Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Jun. 30, 2017 | Mar. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | SQL Technologies Corp. | ||
Entity Central Index Key | 1,598,981 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
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? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 147,128,499 | ||
Entity Common Stock, Shares Outstanding | 53,414,901 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 4,877,720 | $ 4,125,888 |
Accounts recievable | 1,049,965 | 796,824 |
Inventory | 2,352,573 | 2,401,048 |
Prepaid expenses | 61,714 | 41,229 |
Total current assets | 8,341,972 | 7,364,989 |
Furniture and Equipment - net | 194,872 | 113,605 |
Other assets: | ||
Patent - net | 204,412 | 106,342 |
GE trademark license - net | 1,640,466 | 4,675,585 |
Other assets | 40,934 | 202,346 |
Total other assets | 2,080,684 | 5,087,878 |
Total assets | 10,422,656 | 12,462,867 |
Current liabilities: | ||
Accounts payable & accrued expenses | 1,364,446 | 1,060,163 |
Convertible debt - net of debt discount $-0- and $-0- at December 31, 2017 and December 31, 2016 respectively | 150,000 | |
Convertible debt - related parties - net of debt discount $-0- and $-0- at December 31, 2017 and December 31, 2016 respectively | 50,000 | |
Notes payable-current portion | 70,222 | 3,225,961 |
Notes payable - related party | 200,000 | 200,000 |
GE royalty obligation | 10,760,566 | |
Derivative liabilities | 19,175,754 | 24,083,314 |
Other current liabilities | 42,332 | 15,077 |
Total current liabilities | 31,613,320 | 28,784,515 |
Long term liabilities: | ||
Notes payable | 3,456,732 | 73,598 |
GE royalty obligation | 11,302,423 | |
Total long-term liabilities | 3,456,732 | 11,376,021 |
Total liabilities | 35,070,052 | 40,160,536 |
Commitments and contingent liabilities: | ||
Redeemable preferred stock - subject to redemption: $0 par value; 20,000,000 shares authorized; 20,000,000 shares authorized; 13,456,936 and 13,056,932 shares issued and outstanding at December 31, 2017 and December 31, 2016 Respectively | 45,753,569 | 44,393,569 |
Stockholders' deficit: | ||
Common stock: $0 par value, 500,000,000 shares authorized; and 53,174,901 shares issued and outstanding at December 31, 2017 and December 31, 2016 respectively | 80,103,806 | 12,294,391 |
Common stock to be issued | ||
Additional paid-in capital | 77,144,933 | 56,910,107 |
Subscription receivable | (78,000) | |
Accumulated deficit | (168,050,716) | (141,182,294) |
Total Stockholders' deficit | (70,365,523) | (72,055,796) |
Noncontrolling interest | (35,442) | (35,442) |
Total Deficit | (70,400,965) | (72,091,238) |
Total liabilities, redeemable preferred stock, and stockholders' deficit | $ 10,422,656 | $ 12,462,867 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Common Stock Par Value | $ 0 | $ 0 |
Common Stock Authorized | 500,000,000 | 500,000,000 |
Common Stock Issued | 53,174,901 | 53,174,901 |
Common Stock Outstanding | 53,174,901 | 53,174,901 |
Convertible Debt, Currrent, Debt Discount | $ 0 | $ 0 |
Convertible Debt, Current, Related Party, Debt Discount | $ 0 | $ 0 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Sales | $ 7,700,948 | $ 7,014,978 |
Cost of sales | (6,379,728) | (6,136,395) |
Gross profit | 1,321,220 | 878,583 |
Selling, general and administrative expenses | 5,126,302 | 4,383,751 |
Depreciation and amortization | 2,497,408 | 2,482,604 |
Loss on impairement | 600,000 | |
Total operating expense | 8,223,710 | 6,866,355 |
Loss from operations | (6,902,491) | (5,987,772) |
Other income (expense) | ||
Interest expense | (294,734) | (980,867) |
Derivative expenses | 9,678,390 | |
Change in fair value of embedded derivative liabilities | (14,413,192) | (43,634,482) |
Loss on debt extinguishment | (1,260,000) | (41,129,336) |
Warrant expenses | (1,869,358) | |
Options expenses | (2,003,596) | |
Gain on exchange | 6,843 | |
Other income | 17,840 | 13,275 |
Gain on Debt Extinguishment | 2,949,714 | |
Total other income (expense) – net | (19,816,195) | (92,460,086) |
Net loss including noncontrolling interest | (26,718,685) | (98,447,858) |
Less: net loss attributable to noncontrolling interest | ||
Net loss attributable to Safety Quick Lighting & Fans Corp. | $ (26,718,685) | $ (98,447,858) |
Net loss per share - basic and diluted | $ (0.55) | $ (2.60) |
Weighted average number of common shares outstanding during the year - basic and diluted | 48,943,041 | 37,916,952 |
Shareholders Equity
Shareholders Equity - USD ($) | Common Stock | Common Stock To Be Issued | Subscripton Receivable | Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning Balance, Shares at Dec. 31, 2014 | 35,750,000 | ||||||
Beginning 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 related to penalty and Interest | 189,613 | 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 | ||||
Ending Balance, Shares at Dec. 31, 2015 | 41,501,251 | (26,890,210) | (26,890,210) | ||||
Ending Balance, Amount at Dec. 31, 2015 | $ 2,892,078 | 625,000 | 6,472,427 | $ (42,703,470) | (35,442) | $ (32,749,407) | |
Common stock issued in exchange for interest due, Shares | 1,000,000 | ||||||
Common stock issued in exchange for interest due, Amount | $ 625,000 | $ (625,000) | 429,646 | ||||
Reclassification of derivative liability related to convertible notes | 45,161,472 | 45,161,472 | |||||
Reclassification of derivative liability related to interest payable | 4,798,750 | 4,798,750 | |||||
Reclassification of derivative liability related to options | 477,458 | 477,458 | |||||
Common stock issued per mutual release and waiver, Amount | 173,688 | ||||||
Common stock issued, net of issuance cost, Shares | 3,155,000 | ||||||
Common stock issued, net of issuance cost, Amount | $ 7,538,000 | $ (78,000) | 7,460,000 | ||||
Common stock issued for services rendered, Shares | 265,000 | ||||||
Common stock issued for services rendered, Amount | $ 769,000 | 769,000 | |||||
Common stock issued persuant to stock award, Shares | 25,000 | ||||||
Common stock issued persuant to stock award, Amount | $ 65,000 | 65,000 | |||||
Pursuant Director Compensation Policy, appointment to Board and Chair of Audit Committee, Shares | 62,000 | ||||||
Pursuant Director Compensation Policy, appointment to Board and Chair of Audit Committee, Amount | $ 62,000 | 62,000 | |||||
Common stock issued in exchange for principal and interest due, Shares | 790,092 | ||||||
Common stock issued in exchange for principal and interest due, Amount | $ 197,524 | 197,524 | |||||
Conversion of convertible notes to common stock, Shares | 443,156 | ||||||
Conversion of convertible notes to common stock, Amount | $ 110,789 | 110,789 | |||||
Dividends paid | (30,966) | (30,966) | |||||
Net loss | (98,447,858) | (98,447,858) | |||||
Ending Balance, Shares at Dec. 31, 2016 | 47,276,499 | ||||||
Ending Balance, Amount at Dec. 31, 2016 | $ 12,294,391 | (78,000) | 56,910,107 | (141,182,294) | (35,442) | (72,091,238) | |
Common stock issued for the cashless exercise of warrants | $ 4,132,068 | ||||||
Funds received for stock subscription, Shares | 16,667 | ||||||
Funds received for stock subscription, Amount | $ 49,996 | $ 78,000 | 128,000 | ||||
Reclassification of derivative liability associated with warrants | 13,229,681 | 13,229,681 | |||||
Warrant expense | 1,869,358 | 1,869,358 | |||||
Reclassification of derivative liability related to options | 6,091,070 | 6,091,070 | |||||
Common stock issued, net of issuance cost, Shares | 53,000 | ||||||
Common stock issued, net of issuance cost, Amount | $ 159,000 | 159,000 | |||||
Common stock issued for the exercise of warrants, Shares | 1,666,667 | ||||||
Common stock issued for the exercise of warrants, Amount | $ 5,000,000 | 5,000,000 | |||||
Common stock issued for the exercise of options, Shares | 30,000 | ||||||
Common stock issued for the exercise of options, Amount | $ 78,000 | 78,000 | |||||
Options expense | 2,003,591 | 2,003,591 | |||||
Dividends paid | (149,737) | (149,737) | |||||
Net loss | (26,718,685) | (26,718,685) | |||||
Ending Balance, Shares at Dec. 31, 2017 | 53,174,900 | ||||||
Ending Balance, Amount at Dec. 31, 2017 | $ 17,581,387 | $ 80,103,806 | $ (168,050,716) | $ (35,442) | $ (70,400,965) |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities: | ||
Net loss attributable to Safety Quick Lighting & Fans Corp. | $ (26,718,685) | $ (98,447,858) |
Net loss attributable to noncontrolling interest | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation expense | 50,915 | 26,483 |
Amortization of debt issue costs | 14,605 | |
Amortization of debt discount | 474,283 | |
Amortization of patent | 11,395 | 7,958 |
Amortization of GE trademark license | 2,435,117 | 2,448,162 |
Loss on impairement | 600,000 | |
Change in fair value of derivative liabilities | 14,413,192 | 43,634,481 |
Derivative expense | 9,678,390 | |
Loss on debt extinguishment | 1,260,000 | 41,129,336 |
Warrants expenses | 1,869,358 | |
Options expenses | (2,003,596) | |
Loss (Gain) on debt forgiveness | (2,949,714) | |
Stock options issued for services - related parties | 931,000 | |
Change in operating assets and liabilities: | ||
Accounts receivable | (253,141) | (562,515) |
Prepaid expenses | (20,485) | (5,460) |
Inventory | 48,475 | (2,137,177) |
Deferred royalty | ||
Royalty payable | (541,857) | (493,432) |
Other | 188,667 | (167,356) |
Deferred rent | ||
Accounts payable & accrued expenses | 304,283 | 252,367 |
Net cash used in operating activities | (4,349,173) | (6,166,446) |
Cash flows from investing activities: | ||
Purchase of property & equipment | (132,190) | (12,567) |
Payment of patent costs | (109,463) | (31,127) |
Net cash used in investing activities | (241,653) | (43,694) |
Cash flows from financing activities: | ||
Repayments of convertible notes | (200,000) | (4,314,233) |
Reduction of Notes converted to Preferred Stock | 100,000 | 3,264,233 |
Proceeds from note payable | 2,381,132 | 5,293,016 |
Proceeds from note payable - related party | 500,000 | |
Stock issued in exchange for interest | 158,312 | |
Stock issued in exchange for principal | 150,000 | |
Dividends paid | (149,737) | (30,966) |
Repayments of notes payable | (2,153,737) | (2,295,202) |
Repayments of notes - related party | (300,000) | |
Proceeds from issuance of stock | 5,365,000 | 7,460,000 |
Net cash provided by financing activities | 5,342,658 | 9,885,160 |
(Decrease) Increase cash and cash equivalents | 751,832 | 3,675,020 |
Cash and cash equivalents at beginning of year | 4,125,888 | 450,868 |
Cash and cash equivalents at end of year | 4,877,720 | 4,125,888 |
Supplementary disclosure of non-cash financing activities: | ||
Reclassification of derivative liability to additional paid-in-capital | 19,320,751 | 50,437,681 |
Gain on debt extinguishment | 2,949,714 | |
Cash paid during the year for: | ||
Interest | $ 294,735 | $ 315,631 |
Organization and Nature of Oper
