Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Sep. 30, 2018 | Nov. 08, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Water Now, Inc. | |
Entity Central Index Key | 1,713,909 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
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 Common Stock, Shares Outstanding | 34,486,808 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Condensed Balance Sheets (Unaud
Condensed Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash | $ 18,909 | $ 2,049 |
Inventory | 435,138 | 346,101 |
Accounts receivable | 5,250 | |
Total Currents Assets | 459,297 | 348,150 |
Plant and machinery-net | 111,305 | 132,010 |
Security deposit | 10,849 | 9,149 |
Total Assets | 581,451 | 489,309 |
Current Liabilities | ||
Outstanding checks in excess of bank balance | 6,597 | |
Accounts payable and accrued expenses | 459,795 | 116,513 |
Advance from related party | 52,501 | 32,115 |
Current portion of convertible notes payable | 141,450 | |
Notes payable - stockholder | 112,000 | 112,000 |
Total Current Liabilities | 765,746 | 267,225 |
Long-term convertible notes payable | 71,196 | |
Total Liabilities | 836,942 | 267,225 |
Commitments and Contingencies - Note 8 | ||
Stockholders' Equity (Deficit) | ||
Preferred stock - no par value, 10,000,000 shares authorized, zero issued and outstanding at September 30, 2018 and December 31, 2017 | ||
Common Stock - no par value, 90,000,000 shares authorized, 34,433,000 shares and 30,522,000 shares issued and 34,236,808 shares and 30,325,808 shares outstanding as of September 30, 2018 and December 31, 2017, respectively | 6,180,486 | 3,831,205 |
Subscription receivable | (50,000) | |
Accumulated deficit | (6,385,977) | (3,609,121) |
Total Stockholders' Equity (Deficit) | (255,491) | 222,084 |
Total Liabilities and Stockholders' Equity | $ 581,451 | $ 489,309 |
Condensed Balance Sheets (Una_2
Condensed Balance Sheets (Unaudited) (Parenthetical) - shares | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common Stock, shares authorized | 90,000,000 | 90,000,000 |
Common Stock, shares issued | 34,433,000 | 30,522,000 |
Common Stock, shares outstanding | 34,236,808 | 30,325,808 |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenues, net | $ (19,995) | $ 4,400 | $ 39,200 | $ 4,400 |
Cost of goods sold | (10,742) | 2,400 | 25,935 | 2,400 |
Gross Profit (Loss) | (9,253) | 2,000 | 13,265 | 2,000 |
Operating expenses | ||||
Research and development expenses | 506,340 | 571,557 | 998,734 | 854,624 |
General and administrative expenses | 380,616 | 326,615 | 1,694,779 | 440,681 |
Total operating expenses | 886,956 | 898,172 | 2,693,513 | 1,295,305 |
Loss from operations | (896,209) | (896,172) | (2,680,248) | (1,293,305) |
Other expense | ||||
Interest expense | (89,272) | (1,000) | (96,608) | (7,000) |
Total other expense | (89,272) | (1,000) | (96,608) | (7,000) |
Loss before provision for income taxes | (985,481) | (897,172) | (2,776,856) | (1,300,305) |
Provision for income taxes | ||||
Net Loss | $ (985,481) | $ (897,172) | $ (2,776,856) | $ (1,300,305) |
Loss per share - basic and fully diluted | $ (0.03) | $ (0.03) | $ (0.09) | $ (0.04) |
Weighted-average number of shares of common stock - basic and fully diluted | 33,572,678 | 29,372,413 | 32,563,861 | 29,382,240 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (2,776,856) | $ (1,300,305) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Common stock issued as payment for services and employee compensation | 1,005,000 | 540,175 |
Depreciation of equipment | 20,705 | |
Non-cash interest expense | 77,827 | |
Changes in operating working capital items: | ||
Accounts payable and accrued expenses | 243,282 | (6,553) |
Security deposit | (1,700) | (9,149) |
Inventory | (89,037) | (204,294) |
Accounts receivable | (5,250) | (4,400) |
Net cash used in operating activities | (1,526,029) | (984,526) |
Net cash used in investing activities | ||
Cash flows from financing activities: | ||
Outstanding checks in excess of bank balance | (6,597) | (2,500) |
Net advances from related party | 20,386 | 38,615 |
Borrowings on convertible notes payable | 583,600 | |
Issuances of common stock | 1,470,500 | 1,250,030 |
Repurchase of common stock | (525,000) | |
Net cash provided by financing activities | 1,542,889 | 1,286,145 |
Net increase in cash | 16,860 | 301,619 |
Cash at beginning of period | 2,049 | 336 |
Cash at end of period | 18,909 | 301,955 |
Supplemental Disclosure of Interest and Income Taxes Paid: | ||
Interest paid during the period | 15,705 | 7,000 |
Income taxes paid during the period | ||
Non-cash disclosures: | ||
Conversion of convertible notes payable to 200,000 common shares | $ 100,000 | |
Issuance of common stock for debt issuance costs | 53,400 |
1. Basis of Presentation, Backg
