,271,130 |
Furniture and Equipment - net | 127,521 | 132,609 |
Other assets: | ||
Patent - net | 83,174 | 46,419 |
Debt issue costs - net | 14,605 | 161,946 |
GE trademark license - net | 7,123,746 | 9,565,217 |
Other assets | 65,714 | 65,714 |
Total other assets | 7,287,239 | 9,839,296 |
Total assets | 8,399,788 | 11,243,035 |
Current liabilities: | ||
Accounts payable & accrued expenses | 807,798 | 1,041,741 |
Convertible debt - net of debt discount $474,283 and $970,140 at December 31, 2015 and December 31, 2014 respectively | 3,989,950 | 1,223,982 |
Convertible debt - related parties - net of discount $0 and $23,001 at December 31, 2015 and December 31, 2014 respectively | 50,000 | 26,999 |
Notes payable-current portion | 107,944 | 98,086 |
Derivative liabilities | 24,157,838 | 5,140,758 |
Other current liabilities | 46,010 | 78,622 |
Total current liabilities | 29,159,540 | 7,610,188 |
Long term liabilities: | ||
Convertible debt - net of $1,582,087 debt discount | 0 | 688,013 |
Notes payable | 193,800 | 307,009 |
GE royalty obligation | 11,795,855 | 12,000,000 |
Total long term liabilities | 11,989,655 | 12,995,022 |
Total liabilities | 41,149,195 | 20,605,210 |
Stockholders' deficit: | ||
Common stock: $0 par value, 500,000,000 shares authorized; 41,501,251 snd 35,750,000 shares issued and outstanding at December 31, 2015 and December 31, 2014 respectively | 2,892,078 | 189,900 |
Common stock to be issued | 625,000 | 13,812 |
Additional paid-in capital | 6,472,427 | 6,282,814 |
Accumulated deficit | (42,703,470) | (15,813,260) |
Total Stockholders' deficit | (32,713,965) | (9,326,733) |
Noncontrolling interest | (35,442) | (35,442) |
Total Deficit | (32,749,407) | (9,362,175) |
Total liabilities and stockholders' deficit | $ 8,399,788 | $ 11,243,035 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Common Stock Par Value | $ 0 | $ 0 |
Common Stock Authorized | 500,000,000 | 500,000,000 |
Common Stock Issued | 41,501,251 | 35,750,000 |
Common Stock Outstanding | 41,501,251 | 35,750,000 |
Convertible Debt, Currrent, Debt Discount | $ 474,283 | $ 970,150 |
Convertible Debt, Current, Related Party, Debt Discount | $ 0 | $ 23,001 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Statement [Abstract] | ||
Sales | $ 2,885,007 | $ 0 |
Cost of sales | (2,477,252) | 0 |
Gross profit | 367,550 | 0 |
General and administrative expenses | 5,236,747 | 4,799,696 |
Loss from operations | (4,828,992) | (4,799,696) |
Other income (expense) | ||
Interest expense | (2,855,519) | (2,139,485) |
Derivative expenses | 0 | (568,485) |
Change in fair value of embedded derivative liabilities | (19,416,295) | 213,923 |
Gain on debt settlement | 209,604 | 0 |
Other income | 992 | 0 |
Total other income (expense) - net | (22,061,219) | (2,494,047) |
Net loss including noncontrolling interest | (26,890,210) | (7,293,743) |
Less: net loss attributable to noncontrolling interest | 0 | (2) |
Net loss attributable to Safety Quick Lighting & Fans Corp. | $ (26,890,210) | $ (7,293,743) |
Net loss per share - basic and diluted | $ (.76) | $ (.22) |
Weighted average number of common shares outstanding during the year - basic and diluted | 35,409,521 | 33,644,359 |
Shareholders Equity
Shareholders Equity - USD ($) | Common Stock | Common Stock to be Issued | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning Balance, Shares at Dec. 31, 2013 | 34,500,000 | |||||
Beginning Balance, Amount at Dec. 31, 2013 | $ 126,400 | $ 6,068,045 | $ (8,519,517) | $ (35,442) | $ (2,360,513) | |
Payment for exercise of options from Grannus Financial, Shares | 1,000,000 | |||||
Payment for exercise of options from Grannus Financial, Amount | $ 1,000 | 1,000 | ||||
Reclassification of derivative liability associated with warrants | 214,769 | 214,769 | ||||
Common stock issued per mutual release and waiver, Shares | 250,000 | 13,812 | ||||
Common stock issued per mutual release and waiver, Amount | $ 62,500 | $ 62,500 | ||||
Common stock issued for services - related party | 13,812 | |||||
Net loss | (7,293,743) | (2) | $ (7,293,745) | |||
Ending Balance, Shares at Dec. 31, 2014 | 35,750,000 | |||||
Ending Balance, Amount at Dec. 31, 2014 | $ 189,900 | $ 13,812 | 6,282,814 | (15,813,260) | (35,442) | (9,362,177) |
Common stock issued in exchange for interest due, Shares | 1,718,585 | |||||
Common stock issued in exchange for interest due, Amount | $ 429,646 | 429,646 | ||||
Reclassification of derivative liability on interest and penalty on Convertible Notes | 189,613 | |||||
Common stock issued per mutual release and waiver, Shares | 250,000 | |||||
Common stock issued per mutual release and waiver, Amount | $ 62,500 | 111,188 | 173,688 | |||
Common stock issued, net of issuance cost, Shares | 3,782,666 | |||||
Common stock issued, net of issuance cost, Amount | $ 2,210,032 | 500,000 | 2,710,032 | |||
Net loss | (26,890,210) | (26,890,210) | ||||
Ending Balance, Shares at Dec. 31, 2015 | 41,501,251 | |||||
Ending Balance, Amount at Dec. 31, 2015 | $ 2,892,078 | $ 625,000 | $ 6,472,427 | $ (42,703,470) | $ (35,442) | $ (32,749,407) |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Cash flows from operating activities: | ||
Net loss attributable to Safety Quick Lighting & Fans Corp. | $ (26,890,210) | $ (7,293,743) |
Net loss attributable to noncontrolling interest | 0 | (2) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation expense | 22,464 | 17,253 |
Amortization of debt issue costs | 147,341 | 142,867 |
Amortization of debt discount | 2,100,957 | 1,507,108 |
Amortization of patent | 5,347 | 3,002 |
Amortization of GE trademark license | 2,441,471 | 2,434,783 |
Change in fair value of derivative liabilities | 19,416,295 | (213,921) |
Derivative expense | 0 | 568,751 |
Loss (Gain) on debt forgiveness | (209,604) | 23,451 |
Common stock transferred from existing stockholders for services rendered | 0 | 0 |
Stock issued for services - related party | 0 | 76,312 |
Stock options issued for services - related parties | 173,688 | 0 |
Change in operating assets and liabilities: | ||
Accounts receivable | (234,309) | 0 |
Prepaid expenses | (6,126) | 10,359 |
Inventory | (263,871) | 0 |
Deferred royalty | 0 | (12,000,000) |
Royalty payable | (204,147) | 12,000,000 |
Other | (32,822) | 12,908 |
Accounts payable & accrued expenses | (233,944) | 910,641 |
Net cash used in operating activities | (3,767,470) | (1,800,299) |
Cash flows from investing activities: | ||
Purchase of property & equipment | (17,376) | (143,816) |
Payment of patent costs | (42,102) | (24,724) |
Net cash used in investing activities | (59,478) | (168,540) |
Cash flows from financing activities: | ||
Direct issue costs paid | 0 | (69,600) |
Proceeds from issuance of convertible notes | 0 | 2,270,100 |
Proceeds from note payable | 0 | 0 |
Proceeds from note payable - related party | 0 | 0 |
Stock issued in exchange for interest | 429,646 | 0 |
Repayments of notes payable | (103,351) | (98,108) |
Repayments of notes - related party | 0 | (26,108) |
Proceeds from the exercise of warrants | 0 | 0 |
Proceeds from issuance of stock | 2,710,032 | 1,000 |
Net cash provided by financing activities | 3,036,327 | 2,077,284 |
Cash and cash equivalents at beginning of year | 1,241,489 | 1,132,974 |
Cash and cash equivalents at end of year | 450,868 | 1,241,489 |
Supplementary disclosure of non-cash financing activities: | ||
Debt discount recorded on convertible debt accounted for as a derivative liability | 0 | 2,249,459 |
Reclassification of derivative liability to additional paid-in-capital | 189,613 | 214,769 |
Gain on debt extinguishment | 209,604 | 0 |
Cash paid during the year for: | ||
Interest | $ 563,637 | $ 41,487 |
1. Organization and Nature of O
1. Organization and Nature of Operations | 12 Months Ended |
Dec. 31, 2015 | |
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., a Florida corporation (the Company), was originally organized in May 2004 as a limited liability company under the name of Safety Quick Light, LLC. The Company was converted to corporation on November 6, 2012. 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 maintains an office in Foshan, Peoples Republic of China with five staff consisting of four engineers and/or quality control inspectors/engineers. The Company is engaged in the business of developing proprietary technology that enables a quick and safe installation by the use of a power plug for electrical fixtures, such as light fixtures and ceiling fans, into ceiling and wall electrical junction boxes. The Companys main technology consists of a fixable socket and a revolving plug for conducting electric power and supporting an electrical appliance attached to a wall or ceiling. The socket is comprised of a non-conductive body that houses conductive rings connectable to an electric power supply through terminals in its side exterior. The plug is also comprised of a non-conductive body that houses corresponding conductive rings, attaches to the socket via a male post and is capable of feeding electric power to an appliance. The plug also includes a second structural element allowing it to revolve and a releasable latching which, when engaged, provides a retention force between the socket and the plug to prevent disengagement. The socket and plug can be detached by releasing the latch, disengaging the electric power from the plug. The socket is designed to replace the support bar incorporated in electric junction boxes, and the plug can be installed in light fixtures, ceiling fans and wall sconce fixtures. The Company markets consumer friendly, energy saving plug-in ceiling fans and light fixtures under the General Electric (GE) brand as well as conventional ceiling lights and fans carrying the GE brand. The Company also owns 98.8% of SQL Lighting & Fans LLC (the Subsidiary). The Subsidiary was formed in Florida on April 27, 2011, and is in the business of manufacturing the patented device that the Company owns. The Subsidiary had no activity during the periods presented. The Companys fiscal year end is December 31. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2015 | |