Organization and Nature of Operations | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Nature of Operations | Note 1 Organization and Nature of Operations SQL Technologies Corp. (f/k/a 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. Effective August 12, 2016, the Company changed its name from “Safety Quick Lighting & Fans Corp.” to “SQL Technologies Corp.” 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), the CE Marking (for the European market) and, in December 2016, was approved by the National Fire Protection Association for inclusion in the NFPA 70: National Electrical Code (NEC). The Company maintains offices in Georgia, Florida and in Foshan, Peoples Republic of China. The Company is engaged in the business of developing proprietary technology that enables a quick and safe installation of electrical fixtures, such as ceiling fans and light fixtures, using a power plug installed in ceiling and wall electrical junction boxes. The Company’s base technology consists of a weight bearing, 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 an electric power supply that is connected to the electrical junction box. The plug, which is incorporated in an electrical appliance, attaches to the socket via a male post and is capable of feeding electric power to the appliance. The plug includes a second structural element allowing it to revolve and a releasable latching that provides a retention force between the socket and the plug to prevent unintentional disengagement. The socket and plug can be detached by releasing the latch, thereby 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 use of the Company’s technology enables the installation and replacement of ceiling fans and lights and wall sconces in a fraction of the time of similar, conventional appliances. The Company currently markets consumer friendly, energy saving “plugin” ceiling fans and light fixtures under the General Electric Company (“GE” or “General Electric”) 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 Company’s fiscal year end is December 31. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 Summary of Significant Accounting Policies The following is a summary of the Company’s 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. Principles of Consolidation The consolidated financial statements include the accounts of SQL Technologies Corp. (f/k/a Safety Quick Lighting and Fans Corp.) and the Subsidiary, SQL Lighting & Fans LLC. All intercompany accounts and transactions have been eliminated in consolidation. Non-controlling Interest In May 2012, in connection with the sale of the Company’s membership units in the Subsidiary, the Company’s ownership percentage in the Subsidiary decreased from 98.8% to 94.35%. The Company then reacquired these membership units in September 2013, increasing the ownership percentage from 94.35% back to 98.8%. During year ended 2017 and 2016, there was no activity in the Subsidiary. 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 nonconforming events. Accordingly, actual results could differ significantly from estimates. Reclassifications For comparability, reclassifications of certain prior-year balances were made in order to confirm with current-year presentations. Risks and Uncertainties The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future, expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales. 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 $4,877,720 and $4,125,888 in money market as of December 31, 2017, and December 31, 2016, respectively. The Company has deposits in financial institutions which exceeds the amount insured by the FDIC. The amount of uninsured deposits was $4,377,720 at December 31, 2017. 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 bad debts, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The Company’s net balance of accounts receivable for years ended December 31, 2017 and 2016: December 31, 2017 December 31, 2016 Accounts Receivable $ 1,049,965 $ 796,824 Allowance for Doubtful Accounts — Net Accounts Receivable $ 1,049,965 $ 796,824 All amounts are deemed collectible at December 31, 2017 and December 31, 2016 and accordingly, the Company has not incurred any bad debt expense at December 31, 2017 and December 31, 2016. Inventory Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) method. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand. At December 31, 2017 and December 31, 2016, the Company had $2,352,573 and $2,401,048 in inventory, respectively. The inventory at December 31, 2017 consisted of $ 1,891,934 of Finished Goods and $465,539 in Component Parts. The December 31, 2016 inventory consisted entirely of Finished Goods. The Company will maintain an allowance based on specific inventory items that 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, 2017, and December 31, 2016, 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 an impairment adjustment of $600,000 was necessary for the year ended 2017. 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 to 7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. Intangible Asset Patent The Company developed a patent for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are being amortized using the straight-line method over the related 15-year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased, and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. GE Trademark Licensing Agreement The Company entered into a Trademark License Agreement with General Electric on June 15, 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. The Company determined an impairment adjustment of $600,000 was necessary for the year ended 2017. Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: • Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. • Level 2 Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments. The Company accounts for its derivative liabilities, at fair value, on a recurring basis under Level 3. See Note 9. 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 revalued at each reporting date, with changes in the fair value reported as charges or credits to income. The Company changed its method to estimate the valuation of valuation for fair market values of derivatives in 2017 to a lattice-binomial option-pricing model (“lattice-binomial model”) from the Black-Scholes option-pricing model (“Black-Scholes model”) which was previously used under SFAS 123 and are reflected on our condensed consolidated statement of operations as other (income) expense at each reporting period. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. However, such new and/or complex instruments may have immature or limited markets. As a result, the pricing models used for valuation of derivatives often incorporate significant estimates and assumptions, which may impact the level of precision in the financial statements. Furthermore, depending on the terms of a derivative or embedded derivative, the valuation of derivatives may be removed from the financial statements upon conversion of the underlying instrument into some other security. The change in valuation methodology for accounting estimates had no material impact on the Company’s previous calculations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company has reserved for issuance 26,751,860 shares of Common stock associated with conversion features on Series A Preferred Stock, warrants and options. These shares have been reserved for issuance by the Company’s stock transfer agent, and accordingly, no derivative liability has been calculated on these shares. 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 86010 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. Stock Based Compensation – Employees The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties), 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 lattice-binomial option pricing valuation model. The ranges of assumptions for inputs are as follows: • Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees expected exercise and post vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. • Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f) (2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market • 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 – Nonemployees 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 Subtopic 505-50 of the FASB Accounting Standards Codification (“Subtopic 505-50”). Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum, or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option pricing valuation model. The ranges of assumptions for inputs are as follows: • Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. • Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f) (2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. • Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. • Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. Pursuant to ASC paragraph 505-50-257, if fully vested, no 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. Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The fair value of share options and similar instruments is estimated on the date of grant using a lattice-binomial option-pricing valuation model. The ranges of assumptions for inputs are as follows: · Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. · Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. · Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. · Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of |
Furniture and Equipment
Furniture and Equipment | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Furniture and Equipment | Note 3 Furniture and Equipment Property and equipment consisted of the following: December 31, December 31, 2017 2016 Machinery and Equipment $ 31,456 $ 31,456 Computer Equipment 6,846 6,846 Furniture and Fixtures 36,059 36,059 Tooling and Production 207,016 105,379 Leasehold Improvements 30,553 — Total 311,930 179,740 Less: Accumulated Depreciation (117,058 ) (66,135 ) Property and Equipment net $ 194,872 $ 113,605 Depreciation expense amounted to $50,915 and $26,483 for the years ended December 31, 2017 and 2016, respectively. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Note 4 Intangible Assets Intangible assets (patents) consisted of the following: December 31, 2017 December 31, 2016 Patents $ 244,382 $ 134,917 Less: Impairment Charges — — Less: Accumulated Amortization (39,970 ) (28,575 ) Patents - net $ 204,412 $ 106,342 Amortization expense on intangible assets was $11,395 and $7,958 for the years ended December 31, 2017 and 2016, respectively. At December 31, 2017, the estimated amortization of intangible assets for the next five years and thereafter was as follows: Year Ending December 31 2018 $ 16,276 2019 16,276 2020 16,276 2021 16,276 2022 16,276 2023 and Thereafter 123,034 $ 204,412 Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments and other factors. |
GE Trademark License
GE Trademark License | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
GE Trademark License | Note 5 GE Trademark License Agreement The Company entered into an amended License Agreement with General Electric regarding the GE Trademark License. The License Agreement is amortized through its expiration in November 2018. December 31, 2017 December 31, 2016 GE Trademark License $ 12,000,000 $ 12,000,000 Less: Impairment Charges (600,000) — Less: Accumulated Amortization (9,759,534 ) (7,324,415 ) GE trademark license – net $ 1,640,466 $ 4,675,585 Amortization expense associated with the GE Trademark License amounted to $2,435,117 and $2,448,161 for the years ended December 31, 2017 and 2016, respectively. The Company determined an impairment adjustment of $600,000 was necessary for the year ended 2017. At December 31, 2017, future amortization of intangible assets is as follows for the remaining: Year Ending December 31 2018 $ 1,640,466 Thereafter $ 1,640,466 |
Deferred Lease Credits
Deferred Lease Credits | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Deferred Lease Credits | Note 6 Deferred Lease Credits Cash or rent abatements received upon entering certain office leases are recognized on a straight-line basis as a reduction to rent expense over the lease term. The unamortized portion is included in Deferred Lease Credits, which are included in other current liabilities. As of December 31, 2017, and December 31, 2016 the deferred credits were $42,332 and $13,034 respectively. Deferred Rent amortization was $ 29,297 and $(11,987) for the years ended December 31, 2017 and 2016, respectively. |
Note Payable