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 Companys 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. Principles of Consolidation The consolidated financial statements include the accounts of Safety Quick Lighting & Fans Corp and the 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 Companys membership units in the Subsidiary, the Companys ownership percentage in the Subsidiary decreased from 98.8% to 94.35%. The Company then reacquired these membership units in June 2013, increasing the ownership percentage from 94.35% back to 98.8%. During 2014, there was no activity in the Subsidiary. Its pro rata share of the Companys 2014 and 2015 loss from operations is recognized in the financial statements. 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 $450,868 and $1,241,487 in money market as of December 31, 2015 and December 31, 2014, respectively. 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. The Companys net balance of accounts receivable for three-months ended December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Accounts Receivable $ 234,309 $ Allowance for Doubtful Accounts Net Accounts Receivable $ 234,309 $ The Company had no sales in 2014. All amounts are deemed collectible at December 31, 2015, and the Company has not incurred any bad debt expense. Inventory Inventory consists 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 periodically reviews historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. At December 31, 2015 and December 31, 2014, the Company had $223,666 and $0 in inventory, respectively. The Company maintains an allowance based on specific inventory items which have shown no activity over a 24-month period. The Company tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. As of December 31, 2015, the Company has determined that no allowance is required. 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 determined no impairment adjustment was necessary for the periods presented. 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 Companys 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 Companys 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. GE Trademark Licensing Agreement The Company entered into a Trademark License Agreement with General Electric on June, 2011 (the License Agreement) allowing the Company to utilize the GE trademark on products which meet the stringent manufacturing and quality requirements of General Electric (the GE Trademark License). As described further in Note 5 to these financial statements, the Company and General Electric amended the License Agreement in August 2014. As a result of that amendment, the Company is required to pay a minimum trademark licensing fee (the Royalty Obligation) to General Electric of $12,000,000. The repayment schedule is based on a percent of sales, with any unpaid balance due in November 2018. Under SFAS 142 Accounting for Certain Intangible Assets the Company has recorded the value of the Licensing Agreement and will amortize it over the life of the License Agreement, which is 60 months. 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 Companys 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 Companys 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 8. 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 features. 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 Companys most recent private placement memorandum (based on sales to third parties), 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 entitys 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 Companys 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 Companys most recent private placement memorandum, 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 holders expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holders 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 entitys 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 Companys 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 GE branded fans and lighting fixtures to large retailers through retail and on-line sales. 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 Companys 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 nine-months ended December 31, 2015 and 2014, 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 periods presented. The Company has the following common stock equivalents at December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Convertible Debt (Exercise price - $0.25/share) 18,056,932 18,056,932 Stock Warrants (Exercise price - $0.001 - $0.375/share) 9,062,234 9,728,984 Stock Options (Exercise price - $0.375/share) 200,000 200,000 Unvested Restricted Stock- Chief Executive Officer 750,000 Total 27,319,166 28,735,916 Income Tax Provision The financial statements reflect the Companys transactions without adjustment, if any, required for income tax purposes. 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 due to the companys tax designation as an LLC during that period. 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 managements 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 Companys tax returns are subject to examination by the federal and state tax authorities. 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, 2014, 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 82510 |
3. Furniture and Equipment
3. Furniture and Equipment | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
3. Furniture and Equipment | Note 3 Furniture and Equipment Property and equipment consisted of the following at December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Office Equipment $ 136,611 $ 120,759 Furniture and Fixtures 30,561 29,071 Total 167,172 149,830 Less: Accumulated Depreciation (39,651 ) (17,221 ) Property and Equipment - net $ 127,521 $ 132,609 |
4. Intangible Assets
4. Intangible Assets | 12 Months Ended |
Dec. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
4. Intangible Assets | Note 4 Intangible Assets Intangible assets (patents) consisted of the following at December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Patents $ 103,792 $ 61,690 Less: Impairment Charges Less: Accumulated Amortization (20,618 ) (15,271 ) Patents - net $ 83,174 $ 46,419 At December 31, 2015, future amortization of intangible assets was as follows: Year Ending December 31 2016 $ 6,889 2017 6,919 2018 6,919 2019 6,919 2020 6,938 2021 and Thereafter 48,590 $ 83,174 Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments and other factors. |
5. GE Trademark License
5. GE Trademark License | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
5. GE Trademark License | Note 5 GE Trademark License Agreement The Company entered into an amended License Agreement with General Electric regarding the trademarking of its products. The License Agreement is amortized through its expiration in November 2018. December 31, 2015 December 31, 2014 GE Trademark License $ 12,000,000 $ 12,000,000 Less: Impairment Charges Less: Accumulated Amortization (4,876,254) (2,434,783) Patents net $ 7,123,746 $ 9,565,217 At December 31, 2015, future amortization of intangible assets is as follows for the remaining: Year Ending December 31 2016 $ 2,448,161 2017 2,441,472 2018 2,234,113 $ 7,123,746 |
6. Note Payable to Bank
6. Note Payable to Bank | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
6. Note Payable to Bank | Note 6 Note Payable to Bank At December 31, 2015 and December 31, 2014 the Company had a note payable to a bank in the amount of $301,744 and $405,095, respectively. The note, dated May 2007, is due in monthly payments of $10,000 and carries interest at 4.75%. The note is secured by the assets of the Company and personal guarantees by a shareholder and an officer of the Company, and is due August 2018. Principal payments due under the terms of this note are as follows: Principal Due in Next 12 months 2015 $ 107,556 2016 113,225 2017 68,572 2018 12,391 $ 301,744 |
7. Convertible Debt - Net
7. Convertible Debt - Net | 12 Months Ended |
Dec. 31, 2015 | |
Convertible Debt - Net | |