Note Payable | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Note Payable | Note 7 Notes Payable At December 31, 2017 and December 31, 2016, the Company had a note payable to a bank in the amount of $70,222 and $186,823, respectively. The note bears interest at prime plus 1.5%, which was 6% as of December 31, 2017, and matures on August 28, 2018. The note is secured by the assets of the Company and personal guarantees by a shareholder and an officer of the Company. On April 13, 2016, the Company entered into a Line of Credit Promissory Note with a third party (the “Line of Credit”), as amended and extended, in the principal sum of up to ten million U.S. Dollars (US $10,000,000) to support purchase orders, inventory and general working capital needs. The Company may draw and/or repay this Line of Credit from time to time until the maturity hereof. The Note provides for monthly payments of interest at nine percent (9%) per annum on outstanding principal and matures on January 10, 2019, at which time the full principal amount and accrued but unpaid interest become due. The Line of Credit note is secured by the assets of the Company. As of December 31, 2017, and December 31, 2016, the outstanding balance on this note was $3,456,732 and $3,112,737, respectively. The Company received a $500,000 loan from a related party in January 2016. The note is on demand and carries interest of 12%. As of December 31, 2017, the outstanding balance is $200,000. Principal payments due under the terms of the notes described above are as follows: Principal Due in Next 12 months 2018 $ 270,272 2019 3,456,732 $ 3,726.954 |
Convertible Debt - Net
Convertible Debt - Net | 12 Months Ended |
Dec. 31, 2017 | |
Convertible Debt - Net | |
Convertible Debt - Net | Note 8 Convertible Debt Net The Company has recorded derivative liabilities associated with convertible debt instruments, as more fully discussed at Note 8. Third Party Related Party Totals Balance December 31, 2015 $ 3,989,950 $ 50,000 $ 4,039,950 Add: Amortization of Debt Discount 474,283 0 474,283 Less Repayments/Conversions (4,314,233) - - Balance December 31, 2016 150,000 50,000 200,000 Add: Amortization of Debt Discount - - - Less Repayments/Conversions (150,000) (50,000) (200,000) Balance December 31, 2017 $ - $ - $ - On November 26, 2013, May 8, 2014 and September 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. 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 September 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 Investor’s 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 payable twenty-four (24) months after the date of issuance. The principal and outstanding interest under the Notes are convertible into shares of the Company’s 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 Company’s 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 September 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 Company’s 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 predetermined valuation of the Company. Investors of the 15% Notes received Warrants with 15% coverage based on the predetermined 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. The Notes and Warrants were treated as derivative liabilities. In connection with the Notes Offering, the Company entered into Registration Rights Agreements, each dated as of November 26, 2013, May 8, 2014 and September 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”), and 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”). 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. The Company invited the Investors holding Notes dated November 26, 2013 to extend the first interest payment that was scheduled to be paid pursuant to the Notes dated November 26, 2013 (the “Interest Due”) to February 24, 2015 and in exchange offered to capitalize the Interest Due at a rate of 12% through payment (the “Additional Interest”), all of which was convertible into the Company’s common stock at a price of $0.25 per share (the “Agreement and Waiver and Agreement to Convert”). Through December 31, 2016, the Company has issued in total 2,343,191 shares of its common stock representing $585,798 in Additional Interest, Interest Due, Filing Default Damages and Effectiveness Default Damages. As of December 31, 2016, all Additional Interest, Interest Due, Filing Default Damages and Effectiveness Default Damages was repaid by the Company. During 2015, five Investors requested that the Company withhold payments of interest due under their Notes at no cost to the Company, to allow the Company to address working capital needs. Such interest due has been or will be paid to the five Investors in cash or simple non-interest bearing promissory notes, and none of such amounts have been or will be paid in shares of the Company’s capital stock. In November 2015, the Company invited the holders of Notes dated November 26, 2013, 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 Company’s common stock, or (iii) forbear an election for three (3) months, or until February 26, 2016, pursuant to a forbearance agreement, during such time interest under their respective Notes would continue to accrue. In February 2016, the Company invited the same holders to extend their forbearance period to make an election to convert or redeem their Notes for an additional three months, or until May 26, 2016, under the same terms as the first forbearance agreements. In May 2016, the Company invited the holders of all Notes, where such holders had not already made an election to redeem or convert their Notes, to forbear or extend their forbearance period to make an election to convert or redeem their Notes until July 31, 2016, which the Company thereafter extended to August 15, 2016 (the “August 2016 Election”). This also provided a third option to all noteholders, whereby such holders could convert their respective Note(s) into shares of Series A Convertible Preferred Stock (“Preferred Stock”). (See Note 8(B)). Prior to the August 2016 Election, several Investors had previously elected to receive payment in cash or convert their Notes into shares of the Company’s common stock, but most Notes remained outstanding. At December 31, 2017, one Investor redeemed $50,000 in principal balance of one Note and one Investor was issued 200,000 shares of Preferred Stock in connection with its August 2016 Election. Pursuant to the August 2016 Elections received and effective as of August 15, 2016, through September 30, 2017 the Company redeemed or issued shares of the Company’s common stock or Preferred Stock, as applicable, in exchange for the principal balance of the Notes, as follows: (i) the payment of, in the aggregate, $50,000 in principal balance of one Note; (ii) the issuance of 240,000 shares of the Company’s common stock, representing $60,000 in outstanding Note principal balance; and (iii) the issuance of 13,456,936 shares of Preferred Stock, representing $3,364,234 in outstanding Note principal balance. At December 31, 2017, all Notes have either been re-paid in cash, separate debt obligation or by conversion, and all such Notes have been terminated. All issuances of capital stock in the August 2016 Election were made only for principal balances due under the Notes, and all interest was paid directly to the Investors. (A) Terms of Debt The debt carries interest between 12% and 15%, and was due in November 2015, May 2016 and September 2016, as extended to July 31, 2016 pursuant to certain forbearance agreements. All Notes and Warrants issued in connection with the Notes Offering are convertible at $0.25 and $0.375 per 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. (B) Offer to Convert Debt to Preferred Shares By letter to each holder of the Notes, dated July 22, 2016, the Company requested that each holder indicate its election to (i) redeem its Note, (ii) convert its Note into the Company’s common stock or (iii) elect to convert its Note into shares of Preferred Stock (the “Preferred Option”), in each case by August 15, 2016. For those holders electing the Preferred Option, each holder has received shares of the Preferred Stock on a 1 to 1 ratio to the number of shares of the Company’s common stock which are then convertible under such holder’s respective Note. With respect to interest on junior securities, dividends, distributions or liquidation preference, shares of Preferred Stock will rank senior to shares of the Company’s common stock or other junior securities. Along with other terms customary for a class of convertible preferred stock, the Preferred Stock will be convertible into shares of the Company’s common stock at the same conversion price as the Notes (i.e., USD $0.25 per share), and will pay interest quarterly at a rate of six percent (6%). The Preferred Stock will be convertible upon the election of the holder thereof. Shares of the Preferred Stock may be repurchased by the Company upon 30 days’ prior written notice, in whole or in part, for USD $3.50 per share, provided that during such notice period the holder will continue to have the option and right to convert its shares of Preferred Stock into shares of the Company’s common stock. Holders will also have a put option, allowing them to sell their shares of Preferred Stock back to the Company at USD $0.25 per share, the Note conversion price. Each holder electing the Preferred Option was required to enter into an amendment to its Note, providing that the Note will be convertible into the Preferred Stock rather than the Company’s common stock, and to thereafter elect to convert their Note, as amended, into Preferred Stock. In addition, each holder entered into a lockup agreement, whereby the holder agreed not to offer, sell, contract to sell, pledge, give, donate, transfer or otherwise dispose of (i) the shares of the Company’s common stock it then holds, (ii) the shares of Preferred Stock obtained upon conversion of its Note, and (iii) the shares of the Company’s common stock underlying the Preferred Stock, for a period of twelve (12) months following the date of such agreement. The Note amendments, conversion to Preferred Stock and lockup agreement have been entered into on August 15, 2016. The Note amendments were approved by a majority of the holders of the then outstanding Notes. See above for more details related to the results of that offering |
Derivative Liabilities
Derivative Liabilities | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Derivative Liabilities | Note 9 Derivative Liabilities December 31, 2017 December 31, 2016 Balance Beginning of period $ 24,083,314 $ 24,157,838 Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability (13.229.681 — Extinguishment of Derivative Liability - Conversion of Interest to Shares — — Fair value mark to market adjustment - stock options (2,036,621) (268,098 ) Fair value at the commitment date for options granted 4,625,002 Fair value mark to market adjustment - convertible debt — 34,088,543 Fair value mark to market adjustment – warrants 6,264,132 Fair value at commitment date for warrants issued 5,053,387 Debt settlement on the derivative liability associated with interest — 3,549,904 Reclassification of derivative liability to Additional Paid in Capital due to share reservation 6,091,070 (50,437,681 ) Gain on debt settlement — (2,949,714 ) Balance at end of period $ 19,175,755 $ 24,083,314 The Company reclassified $13,229,681 to additional paid in capital. The reclassification is mainly due to the share reservation in transfer agent for options, warrants and conversion of convertible notes. The Company recorded a change in the value of embedded derivative liabilities income/(expense) $(14,413,192) and $(43,634,482) for the years ended December 31, 2017 and 2016, respectively. Commitment Date Recommitment Date Expected dividends 0% 0% Expected volatility 150% 150% Expected term 0.90 – 9.56 years 1.16 – 9.56 years Risk Free Interest Rate 0.76%-2.40% 1.47%-2.33% For the year ended December 31, 2017, the Company and the third-party investors agreed to convert their warrants to the Company's common shares in cashless basis. The Company recognizes the warrant expense of $1,869,358. The fair value of stock warrant is estimated using the Binomial valuation method and based on the information as of the conversion date: exercise price of $3.30, volatility of 150.0%, steps of 20.29 and risk-free rate of 1.98%. For the year ended December 31, 2017, the Company recognizes the option expense of $2,003,593. The fair value of stock option is estimated using the Binomial valuation method and based on the price of the date granted: exercise price of $4.00, volatility of 150.0%, steps of 37.78 and risk-free rate of 2.40%. |
Debt Discount
Debt Discount | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Debt Discount | Note 10 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. Accumulated amortization of debt discount amounted to -0- as of December 31, 2017 and $4,402,773 for the year ended December 31, 2016. The Company recorded a change in the value of embedded derivative liabilities income/(expense) of ($14,413,192) and ($43,634,482) for the years ended December 31, 2017 and 2016, respectively. The Company recorded derivative expense of ($0) and ($9,678,390) for the years ended December 31, 2017 and 2016, respectively. The Company recorded loss on disposition of debt as a result of conversion to Common Stock and Preferred Stock of ($1,260,000) for the year ended 2017. The loss was a result of the conversion value of the shares received exceeded the face value of the note. |
Debt Issue Costs
Debt Issue Costs | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Debt Issue Costs | Note 11 Debt Issue Costs December 31, December 31, 2017 2016 Debt Issuance Costs $ 0 $ 316,797 Total 0 316,797 Less: Accumulated Amortization 0 (316,797 ) Debt Issuance Costs $ — $ — The Company recorded amortization expense of $-0- and $14,605 for the years ended December 31, 2017 and 2016, respectively. |
GE Royalty Obligation
GE Royalty Obligation | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
GE Royalty Obligation | Note 12 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 nontransferable and cannot be sublicensed. Various termination clauses are applicable; however, none were applicable as of December 31, 2017, and December 31, 2016. 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 $541,858 and $489,108 for the years ended December 31, 2017 and 2016, 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 Contract Year Net Sales owed to GE $0 $50,000,000 7% $50,000,001 $100,000,000 6% $100,000,000+ 5% As of December 31, 2017, and December 31, 2016 the outstanding balance was $10,760.566 and $11,302,423, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 13 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, 2017, the Company has a net operating loss carryforward of approximately $22,281,117 available to offset future taxable income indefinitely. 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, 2017, and 2016. The effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2017 and December 31, 2016 are approximately as follows: December 31, 2017 December 31, 2016 Net operating loss carryforward $ (22,281,117) $ (15,512,000 ) Gross Deferred Tax Assets 5,904,496 6,64,000 Less Valuation Allowance (5,904,496) (6,264,000 ) Total Deferred Tax Assets – Net $ — $ — There was no income tax expense for the years ended December 31, 2017 and 2016 due to the Company’s net losses The Company’s tax expense differs from the “expected” tax expense for the years ended December 31, 2017 and December 31, 2016 (computed by applying the Federal Corporate tax rate of 35% to loss before taxes and 5.5% for Florida State Corporate Taxes, are approximately as follows: December 31, 2017 December 31, 2016 Computed "expected" tax expense (benefit) – Federal $ (4,868,395) $ (34,457,000 ) Computed "expected" tax expense (benefit) - State (1,275,056) (5,415,000 ) Derivative expense 774,346 3,920,000 Change in Fair Value of Embedded Derivative 3,401,139 17,672,000 Loss/(Gain) on Debt Extinguishment 333,900 16,657,000 Change in valuation allowance 1,634,066 1,623,000 $ — $ — |
Stockholders Deficit
Stockholders Deficit | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Stockholders Deficit | Note 14 Stockholders Deficit (A) Common Stock For years ended December 31, 2017 and years ended December 31, 2016, the Company issued the following common stock: Transaction Type Quantity (shares) Valuation ($) Range of Value Per Share 2016 Equity Transactions Common Stock issued Board of Directors Compensation (1) 62,000 $ 42,000 0.60-1.00 Common stock issued per Agreement and Waiver and Agreement to Convert (2) 1,790,092 822,524 0.25-.625 Common Stock Offering (3) 3,155,000 7,538,000 1.00-2.70 Common Stock Award (4) 25,000 15,000 0.60 Common Stock Issued for Services (5) 300,000 136,250 0.25-1.00 Common Stock Issued for Conversion of Debt (6) 443,156 110,789 0.25 Total 2016 Equity Transactions 5,775,248 $ 8,664,563 0.25-2.65 2017 Equity Transactions Common Stock Offering (7) 69,667 $ 209,000 3.00 Common Stock Issued per Exercise of Warrants (8) 1,666,667 5,000,000 3.00 Common Stock Issued per Exercise of Options (9) 30,000 78,000 2.60 Common Stock Issued for the cashless exercise of warrants (10) 4,132,068 0 0.0 Total 2017 Equity Transactions 5,898,402 $ 5,287,000 $ 2.60-3.00 The following is a more detailed description of the Company’s stock issuance from the table above: (1) Shares Issued to Board of Directors The Company appointed a new director in November 2015. Pursuant to the Company’s Director Compensation Policy (the “Director Compensation Policy”), the Company issued the director 50,000 shares of the its common stock valued at $0.60 per share in connection with the director’s appointment. The stock award was granted on November 15, 2015, but the shares were not issued by the Company until February 2016. In January 2016, this director agreed to serve as the Company’s Audit Committee Chair, and the Company issued the director 12,000 shares of the its common stock valued at $1.00 per share as compensation for the additional responsibilities, pursuant to the Director Compensation Policy. (2) Shares Issued in Connection with the Notes or Agreements to Convert In connection with the Agreement and Waiver and Agreement to Convert, as of the twelve-months ended December 31, 2016, the Company issued an additional 2,343,191 shares of its common stock as payment for Additional Interest, Interest Due, Filing Default Damages and Effectiveness Default Damages, representing payment to Investors of $1,210,798. Of this amount, $625,000 represents prior year stock awards/grants that were not issued until 2016. (3) Shares Issued in Connection with Offering On February 19, 2016, the Company completed a second closing of its offering of shares of its common stock, which first closed on December 24, 2015, representing aggregate gross proceeds to the Company of $300,000, and thereafter issued 300,000 shares of its common stock. In April 2016, the Company completed an offering of 2,000,000 shares of its common stock at an offering price of $2.50 per share, and 1,666,667 in warrants having a conversion price of $3.00 per share. In May 2016, the Company completed an offering of 675,000 shares of its common stock at an offering price of $2.60 per share, and 1,350,000 of warrants having conversion price between $3.00 and $3.50 over the next three anniversary dates. In July 2016, the Company completed an offering of 30,000 shares of its common stock at an offering price of $2.60 per share, and an additional 150,000 shares of its common stock at $2.70 per share in two separate offerings. (4) Shares Issued Pursuant to Stock Awards. In September 2016, the Company issued 25,000 shares of its common stock in stock awards granted on November 15, 2015, at $0.60 per share. (5) Shares Issued for Services In September 2016, the Company issued 300,000 shares of its common stock representing $136,250 in services received in 2015. The share conversions were in a range of valuations between $0.25 and $1.00 per share, based on the dates of the agreements and when the services were rendered. (6) Shares Issued in Conjunction with Retirement of Debt In accordance with the Notes, the Company issued 443,156 shares of its common stock for the retirement of debt during the year-ended December 31, 2016. (7) Shares Issued for Common Stock During the nine-months ended September 30, 2017, the Company received gross proceeds of $209,000 from the issuance of 69,667 shares of its common stock to three individuals at $3.00 per share. In connection therewith, the Company issued five-year options to purchase up to 315,000 shares of its common stock at an exercise price of $3.00 per share. (8) Shares Issued Pursuant to Warrants Exercised In March 2017, the Company issued 1,666,667 shares of its common stock upon exercise in full of a warrant having an exercise price of $3.00 per share, and the Company received gross proceeds of $5,000,000. (9) Shares Issued Pursuant to Options Exercised In April 2017, the Company issued 30,000 shares of its common stock upon exercise in full of an option having an exercise price of $2.60 per share, and the Company received gross proceeds of $78,000. (10) Common Stock Issued for the cashless Exercise of Warrants In November 2017, the Company issued 4,132,068 shares of its common stock upon exercise of warrants, and it was cashless exercise. (B) Preferred Stock The following is a summary of the Company’s Preferred Stock Activity Transaction Type Quantity Valuation Range of Value per Share 2016 Preferred Stock Transactions Preferred Stock Issued per August 2016 Election 13,056,936 $ 44,393,569 $ 3.40 Total 2016 Preferred Stock Transactions 13,056,936 $ 44,393,569 $ 3.40 2017 Preferred Stock Transactions Preferred Stock Issued per August 2016 Election 400,000 $ 1,360,000 $ 3.40 Total 2017 Preferred Stock Transactions 400,000 $ 1,360,000 3.40 In accordance with the August 2016 Elections (see Note 8(B)), the Company has issued 13,456,932 shares of 6% Preferred Stock in exchange for Notes having a principal balance of $3,364,234. The Preferred Stock will be convertible upon the election of the holder thereof. Shares of the Preferred Stock may be repurchased by the Company upon 30 days’ prior written notice, in whole or in part, for USD $3.50 per share, provided that during such notice period the holder will continue to have the option and right to convert its shares of Preferred Stock into shares of the Company’s common stock. Holders also have a put option, allowing them to sell their shares of Preferred Stock back to the Company at USD $0.25 per share, the Note conversion price, and therefore the stock is classified as Mezzanine equity rather than permanent equity. The stock was valued based upon the value of shares of the Company’s common stock publicly traded nearest the conversion date. During the year ended December 31, 2017 the Company paid dividends in the amount of $149,737 to the Preferred Stock shareholders. Redeemable preferred stock - subject to redemption: $0 par value; 20,000,000 shares authorized; 13,456,932 and 13,056,932 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively (C) Stock Options The following is a summary of the Company’s stock option activity: Weighted Average Weighted Average Remaining Contractual Life Aggregate Intrinsic Options Exercise Price (In Years) Value Balance, December 31, 2015 200,000 $ 0.375 2.68 $ 525,000 Exercised — — — — Granted 1,150,000 0.835 8.88 2,490,000 Forfeited/Cancelled — — — — Balance, December 31, 2016 1,350,000 $ 0.767 7.81 $ 3,015,000 Exercised (30,000) 2.60 — (78,000) Granted 3,555,000 1.307 7.47 6,230,250 Forfeited/Cancelled — — — — Balance, December 31, 2017 4,875,000 $ 1.150 7.40 $ 9,167,250 The Company has issued options, some of which have vested, to purchase shares of common stock through our Incentive Plan. The Company has issued options to purchase, in the aggregate, up to 4,875,000 shares of common stock options, in conjunction with our Incentive Plan, agreements or otherwise. The Company has reserved 4,140,000 shares with the transfer agent for the future issuance for shares associated with common stock options issued. As a result, 735,000 shares have not been reserved and are included in the calculation of derivative liability (See Note 9). During the year ended December 31, 2017, options to purchase up to 2,710,000 shares of our common stock were issued in lieu of services to non-employees, in connection with our Incentive Plan. These options are for ten years, have an average vesting period between zero and three years, and have strike prices ranging between $0.60 and $4.00. These options were issued in connection with grants that were made on November 15, 2015 and April 19, 2017. For the year ended December 31, 2017, the Company recognized an option expense of $2,003,591 (See Note 9). (D) Warrants Issued The following is a summary of the Company’s stock option activity: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years) Balance, December 31, 2015 9,728,984 $ 0.289 1.5 Issued 3,826,667 3.28 1.6 Exercised — — — Cancelled/Forfeited — — — Balance, December 31, 2016 13,555,651 $ 0.72 1.5 Issued 898,040 3.31 4.63 Exercised (6,033,767) (3.00) — Cancelled/Forfeited — — — Balance, December 31, 2017 8,419,924 $ 1.64 2.42 The Company identified conversion features embedded within warrants attached to stock purchases in 2016. 