Convertible Debt - Net | Note 7 Convertible Debt - Net The Company has recorded derivative liabilities associated with convertible debt instruments, as more fully discussed at Notes 8 and 13 (B). Third Party Related Party Totals Balance as of December 31, 2013 $ 361,245 $ 50,000 $ 411,245 Proceeds 2,270,100 2,270,100 Repayments Less: gross debt discount recorded (2,203,354 ) (46,105 ) (2,249,459 ) Add: Amortization of Debt Discount 1,484,004 23,104 1,507,108 Balance as of December 31, 2014 1,911,995 26,999 1,938,994 Add: Amortization of Debt Discount 2,077,955 23,001 2,100,956 Balance as of December 31, 2015 3,989,950 50,000 4,039,950 Less Current portion (3,989,950 ) (50,000 ) (4,039,950 ) Long-Term Convertible Debt $ $ $ In connection with the May 8, 2014 and June 25, 2014 closings of the Notes Offering (defined below), the Company issued 5,390,100 detachable warrants. The notes and warrants were treated as derivative liabilities. On November 26, 2013, May 8, 2014 and June 25, 2014 the Company completed closings in connection with its offering (the Notes Offering) of its 12% Secured Convertible Promissory Notes (the 12% Notes) in the aggregate principal amount of $4,240,100 and/or its 15% Secured Convertible Promissory Notes in the aggregate principal amount of $30,000 (the 15% Notes, and together with the 12% Notes, each a Note and collectively, the Notes), as applicable, with certain accredited investors (the Investors), as defined under Regulation D, Rule 501 of the Securities Act. The entire aggregate principal amount of the Notes of $4,270,100 was outstanding as of December 31, 2015, such amount being exclusive of securities converted into the Notes separate from the Notes Offering. Pursuant to the Notes Offering, the Company received $1,752,803, $1,400,000 and $800,500 in net proceeds on November 26, 2013, May 8, 2014 and June 25, 2014, respectively. In addition to the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor submitted the principal balance of such Investors Note, with the interest thereon becoming due and payable on the one year anniversary, and quarterly thereafter. Upon a default of the Notes, the interest rate will increase by 2% for each 30 day period until cured. The principal balance of each Note and all unpaid interest became or will become due and payable twenty-four (24) months after the date of issuance. The Notes may be prepaid with or without a penalty depending on the date of the prepayment. The principal and interest under the Notes are convertible into shares of the Companys common stock at $0.25 per share and are secured by a first priority lien (subject only to an existing note with Signature Bank of Georgia on the Companys intellectual property and all substitutes, replacements and proceeds of such intellectual property) pursuant to the terms of a Security Purchase Agreement, dated as of November 26, 2013, May 8, 2014 and June 25, 2014, as applicable, by and between the Company and each Investor. Pursuant to the Notes Offering, each Investor also received five (5) year common stock warrants to purchase the Companys common stock at $0.375 per share (each a Warrant and collectively, the Warrants). Investors of the 12% Notes received Warrants with 25% coverage based on a pre-determined valuation of the Company. Investors of the 15% Notes received Warrants with 15% coverage based on the pre-determined valuation of the Company. Investors with a principal investment amount equal to or greater than $250,000 received Warrants with a bonus 40% coverage (Bonus Coverage); however, if an Investor previously invested $250,000 or more in the Notes Offering, such Investor received Bonus Coverage if such Investor subsequently invested $100,000 or more in the Notes Offering. In addition to the terms customarily included in such instruments, the Warrants may be exercised by the Investors by providing to the Company a notice of exercise, payment and surrender of the Warrant. In connection with the Notes Offering, the Company entered into Registration Rights Agreements, each dated as of November 26, 2013, May 8, 2014 and June 25, 2014, and each by and between the Company and each of the Investors (collectively, 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. Because the Company was unable to file a registration statement pursuant to the terms of each Registration Rights Agreements dated as of November 26, 2013 or May 8, 2014, the Company was 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% percent of the aggregate gross proceeds paid by the Investors for the Notes. If the Company fails to pay any partial liquidated damages in full within five (5) days of the date payable, which is the Note maturity date, the Company shall pay interest thereon at a rate of 18% per annum until such amounts, plus all such interest thereon, are paid in full. In addition, because the Company was unable to have a registration statement declared effective pursuant to the terms of the Registration Rights Agreements dated as of November 26, 2013, the Company was in default under such Registration Rights Agreements (the Effectiveness Default Damages). Pursuant to the Registration Rights Agreement, the Effectiveness Default Damages mandated that the interest rate due under the Note corresponding to such Registration Rights Agreement will increase 2% above the then effective interest rate of such Note, and shall continue to increase by 2% every 30 days until a registration statement is declared effective. The Companys registration statement covering its common stock, into which the Notes may be converted, was first filed on August 1, 2014, and was declared effective by the SEC on October 22, 2014. The Filing Default Damages stopped accruing on the date such registration statement was filed, and the Effectiveness Default Damages stopped accruing on the date it was declared effective. On December 11, 2014, the Company sent a letter to the Investors holding Notes dated November 26, 2013 (the 2013 Investors) concerning the first interest payment that was scheduled to be paid pursuant to the Notes dated November 26, 2013 on the one year anniversary of the date that each 2013 Investor submitted payment for their Note (the First Interest Payments). The Company invited the 2013 Investors to convert the First Interest Payments into shares of the Companys common stock to further this purpose. The Company also asked each 2013 Investor to execute an Agreement and Waiver (the Agreement and Waiver), which granted the Company a grace period, deferring the Companys obligation to make payment of the First Interest Payment and interest that was due under the Note through November 26, 2014 (the Interest Due) until February 24, 2015 (the Extension), during which time such deferment would not be considered an Event of Default under the 2013 Investors Note. In return for granting the Extension, the Company offered to capitalize the Interest Due at a rate of 12% (the Additional Interest), which was convertible into shares of the Companys common stock at the conversion price of $0.25 per share as of February 24, 2014, unless the 2013 Investor requested to receive the Additional Interest in cash 15 days prior to the end of the Extension. On January 23, 2015, the Company sent a letter agreement to the Investors holding Notes dated November 26, 2013 and May 8, 2014, which constituted all Investors with Filing Default Damages or Effectiveness Default Damages due to them pursuant to the Registration Rights Agreements dated as of November 26, 2013 or May 8, 2014 (the Agreement to Convert). The Company invited the Investors, as applicable, to elect to convert the Interest Due and/or the Filing Default Damages and Effectiveness Default Damages into shares of the Companys common stock at a price of $0.25 per share, and asked each Investor, as applicable, to make such election by acknowledging and returning the Agreement to Convert to the Company. In connection with the Agreement and Waiver and Agreement to Convert, the Company issued 1,718,585 shares of its common stock representing $429,646 in Additional Interest, Interest Due, Filing Default Damages and Effectiveness Default Damages during the year ended December 31, 2015. The total accrued unpaid Additional Interest, Interest Due, Filing Default Damages and Effectiveness Default Damages as of December 31, 2015 amounted to $410,633. During 2015, five Investors requested that the Company withhold payments of interest due under their Notes and allow the interest to accumulate without penalty, so that such Investors could convert said interest upon maturity of their Note. In November 2015, the Company invited the 2013 Investors, with respect to outstanding principal and interest due under their respective Notes, to (i) receive payment in cash, (ii) convert their Notes into shares of the Companys common stock, or (iii) forbear an election for three months, or until February 26, 2016, pursuant to a forbearance agreement, during such time interest under their respective Notes would continue to accrue. The November 2013 Investors all elected to forbear making an election. (B) Terms of Debt The debt carries interest between 12% and 15%, and was or is due in November 2015 (as extended to May 2016 pursuant to certain forbearance agreements), May 2016 and June 2016. All Notes and Warrants issued in connection with the Notes Offering are convertible at $0.25 and $0.375/share, respectively, subject to the existence of a ratchet feature, which allows for a lower offering price if the Company offers shares to the public at a lower price. (C) Future Commitments At December 31, 2015, the Company has outstanding convertible debt of $3,989,950, which is payable within the next twelve months. |