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. See Footnote 8 for further details. During 2017, the Company issued warrants to twenty-four (24) different groups totaling 898,040. These warrants had lives ranging from three to five years at strike prices between $3.30 and $3.50 per share. For the year ended December 31, 2017, the Company recognized warrant expense of $1,869,358 (See Note 9). In March 2017, 1,666,667 warrants were exercised at $3.00 per share. In May 2017, 60,000 warrants were issued at price between $3.00 and $3.50 per share contingent on the date of exercise. In October 2017, 4,367,100 warrants were cashless exercised. In October 2017, 838,040 warrants were issued at $3.30 per share contingent on the date of exercise. (E) 2015 Stock Incentive Plan On April 27, 2015, the Board approved the Company’s 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 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 Company’s 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 Company’s shareholders have approved the Incentive Plan. The Incentive Plan which became effective July 31, 2016. |
Commitments
Commitments | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments | Note 15 Commitments (A) Operating Lease On September 20, 2017, the Company entered into an operating lease for its Georgia location. The new lease commenced on July 1, 2017 and expires on September 30, 2020. We recognize rent expense under such arrangements on a straight-line basis. On September 27, 2017 the Company entered into two separate residential leases near the Florida office for two of its employees. The term for each lease is 12 months and, each lease carries a rent of $2,000 per month. The collective rent payment are $4,000 per months and will reduce travel costs for the Company. The minimum rent obligations are approximately as follows: Minimum Year Obligation 2018 $ 110,180 2019 78,467 2020 60,320 0 $ 248,967 (B) Employment Agreement – Chief Executive Officer In November 2014, the Company entered into an employment agreement with John Campi, its Chief Executive Officer. In addition to salary, the agreement provided for the issuance of 750,000 restricted shares of the Company’s common stock to him, which vested and were issued as follows: 250,000 shares 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 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 0.5% of annual sales up to $20 million and 0.25% for annual sales $20 million and 3% of annual net income. The 750,000 shares were issued in 2016 and valued at $0.625 per share. On September 1, 2016, the Company entered into a new employment agreement with its Chief Executive Officer. The agreement provides for a base salary of $150,000; 120,000 shares of The Company’s common stock in a “Sign on Bonus” which will vest December 31, 2017; 0.25% of annual net sales, paid in cash on an quarterly basis, and 3% of annual adjusted gross income in cash compensation and 0.50% of quarterly net income in options, the strike price to be determined at the time of grant. Such options will expire 5 years after issuance. Pursuant to the Campi Agreement, if terminated without cause during the initial term, the Company shall pay to Mr. Campi (i) an amount calculated by multiplying the monthly salary, at the time of such termination, times the number of months remaining in the initial term, and (ii) all unpaid incentive compensation then in effect on a pro rata For the years ended December 31, 2017 and December 31, 2016 Mr. Campi earned approximately $171,966 and $137,853, respectively, under this and the agreement associated with performance pay as noted above. (C) Chairman Agreement On November 25, 2013, we entered into a Consulting Agreement with our founder and the Chairman or our Board, Rani Kohen (the “Kohen Consulting Agreement”). The term of the Consulting Agreement was for three (3) years, beginning on December 1, 2013. Subject to the customary terms and conditions of such agreements, the Consulting Agreement provided that Mr. Kohen would receive an annual consulting fee of $150,000, incentive compensation in the form cash, stock and/or options (i) equal to one-half a one percent (0.50%) of annual net revenue, paid in cash on a quarterly basis.; and (ii) to be determined by our Board on a project-by-project basis. Effective September 1, 2016, the Company entered into a Chairman Agreement with Mr. Kohen (the “Chairman’s Agreement”), to serve The Chairman’s Agreement provides that Mr. Kohen will serve for an initial term of three years, which may be renewed by the mutual agreement of Mr. Kohen and the Company. Subject to other customary terms and conditions of such agreements, the Chairman’s Agreement provides that Mr. Kohen will receive (i) a base salary of $250,000 per year, which may be adjusted each year at the discretion of the Board; (ii) stock compensation equal to 340,000 shares of Common Stock per year, which shall vest on January 1 of the following year (the “Chairman Compensation Shares”); (iii) a sign-on bonus of 120,000 shares of Common Stock, with shall vest in its entirety on January 1, 2020; (iv) supplemental bonus compensation of stock options to purchase up to 4,000,000 shares of Common Stock at an exercise price ranging between $3.00 and $5.00 per share, determined based on the achievement of specified market capitalizations of the Company; and (v) incentive compensation equal to one half of one percent (0.50%) of the Company’s gross revenue paid in cash, stock or options on an annual basis. Pursuant to the Chairman’s Agreement, if terminated without cause during the initial term, the Company shall pay to Mr. Kohen (i) an amount calculated by multiplying the monthly salary, at the time of such termination, times the number of months remaining in the initial term, and (ii) all unpaid incentive compensation then in effect. In addition, the sign-on shares of Common Stock shall immediately vest, and the Chairman Compensation Shares shall vest on a pro rata basis based on the number of days served under the Chairman’s Agreement and the number of days from the beginning of the initial term through August 31, 2019. For any other termination during the initial term, Mr. Kohen shall receive payment, at the then current rate, through the date termination is effective. For the years ended December 31, 2017 and December 31, 2016 Mr. Kohen earned approximately $315,989 and $220,257, respectively, under this and the agreement associated with performance pay as noted above. (D) Employee Agreement - President Effective August 17, 2016, the Company entered into an Executive Employment Agreement with Mr. Wells (the “Wells Agreement”), to serve as the Company’s President. The Wells Agreement provides that Mr. Wells will serve for an initial term of three years, which may be renewed by the mutual agreement of Mr. Wells and the Company. Subject to other customary terms and conditions of such agreements, the Wells Agreement provides that Mr. Wells will receive (i) a base salary of $250,000 per year, which may be adjusted each year at the discretion of the Board; (ii) 1,025,000 shares of Common Stock, which shall vest on January 1, 2019 (the “Wells Compensation Shares”); (iii) a sign-on bonus of 120,000 shares of Common Stock, with shall vest in its entirety to Mr. Wells on January 1, 2018; and (iv) incentive compensation equal to one quarter of one percent (0.25%) of the Company’s net revenue, paid in cash on an quarterly basis. Pursuant to the Wells Agreement, if terminated without cause during the initial term, the Company shall pay to Mr. Wells (i) an amount calculated by multiplying the monthly salary, at the time of such termination, times the number of months remaining in the Initial Term, and (ii) all unpaid incentive compensation then in effect. In addition, the sign-on bonus shares of Common Stock shall immediately vest, and the Wells Compensation Shares shall vest on a pro rata For the years ended December 31, 2017 and December 31, 2016 Mr. Wells earned approximately $275,559 and $80,763, respectively, under this and the agreement associated with performance pay as noted above. (D) Employment Agreement – Chief Operating Officer Ms. Barron entered into a three-year Executive Employment Agreement, effective as of September 1, 2016 (the “Barron Agreement”). Under the terms of the Barron Agreement, Ms. Barron will receive (i) an annual salary of $120,000, and (ii) incentive compensation equal to one-quarter of one percent (0.25%) paid in cash on a quarterly basis. For the years ended December 31, 2017 and December 31, 2016 Ms. Barron’s earned approximately $142,927 and $141,018, respectively, under this and the agreement associated with performance pay as noted above. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 15 Subsequent Events On January 31, 2018, the Company entered into an agreement to extend the Line of Credit through January 10, 2019. On March 23, 2018, the Company issued 120,000 shares of Common Stock to Mr. Campi, which vested on December 31, 2017, pursuant to the Campi Agreement On March 23, 2018, the Company issued 120,000 shares of Common Stock to Mr. Wells, which vested on January 1, 2018, pursuant to the Wells Agreement. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
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. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of SQL Technologies Corp. (f/k/a Safety Quick Lighting and Fans Corp.) and the Subsidiary, SQL Lighting & Fans LLC. All intercompany accounts and transactions have been eliminated in consolidation. |
Non-Controlling Interest | Non-controlling Interest In May 2012, in connection with the sale of the Company’s membership units in the Subsidiary, the Company’s ownership percentage in the Subsidiary decreased from 98.8% to 94.35%. The Company then reacquired these membership units in September 2013, increasing the ownership percentage from 94.35% back to 98.8%. During year ended 2017 and 2016, there was no activity in the Subsidiary. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future nonconforming events. Accordingly, actual results could differ significantly from estimates. |
Reclassifications | Reclassifications For comparability, reclassifications of certain prior-year balances were made in order to confirm with current-year presentations. |
Risks and Uncertainties | Risks and Uncertainties The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future, expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales. |
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 $4,877,720 and $4,125,888 in money market as of December 31, 2017, and December 31, 2016, respectively. The Company has deposits in financial institutions which exceeds the amount insured by the FDIC. The amount of uninsured deposits was $4,377,720 at December 31, 2017. |
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 bad debts, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The Company’s net balance of accounts receivable for years ended December 31, 2017 and 2016: December 31, 2017 December 31, 2016 Accounts Receivable $ 1,049,965 $ 796,824 Allowance for Doubtful Accounts — Net Accounts Receivable $ 1,049,965 $ 796,824 All amounts are deemed collectible at December 31, 2017 and December 31, 2016 and accordingly, the Company has not incurred any bad debt expense at December 31, 2017 and December 31, 2016. |
Inventory | Inventory Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) method. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand. At December 31, 2017 and December 31, 2016, the Company had $2,352,573 and $2,401,048 in inventory, respectively. The inventory at December 31, 2017 consisted of $ 1,891,934 of Finished Goods and $465,539 in Component Parts. The December 31, 2016 inventory consisted entirely of Finished Goods. The Company will maintain an allowance based on specific inventory items that 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, 2017, and December 31, 2016, 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 an impairment adjustment of $600,000 was necessary for the year ended 2017. |
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 to 7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. |
Intangible Asset - Patent | Intangible Asset Patent The Company developed a patent for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are being amortized using the straight-line method over the related 15-year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased, and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. |
GE Trademark Licensing Agreement | GE Trademark Licensing Agreement The Company entered into a Trademark License Agreement with General Electric on June 15, 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. The Company determined an impairment adjustment of $600,000 was necessary for the year ended 2017. |
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 Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments. The Company accounts for its derivative liabilities, at fair value, on a recurring basis under Level 3. See Note 9. |
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 revalued at each reporting date, with changes in the fair value reported as charges or credits to income. The Company changed its method to estimate the valuation of valuation for fair market values of derivatives in 2017 to a lattice-binomial option-pricing model (“lattice-binomial model”) from the Black-Scholes option-pricing model (“Black-Scholes model”) which was previously used under SFAS 123 and are reflected on our condensed consolidated statement of operations as other (income) expense at each reporting period. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. However, such new and/or complex instruments may have immature or limited markets. As a result, the pricing models used for valuation of derivatives often incorporate significant estimates and assumptions, which may impact the level of precision in the financial statements. Furthermore, depending on the terms of a derivative or embedded derivative, the valuation of derivatives may be removed from the financial statements upon conversion of the underlying instrument into some other security. The change in valuation methodology for accounting estimates had no material impact on the Company’s previous calculations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company has reserved for issuance 26,751,860 shares of Common stock associated with conversion features on Series A Preferred Stock, warrants and options. These shares have been reserved for issuance by the Company’s stock transfer agent, and accordingly, no derivative liability has been calculated on these shares. |
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 86010 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. |
Stock-Based Compensation - Employees | Stock Based Compensation – Employees The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties), 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 lattice-binomial option pricing valuation model. The ranges of assumptions for inputs are as follows: • Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees expected exercise and post vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. • Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f) (2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market • 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 – Nonemployees 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 Subtopic 505-50 of the FASB Accounting Standards Codification (“Subtopic 505-50”). Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum, or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option pricing valuation model. The ranges of assumptions for inputs are as follows: • Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. • Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f) (2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. • Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. • Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. Pursuant to ASC paragraph 505-50-257, if fully vested, no 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. Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The fair value of share options and similar instruments is estimated on the date of grant using a lattice-binomial option pricing valuation model. The ranges of assumptions for inputs are as follows: · Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. · Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. · Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. · Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. |
Revenue Recognition | Revenue Recognition The Company derives revenues from the sale of GE branded fans and lighting fixtures to large retailers through retail and online sales. Sales are recognized at the time title transfers to the customer., generally upon shipment and 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. Trade allowances and a provision for estimated returns and other allowances are recorded at the time sales are made, considering historical and anticipated trends. On January 1, 2017, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The adoption has had an immaterial impact to our comparative net income and as such comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new standard to be immaterial to our net income on an ongoing basis. A majority of our sales revenue continues to be recognized when products are shipped from our manufacturing facilities and from our third-party logistics facility. |
Cost of Sales | Cost of Sales Cost of sales represents costs directly related to produce, acquire and source inventory for sale, and provisions for inventory shrinkage and obsolescence. These costs include costs of purchased products, inbound freight, custom duties. |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling expenses include costs incurred in the selling of merchandise. General and administrative expenses include costs incurred in the administration or general operations of the business. Selling, general and administrative expenses include employee and related costs, marketing, professional fees, distribution, warehouse costs, and other related selling costs. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the years ended December 31, 2017 and 2016, the Company reflected net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been antidilutive 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, 2017 and December 31, 2016: December 31, 2017 December 31, 2016 Convertible Debt (Exercise price - $0.25/share) — 800,000 Stock Warrants (Exercise price - $0.375 - $3.00/share) 8,419,924 13,555,651 Stock Options (Exercise price $0.375 - $4.00/share) 4,875,000 1,350,000 Total 13,294,924 15,705,651 |
Income Tax Provision | Income Tax Provision From the inception of the Company and through November 6, 2012, the Company was taxed as a pass-through entity (a limited liability company) under the Internal Revenue Code and was not subject to federal and state income taxes; accordingly, no provision had been made. The financial statements reflect the Company’s transactions without adjustment, if any, required for income tax purposes for the period from November 7, 2012 to December 31, 2012. The net loss generated by the Company for the period January 1, 2012 to November 6, 2012 has been excluded from the computation of income taxes. The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (Section 740-10-25). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on derecognition, 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 carrybacks and carryforwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. The Company’s tax returns are subject to examination by the federal and state tax authorities. |
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, 2017 and 2016 |
Related Parties | Related Parties The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include (a) Affiliates of the Company; (b) Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c) Trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management; (d) Principal owners of the Company; (e) Management of the Company; (f) Other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a). the nature of the relationship(s) involved; (b). a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c). the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d). amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. |
Contingencies | Contingencies The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or 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 Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows. |