8. Derivative Liabilities
8. Derivative Liabilities | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
8. Derivative Liabilities | Note 8 Derivative Liabilities 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: The fair value at the commitment and re-measurement dates for the Companys derivative liabilities were based upon the following management assumptions as December 31, 2015: December 31, 2015 12/31/2014 (Restated Fair value at the commitment date - convertible debt $ 4,892,234 $ 4,892,234 Fair value at the commitment date - warrants 677,214 677,214 Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability (404,382 ) (214,769 ) Extinguishment of Derivative Liability - Conversion of Interest to Shares (209,604 ) Fair value mark to market adjustment - stock options 108,548 (25,614 ) Fair value mark to market adjustment - convertible debt 18,172,030 (174,606 ) Fair value mark to market adjustment - warrants 432,770 (13,701 ) Totals $ 23,668,810 $ 5,140,758 Commitment Date Re-measurement Date Expected dividends 0% 0% Expected volatility 150% 150% Expected term 2 - 5 years 0.00 3.48 years Risk free interest rate 0.29% - 1.68% 0.49% - 1.76% |
9. Debt Discount
9. Debt Discount | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
9. Debt Discount | Note 9 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 $0 and $568,485 for years ended December 31, 2015 and 2014, respectively. Accumulated amortization of derivative discount amounted to $4,153,611 as of December 31, 2015 and $2,575,239 for the year ended December 31, 2014. The Company recorded a change in the value of embedded derivative liabilities income/(expense) of ($19,416,295) and $213,923 for the years ended December 31, 2015 and 2014, respectively. |
10. Debt Issue Costs
10. Debt Issue Costs | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
10. Debt Issue Costs | Note 10 Debt Issue Costs Balance- December 31, 2013 $ 247,197 Additions 69,600 Amortization (154,851 ) Balance- December 31, 2014 161,946 Amortization (147,341 ) Balance- December 31, 2015 $ 14,605 The Company recorded amortization expense of $147,341 and $103,388 for the years ended December 31, 2015 and December 31, 2014, respectively. Accumulated amortization of debt issuance costs amounted to $302,192 and $154,851 at December 31, 2015 and December 31, 2014 respectively. Remaining in the following years ended December 31, 2016 $ 14,605 |
11. GE Royalty Obligation
11. GE Royalty Obligation | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
11. GE Royalty Obligation | Note 11 GE Royalty Obligation In 2011, the Company executed a Trademark Licensing Agreement with General Electric, which allows the Company the right to market certain ceiling light and fan fixtures displaying the GE brand. The License Agreement imposes certain manufacturing and quality control conditions that the Company must maintain in order to continue to use the GE brand. The License Agreement is non-transferable and cannot be sub-licensed. Various termination clauses are applicable, however, none were applicable as of December 31, 2015 and December 31, 2014. In August 2014, the Company entered into a second amendment to the License Agreement pertaining to its royalty obligations. Under the terms of the amendment, the Company agreed to pay a total of $12,000,000 by November 2018 for the rights assigned in the original contract. In case the Company does not pay GE a total of at least $12,000,000 in cumulative royalties over the term of the License Agreement, the difference between $12,000,000 and the amount of royalties actually paid to GE is owed in December 2018. Payments are due quarterly based upon the prior quarters sales. The Company made payments of $204,146 and $0, for the years ended December 31, 2015 and December 31, 2014, respectively. The License Agreement obligation will be paid from sales of GE branded product subject to the following repayment schedule: 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 % The Company has limited operating history and does not have the ability to estimate the sales of GE branded product, the liability is classified as long-term. As sales are recognized, the Company will estimate the portion it expects to pay in the current year and classify as current. |
12. Income Taxes
12. Income Taxes | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
12. Income Taxes | Note 12 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, 2015, the Company has a net operating loss carry-forward of approximately $11,280,000 available to offset future taxable income expiring through 2035. Utilization of future net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code. In assessing the realization 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, 2015. The effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2015 and December 31, 2014 are approximately as follows: December 31, 2015 12/31/2014 (Restated) Net operating loss carryforward $ 8,718,000 $ 4,060,000 Gross Deferred Tax Assets (2,906,000 ) (1,354,000 ) Less Valuation Allowance 2,906,000 1,354,000 Total Deferred Tax Assets Net $ $ There was no income tax expense for the years ended December 31, 2015 and 2014 due to the Companys net losses The Companys tax expense differs from the expected tax expense for the years ended December 31, 2015 and December 31, 2014 (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: December 31, 2015 12/31/2014 Restated Computed expected tax expense (benefit) Federal $ (9,115,000 ) $ (2,480,000 ) Computed expected tax expense (benefit) - State (1,616,000 ) (438,000 ) Derivative expense 7,370,000 135,000 Share based payments 66,000 77,300 Amortization of patent 2,000 1,000 Amortization of debt issue costs 56,000 54,000 Amortization of debt discount 798,000 572,000 Amortization of GE Trademark License 927,000 924,000 Change in valuation allowance 1,552,000 1,155,700 $ $ |
13. Stockholders Deficit
13. Stockholders Deficit | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
13. Stockholders Deficit | Note 13 Stockholders Deficit (A) Common Stock For the years ended December 31, 2015 and December, 31 2014, the Company issued the following common stock: Transaction Type Quantity Valuation Range of Value per Share 2014 Equity Transactions Common stock issued in exercise of warrants (1) 1,000,000 $ 1,000 $ 0.001 Common stock issued per mutual release and waiver (2) 250,000 62,500 0.25 December 31, 2014 1,250,000 63,500 $ .001-0.25 2015 Equity Transactions Common stock issued per Waiver and Conversion Agreement (3) 1,718,585 429,646 0.25 Common stock issued per Employment Agreement of CEO - 500,000 to be issued (4) 750,000 173,688 0.25 Common stock issued per Stock Rights Offering (5) 3,782,666 2,210,032 0.60 Common stock issued per Stock Rights Offering - to be issued (6) 500,000 500,000 1.00 December 31 2015 6,751,251 $ 3,313,336 $ 0.25-1.00 The following is a more detailed description of the Companys stock issuance 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 Companys former Chief Executive Officer received 1,250,000 restricted unvested shares in association with an employment contract. These restricted shares were to vest as follows: 500,000 on November 15, 2013 with the remaining 750,000 shares to vest evenly (250,000 shares each vesting period) on December 31, 2014, 2015 and 2016. The shares were valued based on a third party cash offering of convertible debt containing an exercise price of $0.25/share. In November 2014, the agreement was terminated and the Company entered into a new Agreement and Mutual Release with that former CEO. As of that date (November 2014), 500,000 of the aforementioned 1,250,000 shares were fully vested. In accordance with the new Agreement and Mutual Release, the Company issued 250,000 shares that vested on December 31, 2014 and the executive retained the 500,000 shares of the previous granted (fully vested) shares. The remaining 500,000 unvested shares were forfeited. (3) Agreement and Waiver and Agreement to Convert The Company issued 1,718,585 shares at $0.25 per share, representing $429,646 in penalties and interest, in connection with the Agreement and Waiver and the Agreement to Convert. For a complete description of the Agreement and Waiver and the Agreement to Convert, see Note 7 above. (4) Shares Issued to Chief Executive Officer In November 2014, the Company entered into an Employment Agreement with its current Chief Executive Officer, which provided for stock-based compensation equal to 750,000 of restricted shares, of which 250,000 shares vested in May 2015 and 500,000 shares vested in December 2015. These shares were issued at $0.25 per share and were issued subsequent to December 31, 2015 (5) Shares Issued in Connection with Stock Offering In May 2015, the Company offered to existing shareholders a maximum of 6,666,667 shares of common stock at an issuance cost of $0.60 per share for a total of $4,000,000 (the May Stock Offering). The May Stock Offering concluded on November 15, 2015 the Company issued 3,782,666 shares in connection with three closings. (6) Shares Issued in Connection with Stock Offering In November 2015, the Company offered to new and existing shareholders a maximum of 2,000,000 shares of common stock at an issuance cost of $1 per share for a total of $2,000,000 (the November Stock Offering). Through December 31, 2015, the Company will issue 500,000 shares in connection with the first closing of the November Stock Offering. (B) Additional Paid in Capital and Other Equity Transactions The following transactions occurred during the period: (1) Derivative Liability Reclassification of derivative liability associated with warrants of $0 and $214,769 for the years ended December 31, 2015 and December 31, 2014, respectively. (2) Services Rendered Related Parties Common stock issued for services related party of $76,312 for the year ended December 31, 2014. (C) Stock Options The following is a summary of the Companys stock option activity: Weighted Average Weighted Average Remaining Contractual Life Aggregate Intrinsic Options Exercise Price (In Years) Value Balance - December 31, 2013 - outstanding 300,000 0.375 4.67 Exercised Granted Forfeited/Cancelled (100,000 ) Balance- December 31, 2014 200,000 0.375 3.67 Exercised Granted Forfeited/Cancelled Balance- December 31, 2015 200,000 0.375 2.67 Of the total options granted, 100,000 were cancelled in February 2014 upon the resignation of a Board member. (D) Stock Warrants All warrants issued during the year ended December 31, 2014 were accounted for as derivative liabilities, as the warrants contained a ratchet feature. See Note 8. No warrants were issued during the year ended December 31, 2015. As part of the Notes Offering, during 2014, the Company issued 5,390,100 warrants with an exercise price of $0.375 per share. The warrants expire 5 years from issuance on various dates during 2019. Of the total warrants granted, 4,740,100 were granted to third parties, while 650,000 were granted to related parties, consisting of the Companys former Chief Executive Officer. The Black-Scholes assumptions used in the computation of derivative expense for year ended December 31, 2015 is as follows: Exercise price $ 0.375 Expected dividends 0 % Expected volatility 150 % Risk free interest rate 1.76 % Expected term 5 years The following is a summary of the Companys warrant activity: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years) Balance, December 31, 2013 4,338,884 0.242 4.9 Granted 5,390,100 0.375 5 Exercised Cancelled/Forfeited Balance, December 31, 2014 9,728,984 0.375 4.4 Exercised Cancelled/Forfeited Balance, December 31, 2014 9,728,984 0.375 3.9 Exercised Cancelled/Forfeited Balance, December 31, 2015 9,728,984 0.375 3.2 During 2014, the Company received $1,000 in connection with the exercise of a warrant to purchase 1,000,000 shares of the Companys common stock. The warrants had been assigned to the exercising investor from another investor, who originally held warrants exercisable into 2,400,000 shares of the Companys common stock, and had exercised the warrants into 1,400,000 shares of the Companys common stock during 2013. There is was no additional compensation expense recorded on this transaction. D) 2015 Stock Incentive Plan On April 27, 2015, the Board approved the Companys 2015 Stock Incentive Plan (the Incentive Plan). Under the Incentive Plan, the Board has the sole authority to implement, interpret, and/or administer the Incentive Plan unless the Board delegates (i) all or any portion of its authority to implement, interpret, and/or administer the Incentive Plan to a committee of the Board, or (ii) the authority to grant and administer awards under the Incentive Plan to an officer of the Company. The Incentive Plan relates to the issuance of up to 5,000,000 shares of the Companys common stock, subject to adjustment, and shall be effective for ten (10) years, unless earlier terminated. Certain options to be granted to employees under the Incentive Plan are intended to qualify as Incentive Stock Options (ISOs) pursuant to Section 422 of the Internal Revenue Code of 1986, as amended, while other options granted under the Incentive Plan will be nonqualified options not intended to qualify as Incentive Stock Options ISOs (Nonqualified Options), either or both as provided in the agreements evidencing the options described. The Incentive Plan further provides that awards granted under the Incentive Plan cannot be exercised until a majority of the Companys shareholders have approved the Incentive Plan. As of March 25, 2016, a majority of the Companys shareholders had not yet approved the Incentive Plan, On November 15, 2015, the Board authorized the Company to grant certain securities under the Incentive Plan, in the aggregate amount of up to 3,810,000 options to purchase shares of our common stock, vesting in part immediately and entirely over the next two years, and up to 75,000 shares of our common stock, vesting immediately. As of December 31, 2015, the Company had not yet entered into award agreements with the grantees, or issued shares of common stock or options to purchase shares of common stock under the Incentive Plan. The full terms of the Companys Incentive Plan are described in Part II, Item 5 of the Companys Annual Report on Form 10-K for the period ended December 31, 2015. |
14. Commitments
14. Commitments | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
14. Commitments | Note 14 Commitments (A) 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. In October, 2014, the Company executed a 53 month lease for a new corporate headquarters with a base rent of $97,266 escalating annually through 2019. The Company paid a security deposit of $1,914. In October, 2014, the Company entered into a sublease agreement to sublease its previous office space through March 2017. In connection with the sublease, the Company collected $34,981as a security deposit. The minimum rent obligations are approximately as follows: Minimum Sublease Net Year Obligation Rentals Obligation 2016 109,720 86,688 23,032 2017 46,568 22,263 24,305 2018 25,154 25,154 2019 8,615 8,615 Total $ 190,057 $ 108,951 $ 81,106 (B) Employment Agreement Chief Executive Officer In November 2014, the Company entered into an employment agreement with its new Chief Executive Officer. In addition to salary, the agreement provided for the issuance of 750,000 restricted shares to him, vesting as follows: 250,000 after the first 6 months of employment and 500,000 additional shares at December 31, 2015. Under terms of the agreement the executive would receive additional compensation in the form of stock options to purchase shares of Company stock equal to one half of one percent (0.5%) of quarterly net income. The strike price of the options will be established at the time of the grant. The options will vest in twelve months and expire after sixty months. In addition to the stock options compensation, the executive will receive cash compensation equal to one half of one percent (0.5%) of annual sales up to $20 million and one quarter of one percent (0.25%) for annual sales $20 million and 3% of annual net income. For the year ended December 31, 2015, the Company paid $14,376.19 under this agreement in cash compensation, and no options have been issued. In November 2014, the agreement with the former CEO was terminated by mutual agreement upon the Companys execution of an Agreement and Mutual Release and Waiver with the former CEO. The agreement allowed for immediate vesting of 750,000 shares of the original 1,250,000 unvested shares previously granted to the former CEO. In addition, the Company agreed to pay the executive one half of one percent (0.5%) of sales associated with one selected customer, occurring for up to 36 months. For the year ended December 31, 2015, the Company paid $3,324.52 under this agreement in cash compensation. (C) Consulting Agreement The Company has a 3 year consulting agreement with a director which expires in November 2016, and carries an annual payment of $150,000 cash, stock or 5 year options equal to one half of one percent (0.5%) of the Companys annual net sales. For the year ended December 31, 2015, the Company paid $14,376.19 under this agreement in cash compensation, and no stock has been issued. |
15. Going Concern
15. Going Concern | 12 Months Ended |
Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
15. Going Concern | Note 15 Going Concern As reflected in the accompanying financial statements, the Company had a net loss of $(26,890,210) and net cash used in operations of $(3,767,470) for the year ended December 31, 2015; and a working capital deficit and stockholders deficit of $(32,713,965) at December 31, 2015. These factors raise substantial doubt about the Companys ability to continue as a going concern. The ability of the Company to continue its operations is dependent on managements 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 Companys 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 Companys currently available cash along with anticipated revenues may not be sufficient 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. |
16. Restatement of Financial St
16. Restatement of Financial Statements | 12 Months Ended |
Dec. 31, 2015 | |
Restatement Of Financial Statements | |