Subsequent Events | Subsequent Events The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. Pursuant to ASU 201009 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 May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” on revenue recognition. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The original effective date of this guidance was for interim and annual reporting periods beginning after December 15, 2016, early adoption is not permitted, and the guidance must be applied retrospectively or modified retrospectively. In July 2015, the FASB approved an optional one-year deferral of the effective date. On January 1, 2017 We adopted the new accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) to all contracts using the modified retrospective method, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. We expect the impact of the adoption of the new standard to be immaterial to our net income on an ongoing basis. In March 2016, the FASB issued ASU 2016-09, Stock Compensation, which is intended to simplify the accounting for share-based payment award transactions. The new standard will modify several aspects of the accounting and reporting for employee share-based payments and related tax accounting impacts, including the presentation in the statements of operations and cash flows of certain tax benefits or deficiencies and employee tax withholdings, as well as the accounting for award forfeitures over the vesting period. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that year, and will be adopted by the Company in the first quarter of fiscal 2017. The Company anticipates the new standard will result in an increase in the number of shares used in the calculation of diluted earnings per share and will add volatility to the Company’s effective tax rate and income tax expense. The magnitude of such impacts will depend in part on whether significant employee stock option exercises occur. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest—Imputation of Interest (Topic 83530): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by ASU 2015-03. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company has reclassified debt issuance costs from prepaid expenses and other current assets and other assets as a reduction to debt in the condensed consolidated balance sheets. In May 2015, the FASB issued ASU 2015-07, "Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)," which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. Further, the amendments remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and early adoption is permitted. The new guidance should be applied on a retrospective basis to all periods presented. We adopted this guidance on January 1, 2016. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows. In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement –Period Adjustments.” Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquired business recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquired business. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and, instead require the acquiring entity to record these adjustments in the reporting period they are determined. The new standard is effective for both public and private companies for periods beginning after December 15, 2015. We adopted this guidance in the first quarter 2016. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows. In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”), which applies guidance on the subsequent measurement of inventory. ASU 2015-11 states that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonable predictable costs of completion, disposal and transportation. The guidance excludes inventory measured using last in, first out or the retail inventory method. ASU 2015-11 is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is not planning to early adopt ASU 2015-11 and is currently evaluating ASU 2015-11 to determine the potential impact to its condensed consolidated financial statements and related disclosures. In February 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis," which makes changes to both the variable interest model and voting interest model and eliminates the indefinite deferral of FASB Statement No. 167, included in ASU 2010-10, for certain investment funds. All reporting entities that hold a variable interest in other legal entities will need to re-evaluate their consolidation conclusions as well as disclosure requirements. This ASU is effective for annual periods beginning after December 15, 2015, and early adoption is permitted, including any interim period. We adopted this guidance on January 1, 2016. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows. In January 2015, the FASB issued ASU 2015-01, "Income Statement – Extraordinary and Unusual Items (Subtopic 225-20)," effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. This update eliminates from GAAP the concept of extraordinary items. We adopted this guidance on January 1, 2016. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows. In November 2014, the FASB issued ASU 2014-16, "Derivatives and Hedging (Topic 815)." Entities commonly raise capital by issuing different classes of shares, including preferred stock, that entitle the holders to certain preferences and rights over the other shareholders. The specific terms of those shares may include conversion rights, redemption rights, voting rights, and liquidation and dividend payment preferences, among other features. One or more of those features may meet the definition of a derivative under GAAP. Shares that include such embedded derivative features are referred to as hybrid financial instruments. The objective of this update is to eliminate the use of different methods in practice and thereby reduce existing diversity under GAAP in the accounting for hybrid financial instruments issued in the form of a share. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We adopted this guidance on January 1, 2016. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows. In August 2014, the FASB issued ASU 2014-15, "Presentation of Financial Statements – Going Concern (Subtopic 205-40), effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. This standard provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The guidance is effective for annual reporting periods ending after December 15, 2016, and early adoption is permitted. We adopted this guidance on January 1, 2016. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows. In March 2016, the FASB issued an accounting standard update which simplifies the accounting for share-based payment transactions, inclusive of income tax accounting and disclosure considerations. This guidance is effective for fiscal and interim periods beginning after December 15, 2016 and is required to be applied retrospectively to all impacted share-based payment arrangements. We adopted this guidance on January 1, 2017. The adoption of this guidance did not have a material impact on our financial position, results of operations or cash flows. In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. We are currently evaluating the impact of adopting this guidance. In February 2016, the FASB issued an accounting standard update which modifies the accounting for leasing arrangements, particularly those arrangements classified as operating leases. This update will require entities to recognize the assets and liabilities arising from operating leases on the balance sheet. This guidance is effective for fiscal and interim periods beginning after December 15, 2018 and is required to be applied retrospectively to all leasing arrangements. We are currently assessing the effects this guidance may have on our financial statements. In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Clarifying the Definition of a Business ("ASU 2017-01"). The standard clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Under ASU 2017-01, to be considered a business, the assets in the transaction need to include an input and a substantive process that together significantly contribute to the ability to create outputs. Prior to the adoption of the new guidance, an acquisition or disposition would be considered a business if there were inputs, as well as processes that when applied to those inputs had the ability to create outputs. Early adoption is permitted for certain transactions. Adoption of ASU 2017-01 may have a material impact on our consolidated financial statements if we enter into future business combinations. In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not anticipate the adoption of ASU 2017-04 will have a material impact on our consolidated financial statements. 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 Company’s financial position, results of operations or cash flows. |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Accounts Receivable and Allowance for Doubtful Accounts | December 31, 2017 December 31, 2016 Accounts Receivable $ 1,049,965 $ 796,824 Allowance for Doubtful Accounts — Net Accounts Receivable $ 1,049,965 $ 796,824 |
Earnings (Loss) Per Share | December 31, 2017 December 31, 2016 Convertible Debt (Exercise price - $0.25/share) — 800,000 Stock Warrants (Exercise price - $0.375 - $3.00/share) 8,419,924 13,555,651 Stock Options (Exercise price $0.375 - $4.00/share) 4,875,000 1,350,000 Total 13,294,924 15,705,651 |
Furniture and Equipment (Tables
Furniture and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Furniture and Equipment | December 31, December 31, 2017 2016 Machinery and Equipment $ 31,456 $ 31,456 Computer Equipment 6,846 6,846 Furniture and Fixtures 36,059 36,059 Tooling and Production 207,016 105,379 Leasehold Improvements 30,553 — Total 311,930 179,740 Less: Accumulated Depreciation (117,058 ) (66,135 ) Property and Equipment net $ 194,872 $ 113,605 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | December 31, 2017 December 31, 2016 Patents $ 244,382 $ 134,917 Less: Impairment Charges — — Less: Accumulated Amortization (39,970 ) (28,575 ) Patents - net $ 204,412 $ 106,342 |
Intangible Assets - Future Amortization | Year Ending December 31 2018 $ 16,276 2019 16,276 2020 16,276 2021 16,276 2022 16,276 2023 and Thereafter 123,034 $ 204,412 |
GE Trademark License (Tables)
GE Trademark License (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
GE Trademark License | December 31, 2017 December 31, 2016 GE Trademark License $ 12,000,000 $ 12,000,000 Less: Impairment Charges (600,000) — Less: Accumulated Amortization (9,759,534 ) (7,324,415 ) GE trademark license – net $ 1,640,466 $ 4,675,585 |
GE Trademark License - Future Amortization | Year Ending December 31 2018 $ 1,640,466 Thereafter $ 1,640,466 |
Note Payable (Tables)
Note Payable (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Note Payable To Bank Tables | |
Future Commitments | Principal Due in Next 12 months 2018 $ 270,272 2019 3,456,732 $ 3,726.954 |
Convertible Debt - Net (Tables)
Convertible Debt - Net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Convertible Debt - Net | Third Party Related Party Totals Balance December 31, 2015 $ 3,989,950 $ 50,000 $ 4,039,950 Add: Amortization of Debt Discount 474,283 0 474,283 Less Repayments/Conversions (4,314,233) - - Balance December 31, 2016 150,000 50,000 200,000 Add: Amortization of Debt Discount - - - Less Repayments/Conversions (150,000) (50,000) (200,000) Balance December 31, 2017 $ - $ - $ - |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Derivative Liabilities - Fair Value | December 31, 2017 December 31, 2016 Balance Beginning of period $ 24,083,314 $ 24,157,838 Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability (13.229.681 — Extinguishment of Derivative Liability - Conversion of Interest to Shares — — Fair value mark to market adjustment - stock options (2,036,621) (268,098 ) Fair value at the commitment date for options granted 4,625,002 Fair value mark to market adjustment - convertible debt — 34,088,543 Fair value mark to market adjustment – warrants 6,264,132 Fair value at commitment date for warrants issued 5,053,387 Debt settlement on the derivative liability associated with interest — 3,549,904 Reclassification of derivative liability to Additional Paid in Capital due to share reservation 6,091,070 (50,437,681 ) Gain on debt settlement — (2,949,714 ) Balance at end of period $ 19,175,755 $ 24,083,314 |
Derivative Liabilities - Assumptions Used | Commitment Date Recommitment Date Expected dividends 0% 0% Expected volatility 150% 150% Expected term 0.90 – 9.56 years 1.16 – 9.56 years Risk Free Interest Rate 0.76%-2.40% 1.47%-2.33% |
Debt Issue Costs (Tables)
Debt Issue Costs (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Debt Issue Costs | December 31, December 31, 2017 2016 Debt Issuance Costs $ 0 $ 316,797 Total 0 316,797 Less: Accumulated Amortization 0 (316,797 ) Debt Issuance Costs $ — $ — |
GE Royalty Obligation (Tables)
GE Royalty Obligation (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