16. Restatement of financial statements | Note 16 Restatement of Financial Statements In 2015, the Company identified certain errors in calculating derivative liabilities and common stock as of December 31, 2014. The Company determined that it had not properly recorded the derivative liability associated with the accrued interest and penalties included with the Notes issued in the November 26, 2013, May 8, 2014 and June 25, 2014 closings of the Notes Offering. As a result, the penalty and interest will be calculated and accounted for as a derivative liability. Accordingly, derivative liabilities as of December 31, 2014 and changes in derivative liabilities for the year of 2014 were understated in the amount of $488,996. Additionally, the Company restated the shares issued at zero par to common stock and common stock to be issued by adjusting additional paid in capital, where these amounts were posted in 2014, resulting in a change to the additional paid in capital of $76,312; common stock of $62,500 and common stock to be issued of $13,812. The following table sets forth all the accounts in the original amounts and restated amounts, respectively. As of December 31, 2014 Original Adjustment Restated Derivative liabilities $ 4,651,762 488,996 $ 5,140,758 Common Stock $ 127,400 62,500 $ 189,900 Common Stock to be issued $ 0 13,812 $ 13,812 Additional paid in capital $ 6,359,127 (76,312 ) $ 6,282,814 Accumulated deficit $ (15,324,264 ) (488,996 ) $ (15,813, |
17. Subsequent Events
17. Subsequent Events | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events [Abstract] | |
17. Subsequent Events | Note 17 Subsequent Events In connection with the Agreement and Waiver and Agreement to Convert, the Company issued an additional 624,606 shares of its common stock as payment for Additional Interest, Interest Due, Filing Default Damages and Effectiveness Default Damages, representing payment to Investors of $156,152. In February 2016, the Company invited the November 2013 Investors to extend their forbearance period to make an election to convert or redeem their Notes for an additional three months, or until March 26, 2016, under the same terms as the November 2015 forbearance agreements. All but three of the November 2013 Investors elected to forbear an election for the additional period. In February 2016, the Company issued 165,486 shares of its common stock upon full conversion of a Note by a 2013 Investor. In total, $229,998 was paid to Investors in February 2016 in cash or shares of common stock. As of March 25, 2016, the Company has entered into Option Award Agreements with two grantees, pursuant to awards granted on November 15, 2015 under the Incentive Plan, consisting of up to 650,000 options to purchase shares of the Companys common stock, of which options to purchase up to 450,000 shares of common stock vest immediately, and options to purchase up to 200,000 shares of common stock will vest on November 15, 2016. Also as of March 25, 2016, the Company has entered into Stock Award Agreements with two grantees to issued 75,000 shares of its common stock, vesting immediately. The exercise of such awards is contingent upon attainment of majority shareholder approval of the Incentive Plan. F-?? |
2. Summary of Significant Acc24
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
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 | 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 Companys 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. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Safety Quick Lighting & Fans Corp and the 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 Companys membership units in the Subsidiary, the Companys ownership percentage in the Subsidiary decreased from 98.8% to 94.35%. The Company then reacquired these membership units in June 2013, increasing the ownership percentage from 94.35% back to 98.8%. During 2014, there was no activity in the Subsidiary. Its pro rata share of the Companys 2014 and 2015 loss from operations is recognized in the financial statements. |
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 $450,868 and $1,241,487 in money market as of December 31, 2015 and December 31, 2014, respectively. |
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. The Companys net balance of accounts receivable for three-months ended December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Accounts Receivable $ 234,309 $ Allowance for Doubtful Accounts Net Accounts Receivable $ 234,309 $ The Company had no sales in 2014. All amounts are deemed collectible at December 31, 2015, and the Company has not incurred any bad debt expense. |
Inventory | Inventory Inventory consists 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 periodically reviews historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. At December 31, 2015 and December 31, 2014, the Company had $223,666 and $0 in inventory, respectively. The Company maintains an allowance based on specific inventory items which have shown no activity over a 24-month period. The Company tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. As of December 31, 2015, the Company has determined that no allowance is required. |
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 determined no impairment adjustment was necessary for the periods presented. |
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 Companys 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 Companys 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. |
GE Trademark Licensing Agreement | G E Trademark Licensing Agreement The Company entered into a Trademark License Agreement with General Electric on June, 2011 (the License Agreement) allowing the Company to utilize the GE trademark on products which meet the stringent manufacturing and quality requirements of General Electric (the GE Trademark License). As described further in Note 5 to these financial statements, the Company and General Electric amended the License Agreement in August 2014. As a result of that amendment, the Company is required to pay a minimum trademark licensing fee (the Royalty Obligation) to General Electric of $12,000,000. The repayment schedule is based on a percent of sales, with any unpaid balance due in November 2018. Under SFAS 142 Accounting for Certain Intangible Assets the Company has recorded the value of the Licensing Agreement and will amortize it over the life of the License Agreement, which is 60 months. |
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 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 Companys 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 Companys 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 8. |
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 features. |
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 Companys most recent private placement memorandum (based on sales to third parties), 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 entitys 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 Companys 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 Companys most recent private placement memorandum, 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 holders expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holders 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 entitys 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 Companys 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 The Company derives revenues from the sale of GE branded fans and lighting fixtures to large retailers through retail and on-line sales. 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 Companys 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 nine-months ended December 31, 2015 and 2014, 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 periods presented. The Company has the following common stock equivalents at December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Convertible Debt (Exercise price - $0.25/share) 18,056,932 18,056,932 Stock Warrants (Exercise price - $0.001 - $0.375/share) 9,062,234 9,728,984 Stock Options (Exercise price - $0.375/share) 200,000 200,000 Unvested Restricted Stock- Chief Executive Officer 750,000 Total 27,319,166 28,735,916 |
Income Tax Provision | Income Tax Provision The financial statements reflect the Companys transactions without adjustment, if any, required for income tax purposes. 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 due to the companys tax designation as an LLC during that period. 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 managements 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 Companys tax returns are subject to examination by the federal and state tax authorities. |
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, 2014, 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 8251015, 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 un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted 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 Companys 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 Companys 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 September 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, InterestImputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the Companys financial position, results of operations or cash flows. |
2. Summary of Significant Acc25
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Accounts Receivable and Allowance for Doubtful Accounts | December 31, 2015 December 31, 2014 Accounts Receivable $ 234,309 $ Allowance for Doubtful Accounts Net Accounts Receivable $ 234,309 $ |
Earnings (Loss) Per Share | December 31, 2015 December 31, 2014 Convertible Debt (Exercise price - $0.25/share) 18,056,932 18,056,932 Stock Warrants (Exercise price - $0.001 - $0.375/share) 9,062,234 9,728,984 Stock Options (Exercise price - $0.375/share) 200,000 200,000 Unvested Restricted Stock- Chief Executive Officer 750,000 Total 27,319,166 28,735,916 |
3. Furniture and Equipment (Tab
3. Furniture and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | |
Furniture and Equipment | December 31, 2015 December 31, 2014 Office Equipment $ 136,611 $ 120,759 Furniture and Fixtures 30,561 29,071 Total 167,172 149,830 Less: Accumulated Depreciation (39,651 ) (17,221 ) Property and Equipment - net $ 127,521 $ 132,609 |
4. Intangible Assets (Tables)
4. Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | December 31, 2015 December 31, 2014 Patents $ 103,792 $ 61,690 Less: Impairment Charges Less: Accumulated Amortization (20,618 ) (15,271 ) Patents - net $ 83,174 $ 46,419 |
Intangible Assets - Future Amortization | Year Ending December 31 2016 $ 6,889 2017 6,919 2018 6,919 2019 6,919 2020 6,938 2021 and Thereafter 48,590 $ 83,174 |
5. GE Trademark License (Tables
5. GE Trademark License (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
GE Trademark License | December 31, 2015 December 31, 2014 GE Trademark License $ 12,000,000 $ 12,000,000 Less: Impairment Charges Less: Accumulated Amortization (4,876,254) (2,434,783) Patents net $ 7,123,746 $ 9,565,217 |
GE Trademark License - Future Amortization | Year Ending December 31 2016 $ 2,448,161 2017 2,441,472 2018 2,234,113 $ 7,123,746 |
6. Note Payable to Bank (Tables
6. Note Payable to Bank (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Note Payable To Bank Tables | |
Future Commitments | Principal Due in Next 12 months 2015 $ 107,556 2016 113,225 2017 68,572 2018 12,391 $ 301,744 |
7. Convertible Debt - Net (Tabl
7. Convertible Debt - Net (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
Convertible Debt - Net | Third Party Related Party Totals Balance as of December 31, 2013 $ 361,245 $ 50,000 $ 411,245 Proceeds 2,270,100 2,270,100 Repayments Less: gross debt discount recorded (2,203,354 ) (46,105 ) (2,249,459 ) Add: Amortization of Debt Discount 1,484,004 23,104 1,507,108 Balance as of December 31, 2014 1,911,995 26,999 1,938,994 Add: Amortization of Debt Discount 2,077,955 23,001 2,100,956 Balance as of December 31, 2015 3,989,950 50,000 4,039,950 Less Current portion (3,989,950 ) (50,000 ) (4,039,950 ) Long-Term Convertible Debt $ $ $ |
8. Derivative Liabilities (Tabl
8. Derivative Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Derivative Liabilities - Fair Value | December 31, 2015 12/31/2014 (Restated Fair value at the commitment date - convertible debt $ 4,892,234 $ 4,892,234 Fair value at the commitment date - warrants 677,214 677,214 Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability (404,382 ) (214,769 ) Extinguishment of Derivative Liability - Conversion of Interest to Shares (209,604 ) Fair value mark to market adjustment - stock options 108,548 (25,614 ) Fair value mark to market adjustment - convertible debt 18,172,030 (174,606 ) Fair value mark to market adjustment - warrants 432,770 (13,701 ) Totals $ 23,668,810 $ 5,140,758 |
Derivative Liabilities - Assumptions Used | Commitment Date Re-measurement Date Expected dividends 0% 0% Expected volatility 150% 150% Expected term 2 - 5 years 0.00 3.48 years Risk free interest rate 0.29% - 1.68% 0.49% - 1.76% |
10. Debt Issue Costs (Tables)
10. Debt Issue Costs (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Debt Issue Costs | Balance- December 31, 2013 $ 247,197 Additions 69,600 Amortization (154,851 ) Balance- December 31, 2014 161,946 Amortization (147,341 ) Balance- December 31, 2015 $ 14,605 |
11. GE Royalty Obligation (Tabl
11. GE Royalty Obligation (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
GE Royalty Obligation | 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 % |
12. Income Taxes (Tables)
12. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Deferred Tax Assets | and December 31, 2014 are approximately as follows: December 31, 2015 12/31/2014 (Restated) Net operating loss carryforward $ 8,718,000 $ 4,060,000 Gross Deferred Tax Assets (2,906,000 ) (1,354,000 ) Less Valuation Allowance 2,906,000 1,354,000 Total Deferred Tax Assets Net $ $ |
Income Tax Rate Reconciliation | December 31, 2015 12/31/2014 Restated Computed expected tax expense (benefit) Federal $ (9,115,000 ) $ (2,480,000 ) Computed expected tax expense (benefit) - State (1,616,000 ) (438,000 ) Derivative expense 7,370,000 135,000 Share based payments 66,000 77,300 Amortization of patent 2,000 1,000 Amortization of debt issue costs 56,000 54,000 Amortization of debt discount 798,000 572,000 Amortization of GE Trademark License 927,000 924,000 Change in valuation allowance 1,552,000 1,155,700 $ $ |
13. Stockholders Deficit (Table
13. Stockholders Deficit (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
Common Stock | Transaction Type Quantity Valuation Range of Value per Share 2014 Equity Transactions Common stock issued in exercise of warrants (1) 1,000,000 $ 1,000 $ 0.001 Common stock issued per mutual release and waiver (2) 250,000 62,500 0.25 December 31, 2014 1,250,000 63,500 $ .001-0.25 2015 Equity Transactions Common stock issued per Waiver and Conversion Agreement (3) 1,718,585 429,646 0.25 Common stock issued per Employment Agreement of CEO - 500,000 to be issued (4) 750,000 173,688 0.25 Common stock issued per Stock Rights Offering (5) 3,782,666 2,210,032 0.60 Common stock issued per Stock Rights Offering - to be issued (6) 500,000 500,000 1.00 December 31 2015 6,751,251 $ 3,313,336 $ 0.25-1.00 |
Stock Options - Assumptions | Exercise price $ 0.375 Expected dividends 0 % Expected volatility 150 % Risk free interest rate 1.76 % Expected term 5 years |
Stock Option Activity | Weighted Average Weighted Average Remaining Contractual Life Aggregate Intrinsic Options Exercise Price (In Years) Value Balance - December 31, 2013 - outstanding 300,000 0.375 4.67 Exercised Granted Forfeited/Cancelled (100,000 ) Balance- December 31, 2014 200,000 0.375 3.67 Exercised Granted Forfeited/Cancelled Balance- December 31, 2015 200,000 0.375 2.67 |
Summary of Warrant Activity | Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years) Balance, December 31, 2013 4,338,884 0.242 4.9 Granted 5,390,100 0.375 5 Exercised Cancelled/Forfeited Balance, December 31, 2014 9,728,984 0.375 4.4 Exercised Cancelled/Forfeited Balance, December 31, 2014 9,728,984 0.375 3.9 Exercised Cancelled/Forfeited Balance, December 31, 2015 9,728,984 0.375 3.2 |
14. Commitments (Tables)
14. Commitments (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum Rent Obligations | Minimum Sublease Net Year Obligation Rentals Obligation 2016 109,720 86,688 23,032 2017 46,568 22,263 24,305 2018 25,154 25,154 2019 8,615 8,615 Total $ 190,057 $ 108,951 $ 81,106 |
16. Restatement of Financial 37
16. Restatement of Financial Statements (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Restatement Of Financial Statements Tables | |
Restatement of financial statements | As of December 31, 2014 Original Adjustment Restated Derivative liabilities $ 4,651,762 488,996 $ 5,140,758 Common Stock $ 127,400 62,500 $ 189,900 Common Stock to be issued $ 0 13,812 $ 13,812 Additional paid in capital $ 6,359,127 (76,312 ) $ 6,282,814 Accumulated deficit $ (15,324,264 ) (488,996 ) $ (15,813, |
1. Organization and Nature of38
1. Organization and Nature of Operations (Details Narrative) | Dec. 31, 2015 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Ownership Percentage of Subsidiary | 98.80% |
2. Summary of Significant Acc39
2. Summary of Significant Accounting Policies (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Accounting Policies [Abstract] | ||
Accounts Receivable | $ 234,309 | $ 0 |
Allowance for Doubtful Accounts | 0 | 0 |
Net Accounts Receivable | $ 234,309 | $ 0 |
2. Summary of Significant Acc40
2. Summary of Significant Accounting Policies (Details 1) - shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Common Stock Equivalents | 27,319,166 | 28,735,916 |
Convertible Debt | ||
Common Stock Equivalents | 18,056,932 | 18,056,932 |
Stock Warrant | ||
Common Stock Equivalents | 9,062,234 | 9,728,984 |
Stock Options | ||
Common Stock Equivalents | 200,000 | 200,000 |
Unvested Restricted Stock- Chief Executive Officer | ||
Common Stock Equivalents | 0 | 750,000 |
3. Furniture and Equipment (Det
3. Furniture and Equipment (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Property and Equipment - gross | $ 167,172 | $ 149,830 |
Less: Accumulated Depreciation | (39,651) | (17,221) |
Property and Equipment - net | 127,521 | 132,609 |
Office Equipment | ||
Property and Equipment - gross | 136,611 | 120,759 |