GE Royalty Obligation | Net Sales in Contract Year Percentage of Contract Year Net Sales owed to GE $0 $50,000,000 7% $50,000,001 $100,000,000 6% $100,000,000+ 5% |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Deferred Tax Assets | December 31, 2017 December 31, 2016 Net operating loss carryforward $ (22,281,117) $ (15,512,000 ) Gross Deferred Tax Assets 5,904,496 6,64,000 Less Valuation Allowance (5,904,496) (6,264,000 ) Total Deferred Tax Assets – Net $ — $ — |
Income Tax Rate Reconciliation | December 31, 2017 December 31, 2016 Computed "expected" tax expense (benefit) – Federal $ (4,868,395) $ (34,457,000 ) Computed "expected" tax expense (benefit) - State (1,275,056) (5,415,000 ) Derivative expense 774,346 3,920,000 Change in Fair Value of Embedded Derivative 3,401,139 17,672,000 Loss/(Gain) on Debt Extinguishment 333,900 16,657,000 Change in valuation allowance 1,634,066 1,623,000 $ — $ — |
Stockholders Deficit (Tables)
Stockholders Deficit (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Common Stock | Transaction Type Quantity (shares) Valuation ($) Range of Value Per Share 2016 Equity Transactions Common Stock issued Board of Directors Compensation (1) 62,000 $ 42,000 0.60-1.00 Common stock issued per Agreement and Waiver and Agreement to Convert (2) 1,790,092 822,524 0.25-.625 Common Stock Offering (3) 3,155,000 7,538,000 1.00-2.70 Common Stock Award (4) 25,000 15,000 0.60 Common Stock Issued for Services (5) 300,000 136,250 0.25-1.00 Common Stock Issued for Conversion of Debt (6) 443,156 110,789 0.25 Total 2016 Equity Transactions 5,775,248 $ 8,664,563 0.25-2.65 2017 Equity Transactions Common Stock Offering (7) 69,667 $ 209,000 3.00 Common Stock Issued per Exercise of Warrants (8) 1,666,667 5,000,000 3.00 Common Stock Issued per Exercise of Options (9) 30,000 78,000 2.60 Common Stock Issued for the cashless exercise of warrants (10) 4,132,068 0 0.0 Total 2017 Equity Transactions 5,898,402 $ 5,287,000 $ 2.60-3.00 |
Preferred Stock | Transaction Type Quantity Valuation Range of Value per Share 2016 Preferred Stock Transactions Preferred Stock Issued per August 2016 Election 13,056,936 $ 44,393,569 $ 3.40 Total 2016 Preferred Stock Transactions 13,056,936 $ 44,393,569 $ 3.40 2017 Preferred Stock Transactions Preferred Stock Issued per August 2016 Election 400,000 $ 1,360,000 $ 3.40 Total 2017 Preferred Stock Transactions 400,000 $ 1,360,000 3.40 |
Stock Option Activity | Weighted Average Weighted Average Remaining Contractual Life Aggregate Intrinsic Options Exercise Price (In Years) Value Balance, December 31, 2015 200,000 $ 0.375 2.68 $ 525,000 Exercised — — — — Granted 1,150,000 0.835 8.88 2,490,000 Forfeited/Cancelled — — — — Balance, December 31, 2016 1,350,000 $ 0.767 7.81 $ 3,015,000 Exercised (30,000) 2.60 — (78,000) Granted 3,555,000 1.307 7.47 6,230,250 Forfeited/Cancelled — — — — Balance, December 31, 2017 4,875,000 $ 1.150 7.40 $ 9,167,250 |
Summary of Warrant Activity | Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years) Balance, December 31, 2015 9,728,984 $ 0.289 1.5 Issued 3,826,667 3.28 1.6 Exercised — — — Cancelled/Forfeited — — — Balance, December 31, 2016 13,555,651 $ 0.72 1.5 Issued 898,040 3.31 4.63 Exercised (6,033,767) (3.00) — Cancelled/Forfeited — — — Balance, December 31, 2017 8,419,924 $ 1.64 2.42 |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum Rent Obligations | Minimum Year Obligation 2018 $ 110,180 2019 78,467 2020 60,320 0 $ 248,967 |
Organization and Nature of Op36
Organization and Nature of Operations (Details Narrative) | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Ownership Percentage of Subsidiary | 98.80% |
Summary of Significant Accoun37
Summary of Significant Accounting Policies (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Accounting Policies [Abstract] | ||
Accounts Receivable | $ 1,049,965 | $ 796,824 |
Allowance for Doubtful Accounts | ||
Net Accounts Receivable | $ 1,049,965 | $ 796,824 |
Summary of Significant Accoun38
Summary of Significant Accounting Policies (Details 1) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Common Stock Equivalents | 13,294,924 | 15,705,651 |
Convertible Debt | ||
Common Stock Equivalents | 800,000 | |
Stock Warrant | ||
Common Stock Equivalents | 8,419,924 | 13,555,651 |
Stock Options | ||
Common Stock Equivalents | 4,875,000 | 1,350,000 |
Furniture and Equipment (Detail
Furniture and Equipment (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Total | $ 311,930 | $ 179,740 |
Less: Accumulated Depreciation | (117,058) | (66,135) |
Property and Equipment net | 194,872 | 113,605 |
Machinery and Equipment | ||
Total | 31,456 | 31,456 |
Computer Equipment | ||
Total | 6,846 | 6,846 |
Furniture and Fixtures | ||
Total | 36,059 | 36,059 |
Tooling and Production | ||
Total | 207,016 | 105,379 |
Leasehold Improvements [Member] | ||
Total | $ 30,553 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Patents | $ 244,382 | $ 134,917 |
Less: Impairment Charges | ||
Less: Accumulated Amortization | (39,970) | (28,575) |
Patents - net | $ 204,412 | $ 106,342 |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2,018 | $ 16,276 | |
2,019 | 16,276 | |
2,020 | 16,276 | |
2,021 | 16,276 | |
2,022 | 16,276 | |
2023 and Thereafter | 123,034 | |
Total | $ 204,412 | $ 106,342 |
GE Trademark License (Details)
GE Trademark License (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
GE Trademark License | $ 244,382 | $ 134,917 |
Less: Impairment Charges | ||
Less: Accumulated Amortization | (39,970) | (28,575) |
Patents - net | 204,412 | 106,342 |
GE Trademark | ||
GE Trademark License | 12,000,000 | 12,000,000 |
Less: Impairment Charges | (600,000) | |
Less: Accumulated Amortization | (9,759,534) | (7,324,415) |
Patents - net | $ 1,640,466 | $ 4,675,585 |
GE Trademark License (Details 1
GE Trademark License (Details 1) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
2,018 | $ 16,276 | |
Total | 204,412 | $ 106,342 |
GE Trademark | ||
2,018 | 1,640,466 | |
Total | $ 1,640,466 | $ 4,675,585 |
Notes Payable (Details)
Notes Payable (Details) | Dec. 31, 2017USD ($) |
Debt Disclosure [Abstract] | |
2,018 | $ 270,237 |
2,019 | 3,456,732 |
Total | $ 3,727,954 |
Convertible Debt - Net (Details
Convertible Debt - Net (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Related Party | ||
Beginning Balance, Convertible Debt | $ 50,000 | $ 50,000 |
Less Repayments/Conversions | (50,000) | |
Ending Balance, Convertible Debt | 0 | 50,000 |
Third Party | ||
Beginning Balance, Convertible Debt | 150,000 | 3,989,950 |
Add: amortization of debt discount | 474,283 | |
Less Repayments/Conversions | (150,000) | (4,314,233) |
Ending Balance, Convertible Debt | 0 | 150,000 |
Total | ||
Beginning Balance, Convertible Debt | 200,000 | 4,039,950 |
Add: amortization of debt discount | 474,283 | |
Less Repayments/Conversions | (200,000) | |
Ending Balance, Convertible Debt | $ 0 | $ 200,000 |
Derivative Liabilities (Details
Derivative Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Derivative liabilities [Roll Forward] | ||
Balance Beginning of period | $ 24,083,314 | $ 24,157,838 |
Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability | (13,229,681) | |
Extinguishment of Derivative Liability - Conversion of Interest to Shares | ||
Fair value mark to market adjustment - stock options | (2,036,621) | (268,098) |
Fair value at the commitment date for options granted | 1,441,934 | 4,625,002 |
Fair value mark to market adjustment - convertible debt | 34,088,543 | |
Fair value mark to market adjustment - warrants | 6,264,132 | |
Fair value at commitment date for warrants issued | 5,053,387 | |
Debt settlement on the derivative liability associated with interest | 3,549,904 | |
Reclassification of derivative liability to Additional Paid-in-Capital due to share reservation | (6,091,070) | (50,437,681) |
Gain on Settlement of Debt | (2,949,714) | |
Balance at end of period | $ 19,175,755 | $ 24,083,314 |
Derivative Liabilities - Assump
Derivative Liabilities - Assumptions Used (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Commitment Date | Minimum | |
Expected dividends | 0.00% |
Expected term | 10 months 25 days |
Risk free interest rate | 0.76% |
Commitment Date | Maximum | |
Expected dividends | 0.00% |
Expected volatility | 150.00% |
Expected term | 9 years 6 months 21 days |
Risk free interest rate | 2.40% |
Remeasurement Date | Minimum | |
Expected dividends | 0.00% |
Expected term | 1 year 1 month 27 days |
Risk free interest rate | 1.47% |
Remeasurement Date | Maximum | |
Expected dividends | 0.00% |
Expected volatility | 150.00% |
Expected term | 9 years 6 months 21 days |
Risk free interest rate | 2.33% |
Debt Discount (Details Narrativ
Debt Discount (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Notes to Financial Statements | ||
Derivative Expense | $ (9,678,390) |
Debt Issue Costs (Details)
Debt Issue Costs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Notes to Financial Statements | ||
Debt issue costs, Beginning | $ 0 | $ 316,797 |
Additons | 0 | |
Less: Accumulated Amortization | 0 | (316,797) |
Debt issue costs, Ending | $ 0 | $ 0 |
GE Royalty Obligation (Details)
GE Royalty Obligation (Details) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
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% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ (22,281,117) | $ (15,512,000) |
Gross Deferred Tax Assets | 5,904,496 | 6,264,000 |
Less Valuation Allowance | (5,904,496) | (6,264,000) |
Total Deferred Tax Assets - Net |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Computed ""expected"" tax expense (benefit) - Federal | $ (4,868,395) | $ (34,457,000) |
Computed ""expected"" tax expense (benefit) - State | (1,275,056) | (5,415,000) |
Derivative expense | 774,346 | 3,920,000 |
Change in Fair Value of Embedded Derivative | 3,401,139 | 17,672,000 |
Loss/(Gain) on Debt Extinguishment | 333,900 | 16,657,000 |
Change in valuation allowance | 1,634,066 | 1,623,000 |
Total | $ 0 | $ 0 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | Dec. 31, 2017USD ($) |
Income Tax Disclosure [Abstract] | |
Net Operating Loss Carry-forward | $ 22,281,117 |
Stockholders Deficit (Details)
Stockholders Deficit (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Equity [Abstract] | ||
Beginning Balance, Options | 1,350,000 | 200,000 |
Beginning Balance, Weighted Average Exercise Price | $ 0.767 | $ 0.375 |
Beginning Balance, Weighted Average Remaining Contractual Life (In Years) | 2 years 8 months 5 days | |
Options Granted | 3,555,000 | 1,150,000 |
Options Granted, Weighted Average Exercise Price | $ 1.307 | $ 0.835 |
Options Granted, Weighted Average Remaining Contract (In Years) | 7 years 5 months 20 days | 8 years 10 months 17 days |
Options Exercised | (30,000) | |
Ending Balance, Options Outstanding | 4,875,000 | 1,350,000 |
Ending Balance, Weighted Average Exercise Price, Options Outstanding | $ 1.150 | $ 0.767 |
Stockholders Deficit (Details 1
Stockholders Deficit (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Equity [Abstract] | ||
Beginning Balance, Warrants | 13,555,651 | 9,728,984 |
Warrants Issued | 898,040 | 3,826,667 |
Warrants Issued, Weighted Average Exercise Price | $ 3.31 | $ 3.28 |
Warrants Issued, Weighted Average Remaining Contractual Life (in Years) | 4 years 7 months 17 days | 1 year 6 months |
Warrants Exercised | (6,033,767) | |
Warrants Exercised, Weighted Average Exercise Price | $ (3) | |
Ending Balance, Warrants Outstanding | 8,419,924 | 13,555,651 |
Ending Balance, Warrants, Weighted Average Exercise Price | $ 1.64 | $ 0.72 |
Ending Balance, Warrants, Weighted Average Remaining Contractual Life (in Years) | 2 years 5 months 1 day | 1 year 6 months |
Commitments (Details)
Commitments (Details) - Minimum Obligation | Dec. 31, 2017USD ($) |
2,018 | $ 110,180 |
2,019 | 78,467 |
2,020 | 60,320 |
Total | $ 248,967 |