Furniture and Fixtures | ||
Property and Equipment - gross | $ 29,071 | $ 30,561 |
4. Intangible Assets (Details)
4. Intangible Assets (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Patents | $ 103,792 | $ 61,690 |
Less: Impairment Charges | 0 | 0 |
Less: Accumulated Amortization | (20,618) | (15,271) |
Patents - net | $ 83,174 | $ 46,419 |
4. Intangible Assets (Details 1
4. Intangible Assets (Details 1) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2,016 | $ 6,889 | |
2,017 | 6,919 | |
2,018 | 6,919 | |
2,019 | 6,919 | |
2,020 | 6,938 | |
2021 and Thereafter | 48,590 | |
Total | $ 83,174 | $ 46,419 |
5. GE Trademark License (Detail
5. GE Trademark License (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
GE Trademark License | $ 103,792 | $ 61,690 |
Less: Impairment Charges | 0 | 0 |
Less: Accumulated Amortization | (20,618) | (15,271) |
Patents - net | 83,174 | 46,419 |
GE Trademark | ||
GE Trademark License | 12,000,000 | 12,000,000 |
Less: Impairment Charges | 0 | 0 |
Less: Accumulated Amortization | (4,876,254) | (2,434,783) |
Patents - net | $ 7,123,746 | $ 9,565,217 |
5. GE Trademark License (Deta45
5. GE Trademark License (Details 1) | Dec. 31, 2015USD ($) |
2,016 | $ 6,889 |
2,017 | 6,919 |
2,018 | 6,919 |
2019 and Thereafter | 48,590 |
GE Trademark | |
2,016 | 2,448,161 |
2,017 | 2,441,472 |
2,018 | 2,234,113 |
2019 and Thereafter | $ 7,123,746 |
6. Notes Payable to Bank (Detai
6. Notes Payable to Bank (Details) | Dec. 31, 2015USD ($) |
Debt Disclosure [Abstract] | |
2,015 | $ 107,556 |
2,016 | 113,225 |
2,017 | 68,572 |
2,018 | $ 12,391 |
7. Convertible Debt - Net (Deta
7. Convertible Debt - Net (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Beginning Balance, Convertible Debt | $ 1,938,994 | $ 411,245 |
Proceeds | $ 0 | $ 2,270,100 |
Repayments | ||
Less: gross debt discount recorded | $ (2,249,459) | |
Add: amortization of debt discount | $ 2,100,956 | 1,507,108 |
Ending Balance, Convertible Debt | 4,039,950 | $ 1,938,994 |
Less Current portion | (4,039,950) | |
Third Party | ||
Beginning Balance, Convertible Debt | $ 1,911,995 | $ 361,245 |
Proceeds | $ 2,270,100 | |
Repayments | ||
Less: gross debt discount recorded | $ (2,203,354) | |
Add: amortization of debt discount | $ 2,077,955 | 1,484,004 |
Ending Balance, Convertible Debt | 3,989,950 | $ 1,911,995 |
Less Current portion | (3,989,950) | |
Related Party | ||
Beginning Balance, Convertible Debt | 26,999 | $ 50,000 |
Proceeds | ||
Repayments | ||
Less: gross debt discount recorded | $ (46,105) | |
Add: amortization of debt discount | 23,001 | 23,104 |
Ending Balance, Convertible Debt | 50,000 | $ 26,999 |
Less Current portion | $ (50,000) |
8. Derivative Liabilities (Deta
8. Derivative Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Fair value at the commitment date - convertible debt | $ 4,892,234 | $ 4,892,234 |
Fair value at the commitment date - warrants | 677,214 | 677,214 |
Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability | (404,382) | (214,769) |
Extinguishment of Derivative Liability-Conversion of Interest to Shares | (209,604) | 0 |
Fair value mark to market adjustment - stock options | 108,548 | (25,614) |
Fair value mark to market adjustment - convertible debt | 18,172,030 | (174,606) |
Fair value mark to market adjustment - warrants | 432,770 | (13,701) |
Totals | $ 22,668,810 | $ 5,140,758 |
8. Derivative Liabilities - Ass
8. Derivative Liabilities - Assumptions Used (Details) | 12 Months Ended |
Dec. 31, 2015 | |
Commitment Date | Minimum | |
Expected dividends | 0.00% |
Expected volatility | 150.00% |
Expected term | 2 years |
Risk free interest rate | 0.29% |
Commitment Date | Maximum | |
Expected term | 5 years |
Risk free interest rate | 1.68% |
Remeasurement Date | Minimum | |
Expected dividends | 0.00% |
Expected volatility | 150.00% |
Expected term | 0 years |
Risk free interest rate | 0.49% |
Remeasurement Date | Maximum | |
Expected term | 3 years 6 months |
Risk free interest rate | 1.76% |
9. Debt Discount (Details Narra
9. Debt Discount (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Derivative Expense | $ 0 | $ 568,485 |
10. Debt Issue Costs (Details)
10. Debt Issue Costs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Debt issue costs, Beginning | $ 161,946 | $ 247,197 |
Additons | 0 | 69,600 |
Amortization | (147,341) | (154,851) |
Debt issue costs, Ending | $ 14,605 | $ 161,946 |
11. GE Royalty Obligation (Deta
11. GE Royalty Obligation (Details) | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Tier 1 | Minimum | |
Net Sales in Contract Year | $ 0 |
Percentage of the Contract Year Net Sales owed to GE | 7.00% |
Tier 1 | Maximum | |
Net Sales in Contract Year | $ 50,000,000 |
Tier 2 | Minimum | |
Net Sales in Contract Year | $ 50,000,001 |
Percentage of the Contract Year Net Sales owed to GE | 6.00% |
Tier 2 | Maximum | |
Net Sales in Contract Year | $ 100,000,000 |
Tier 3 | Minimum | |
Net Sales in Contract Year | $ 100,000,001 |
Percentage of the Contract Year Net Sales owed to GE | 5.00% |
12. Income Taxes (Details)
12. Income Taxes (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 8,718,000 | $ 4,060,000 |
Gross Deferred Tax Assets | (2,906,000) | (1,354,000) |
Less Valuation Allowance | 2,906,000 | 1,354,000 |
Total Deferred Tax Assets - Net | $ 0 | $ 0 |
12. Income Taxes (Details 1)
12. Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Tax Disclosure [Abstract] | ||
Computed ""expected"" tax expense (benefit) - Federal | $ (9,115,000) | $ (2,480,000) |
Computed ""expected"" tax expense (benefit) - State | (1,616,000) | (438,000) |
Derivative expense | 7,370,000 | 135,000 |
Share based payments | 66,000 | 77,300 |
Amortization of patent | 2,000 | 1,000 |
Amortization of debt issue costs | 56,000 | 54,000 |
Amortization of debt discount | 798,000 | 572,000 |
Amortization of GE Trademark License | 927,000 | 924,000 |
Change in valuation allowance | $ 1,552,000 | $ 1,155,700 |
12. Income Taxes (Details Narra
12. Income Taxes (Details Narrative) | Dec. 31, 2015USD ($) |
Income Tax Disclosure [Abstract] | |
Net Operating Loss Carry-forward | $ 11,280,000 |
13. Stockholders Deficit (Detai
13. Stockholders Deficit (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Equity [Abstract] | ||
Beginning Balance, Options | 200,000 | 30,000 |
Beginning Balance, Weighted Average Exercise Price | $ .375 | $ .375 |
Beginning Balance, Weighted Average Remaining Contractual Life (In Years) | 3 years 8 months 2 days | 4 years 8 months 2 days |
Options Forfeited/Cancelled | (100,000) | |
Ending Balance, Options Outstanding | 200,000 | 200,000 |
Ending Balance, Weighted Average Exercise Price, Options Outstanding | $ 0.375 | $ .375 |
13. Stockholders Deficit (Det57
13. Stockholders Deficit (Details 1) | 12 Months Ended |
Dec. 31, 2015USD ($)$ / shares | |
Stockholders Deficit Details 1 | |
Exercise price | $ / shares | $ 0.375 |
Expected dividends | $ | $ 0 |
Expected volatility | 150.00% |
Risk free interest rate | 1.76% |
Expected term | 5 years |
13. Stockholders Deficit (Det58
13. Stockholders Deficit (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Equity [Abstract] | ||
Beginning Balance, Warrants | 9,728,984 | 4,338,884 |
Warrants Granted | 0.375 | 5,390,100 |
Warrants Granted, Weighted Average Exercise Price | $ .375 | |
Warrants Granted, Weighted Average Remaining Contractual Life (in Years) | 3 years 10 months 25 days | 5 years |
Ending Balance, Warrants Outstanding | 9,728,984 | 9,728,984 |
Ending Balance, Warrants, Weighted Average Exercise Price | $ 0.375 | $ .375 |
Ending Balance, Warrants, Weighted Average Remaining Contractual Life (in Years) | 3 years 2 months 12 days | 4 years 4 months 24 days |
14. Commitments (Details)
14. Commitments (Details) | Dec. 31, 2015USD ($) |
2,016 | $ 23,032 |
2,017 | 24,305 |
2,018 | 25,154 |
2,019 | 8,615 |
Total | 81,106 |
Minimum Obligation | |
2,016 | 109,720 |
2,017 | 46,568 |
2,018 | 25,154 |
2,019 | 8,615 |
Total | 190,057 |
Sublease Rentals | |
2,016 | 86,688 |
2,017 | 22,263 |
2,018 | 0 |
2,019 | 0 |
Total | $ 108,951 |
15. Going Concern (Details Narr
15. Going Concern (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net Loss | $ (26,890,210) | $ (7,293,745) |
Net Cash Used in Operations | (3,767,470) | |
Working Capital Deficit | $ (32,713,965) |
16. Restatement of Financial 61
16. Restatement of Financial Statements (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Derivative liabilities | $ 24,157,838 | $ 5,140,758 |
Common Stock | 2,892,078 | 189,900 |
Common Stock to be issued | 625,000 | 13,812 |
Additional paid in capital | 6,472,427 | 6,282,814 |
Accumulated deficit | $ (42,703,470) | (15,813,260) |
Original | ||
Derivative liabilities | 4,651,762 | |
Common Stock | 127,400 | |
Common Stock to be issued | 0 | |
Additional paid in capital | 6,359,127 | |
Accumulated deficit | (15,324,264) | |
Adjustment | ||
Derivative liabilities | 488,996 | |
Common Stock | 62,500 | |
Common Stock to be issued | 13,812 | |
Additional paid in capital | (76,312) | |
Accumulated deficit | (488,996) | |
Restated | ||
Derivative liabilities | 5,140,758 | |
Common Stock | 189,900 | |
Common Stock to be issued | 13,812 | |
Additional paid in capital | 6,282,814 | |
Accumulated deficit | $ (15,813,260) |