1. Basis of Presentation, Background and Description of Business | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation, Background and Description of Business | 1. Basis of presentation, Background and Description of Business Basis of presentation The accompanying unaudited financial statements of Water Now, Inc. (the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, including the instructions to Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements for the period ended December 31, 2017. In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three-month period have been made. Results for the interim period presented are not necessarily indicative of the results that might be expected for the entire fiscal year. When used in these notes, the terms “Company”, “we”, “us” or “our” mean Water Now, Inc. Background and Description of Business On September 27, 2016, we consummated a transaction whereby VCAB One Corporation, a Texas corporation (“VCAB”), merged with and into us. At the time of the merger VCAB was subject to a bankruptcy proceeding and had minimal assets, no equity owners and no liabilities, except for approximately 1,500 holders of Class 5 Allowed General Unsecured Claims and a holder of allowed administrative expenses (collectively, “Claim Holders”). Pursuant to the terms of the merger, and in accordance with the bankruptcy plan, we issued an aggregate of 703,808 shares of our common stock (the “Plan Shares”) to the Claim Holders whose claims had been approved as of the time of issuance as full settlement and satisfaction of their respective claims. As provided in the confirmed bankruptcy plan, the Plan Shares were issued pursuant to Section 1145 of the United States Bankruptcy Code. An additional 196,192 Plan Shares are held in reserve in the Company’s treasury for issuance to Claim Holders whose claims have yet to be either approved or denied by the court. The treasury shares will be issued once a Claim Holder’s claim has been approved or disapproved. If disapproved the shares will be distributed to approve Claim Holders on a pro rata basis. As a result of the merger, the separate corporate existence of VCAB was terminated. We entered into the merger in order to increase our shareholder base in order to, among other things, assist us in satisfying the listing standards of a national securities exchange. The Company recorded total restructuring expenses of $615,000, including $165,000 of consulting fees in cash and $450,000 for the issuance of the Plan Shares for settlement of claims held by the Claim Holders. |
2. Going Concern
2. Going Concern | 9 Months Ended |
Sep. 30, 2018 | |
Going Concern | |
Going Concern | 2. Going Concern At September 30, 2018, the Company had approximately $19,000 in cash and had net working capital deficit of approximately $306,000. The Company, which generated a net loss of approximately $2,777,000 and $1,300,000 for the nine-months ended September 30, 2018 and 2017, respectively, may not have sufficient cash to fund its current and future operations. There is no assurance that future operations will result in profitability. No assurance can be given that management will be successful in its efforts to raise additional capital from present or future shareholders. The failure to raise additional capital needed to achieve its business plans will have a material adverse effect on the Company’s financial position, results of operations, and ability to continue as a going concern. |
3. Summary of Significant Accou
3. Summary of Significant Accounting Policies and Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies and Recent Accounting Pronouncements | 3. Summary of Significant Accounting Policies and Recent Accounting Pronouncements Cash and Cash Equivalents Cash and cash equivalents consist primarily of deposit accounts with original maturities of three months or less. Inventory Inventory includes manufacturing parts and work in process for the Company’s water purification equipment. Inventories are carried at the lower of cost (on a first-in, first-out (“FIFO”) basis), or net realizable value. Use of Accounting Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The most significant estimates and assumptions made by management related to determining the value of stock-based expenses. Revenue The Company had a reversal of sale totaling $23,995 during the three months ended September 30, 2018 due to the Company writing off the sale as a charitable donation. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. The Company accounts for uncertain tax positions in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740-10, “ Income Taxes Stock-Based Expenses The Company accounts for stock-based expenses under the provisions of ASC 718, “ Compensation—Stock Compensation and milestone based restrictions that prevented the sale of the stock granted. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the shorter of the period over which services are to be received or the vesting period. The Company accounts for stock-based expenses awards to non-employees in accordance with ASC 505-50, “ Equity-Based Payments to Non-Employees The Company estimated the fair value of stock-based awards issued to employees, directors and non-employees during the nine months ended September 30, 2018 and 2017 based on prices paid by unrelated third-parties for the purchases of its common stock during this period, which amounted to $0.50 per share. The components of stock-based compensation related to stock awards in the Company’s Statement of Operations for the three months ended September 30, 2018 and 2017, and for the nine months ended September 30, 2018 and 2017 are as follows (rounded to nearest thousand): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Research and development expenses $ 265,000 $ 362,500 $ 440,000 $ 437,500 General and administrative expenses 50,000 102,675 565,000 102,675 Total stock-based expense $ 315,000 $ 465,175 $ 1,005,000 $ 540,175 Research and development costs The Company expenses research and development costs as incurred in accordance with ASC 730, “ Research and Development Earnings (Loss) Per Share Basic earnings (loss) per share are computed by dividing the net income (loss) by the weighted-average number of shares of common stock and common stock equivalents such as outstanding stock options and warrants. Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method. The calculation of fully diluted earnings (loss) per share assumes the dilutive effect of the exercise of outstanding options and warrants at either the beginning of the respective period presented or the date of issuance, whichever is later. Recently Adopted Accounting Pronouncements Going Concern Presentation of Financial Statements – Going Concern – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, continue as a going concern. The updated accounting guidance was effective for the Company on December 31, 2016. We have implemented this new accounting standard and we will update our liquidity disclosures as necessary. Revenue Revenue from Contracts with Customers Leases Leases Debt Issuance Costs Simplifying the Presentation of Debt Issuance Costs Stock Compensation Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting Statement of Cash Flows |
4. Notes Payable-Stockholder
4. Notes Payable-Stockholder | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable-Stockholders | 4. Note Payable – Stockholder The Company borrowed $112,000 from a shareholder on November 2, 2017. The note bears interest at 12% and is payable monthly interest-only through April 30, 2019, at which time the entire amount of principal and any accrued interest is due and payable. The note is collateralized by all equipment owned by the Company and is guaranteed by the Company’s President. The interest expense incurred on the note payable - stockholder was $10,080 and $0, for the nine months ended September 30, 2018 and 2017, respectively. |
5. Convertible Notes Payable
5. Convertible Notes Payable | 3 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
5. Convertible Notes Payable | 5. Convertible Notes Payable The Company borrowed $187,500 from three shareholders on June 18, 2018. The notes bear interest at 10% and are payable in one lump sum on June 18, 2019, at which time the entire amount of principal and accrued interest is due and payable. The notes are unsecured. The outstanding principal and interest amount is convertible by the holders into shares of the Company’s common stock at any time prior to the maturity date at a price per share equal to fifty percent of the average closing price of the Company’s common stock for the ten trading days prior to the conversion date. The principal balance at September 30, 2018 is $187,500. The interest expense incurred on the notes payable was approximately $5,500 and $0, for the nine months ended September 30, 2018 and 2017, respectively. The Company’s chief executive officer has guaranteed the shareholder notes. The value of the embedded beneficial conversion feature on the notes payable was estimated to be $187,500. For the nine months ended September 30, 2018, the Company recorded $54,687 of interest expense related to the value of the embedded beneficial conversion feature. The Company borrowed $120,000 from a shareholder on August 27, 2018. The note bears interest at 8% and is payable in one lump sum on February 27, 2019, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding principal and interest amount is convertible by the holder into shares of the Company’s common stock at any time prior to the maturity date at the conversion price of $0.50 per share. The principal balance at September 30, 2018 is $120,000. The interest expense incurred on the note payable was approximately $800 and $0, for the nine months ended September 30, 2018 and 2017, respectively. The value of the embedded beneficial conversion feature on the note payable was estimated to be $88,800. For the nine months ended September 30, 2018, the Company recorded $14,800 of interest expense related to the value of the embedded beneficial conversion feature. The Company borrowed $68,000 from a lender on September 4, 2018. The note bears interest at 8% and is payable in one lump sum on September 4, 2019, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding principal and interest amount is convertible by the holder into shares of the Company’s common stock beginning 170 days after the issuance date and prior to the maturity date at a price per share equal to sixty-five percent of the average of the lowest two trading prices of the Company’s common stock for the twenty trading days prior to the conversion date. The principal balance at September 30, 2018 is $68,000. The interest expense incurred on the note payable was approximately $450 and $0, for the nine months ended September 30, 2018 and 2017, respectively. The value of the embedded beneficial conversion feature on the note payable was estimated to be $39,748. For the nine months ended September 30, 2018, the Company recorded $3,510 of interest expense related to the value of the embedded beneficial conversion feature. The Company borrowed $50,000 from a shareholder on September 13, 2018. The note bears interest at 10% and is payable in one lump sum on March 13, 2019, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding principal and interest amount is convertible by the holder into shares of the Company’s common stock at any time prior to the maturity date at the conversion price of $0.50 per share. The principal balance at September 30, 2018 is $50,000. The interest expense incurred on the note payable was approximately $200 and $0, for the nine months ended September 30, 2018 and 2017, respectively. The value of the embedded beneficial conversion feature on the note payable was estimated to be $42,000. For the nine months ended September 30, 2018, the Company recorded $3,500 of interest expense related to the value of the embedded beneficial conversion feature. The Company borrowed $200,000 from a lender on September 17, 2018. The note bears interest at 10% and is payable monthly through the maturity date, September 17, 2021, at which time the entire amount of principal and accrued interest is due and payable. The note is unsecured. The outstanding principal and interest amount is convertible by the holder into shares of the Company’s common stock at any time prior to the maturity date at a price per share equal to $0.75 per share if before 180 days after the issuance date, or if 180 days after the issuance date, the lesser of $0.75 per share or seventy percent of the second lowest trading price of the Company’s common stock for the twenty trading days prior to the conversion date. The principal balance at September 30, 2018 is $200,000. The interest expense incurred on the note payable was approximately $800 and $0, for the nine months ended September 30, 2018 and 2017, respectively. The value of the embedded beneficial conversion feature on the note payable was estimated to be $37,333. In addition, the Company granted 60,000 shares of the Company’s common stock valued at $53,400 based on the Company’s share price on the date of the note agreement and paid $5,000 for debt issuance costs. For the nine months ended September 30, 2018, the Company recorded $1,330 of interest expense related to the value of the embedded beneficial conversion feature and debt issuance costs. |
6. Advances from Related Party
6. Advances from Related Party | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Advances from Related Party | 6. Advances From Related Party The Company has received non-interest bearing advances without a specified maturity date from a stockholder of the Company. The Company owed approximately $53,000 and $32,000, respectively, at September 30, 2018 and December 31, 2017 to the stockholder. |
7. Equity Transactions
7. Equity Transactions | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Equity Transactions | 7. Equity Transactions From January 1, 2017 to December 31, 2017, the Company issued 2,922,000 shares to investors at $0.50 per share for cash, with total proceeds of $1,436,030. The Company also issued 200,000 shares to shareholders to convert the Convertible Notes amounting to $100,000 in August 2017. From July 1, 2017 to December 31, 2017, the Company issued 1,230,350 shares to executives, employees working in research and development at the Company and consultants. The value of these shares at $0.50 per share was $615,175. In addition, there were 600,000 shares of common stock issued in 2016 which vested in January, 2017. In May 2017 and September 2017, the Company’s principal shareholder surrendered an aggregate of 2,779,850 shares of common stock to the Company, which were recorded as treasury stock with a $0 value. All surrendered shares were used to issue stock by the Company during the year. From January 1, 2018 to March 31, 2018, the Company issued 1,656,000 shares to investors at $0.50 per share for cash, with total proceeds of $828,000. In addition, the Company issued 610,000 shares to executives, employees working in research and development at the Company and consultants. The value of these shares at $0.50 per share was $305,000. From April 1, 2018 to June 30, 2018, the Company issued 625,000 shares to investors at $0.50 per share for cash, with total proceeds of $312,500. In addition, the Company issued 770,000 shares to executives, employees working in research and development at the Company and consultants. The value of these shares at $0.50 per share was $385,000. Also see Note 8 regarding shares returned during June 2018 as a result of a lawsuit settlement. From July 1, 2018 to September 30, 2018, the Company issued 660,000 shares to investors at $0.50 per share for cash, with total proceeds of $330,000. In addition, the Company granted 705,000 shares to executives, employees working in research and development at the Company and consultants. The value of these shares at $0.50 per share was $352,500. Also see Note 5 regarding shares issued for debt issuance costs in September 2018. |
8. Commitments and Contingencie
8. Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 8. Commitments and Contingencies Lease Commitments Operating Leases – Rental Property On September 11, 2017, the Company signed a lease agreement with Peleton Properties LLC which commenced on October 15, 2017. The lease is for a term of 36.5 months ending on October 30, 2020, and requires monthly payments of approximately $9,000. As of September 30, 2018, future minimum lease payments to Peleton Properties LLC required under the non-cancellable operating lease are as follows (rounded to nearest thousand): Year ending December 31, 2018 26,000 2019 102,000 2020 85,000 Total minimum payments $ 213,000 Contractual Commitments Effective as of May 1, 2016, the Company entered into a three-year employment agreement with the Company’s President. The agreement calls for monthly payments of $7,000 per month through April 2017 and $15,000 per month thereafter. The employment agreement also provided for the grant of 500,000 shares of common stock, which were fully vested on January 1, 2017. The Company expensed $250,000 for these shares during the period ended December 31, 2016 in accordance with ASC 718. The employment agreement provides for an additional grant of 500,000 shares of common stock subject to satisfactory employment through December 2017. These shares were issued in September 2017. The Company expensed $250,000 for these shares during the year ended December 31, 2017 in accordance with ASC 718. The Company has entered into a two-year accounting consulting services agreement with a financial consultant. The accounting consulting services agreement provided for a grant of 100,000 shares of common stock, which fully vested at January 2, 2017. The Company expensed $50,000 for these shares during the period ended December 31, 2016 in accordance with ASC 505-50. The Company shall pay to the consultant 75,000 shares of common stock per each completed six months of satisfactory service. The first installment shall be payable at such time as the Company generates revenue from the sale of its products. These shares were issued in September 2017. The Company expensed $37,500 for these shares during the period ended December 31, 2016 in accordance with ASC 718. We may become involved in, or have been involved in, arbitrations or various other legal proceedings that arise from the normal course of our business. We cannot predict the timing or outcome of these claims and other proceedings. The ultimate outcome of any litigation is uncertain, and either unfavorable or favorable outcomes could have a material negative impact on our results of operations, balance sheets and cash flows due to defense costs, and divert management resources. Currently, except as set forth below, we are not involved in any arbitration and/or other legal proceeding that could have a material effect on our business, financial condition, results of operations and cash flows. We accrue for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgement is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. In addition, in the event we determine that a loss is not probable, but is reasonably possible, and it becomes possible to develop what we believe to be a reasonable range of possible loss, then we will include disclosure related to such a matter as appropriate and in compliance with ASC 450. The accruals or estimates, if any, are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. To the extent there is a reasonable possibility that the losses could exceed the amounts already accrued, we will, as applicable, adjust the accrual in the period the determination is made, disclose an estimate of the additional loss or range of loss, indicate that the estimate is immaterial to our financial statements as a whole, or, if the amount of such adjustment cannot be reasonably estimated, disclose that an estimate cannot be made. Litigation On May 30, 2018, the Company reached an amicable resolution by way of a settlement agreement and release (the “Settlement Agreement”) with Cloudburst Solutions, LLC (“CS”) with respect to the Manufacturing and Licensing Agreement entered into on July 1, 2016 (“Agreement”). Neither party admitted liability and each agreed to finally and forever, settle and compromise all disputes and matters of controversy between them. CS has agreed to dismiss the lawsuit filed, fully release, acquit, and forever discharge the Company and David King from any claims related to the Agreement, render the Agreement null and void in all respects, and to cancel 1,250,000 shares held by CS in the Company’s stock. The Company has agreed to fully release, acquit, and forever discharge CS from any claims related to the Agreement and has agreed that the Agreement is null and void and neither party owes any duties or obligations thereunder. The Company has agreed to pay CS $700,000.00 in four installments. The first payment of $150,000 was paid on June 20, 2018. The second payment of $150,000 was paid to CS within 30 days of the first payment. The third payment of $150,000 was paid to CS within 30 days of the second payment. The final payment of $250,000 was to be paid to CS within 30 days of the third payment. At September 30, 2018, $175,000 remains to be paid by the Company to CS. The Settlement Agreement does not contain any admission of liability, wrongdoing, or responsibility by any of the parties. |
9. Income Taxes
9. Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 9. Income Taxes The Company accounts for income taxes under the liability method. Deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. The Company’s tax provision is determined using an estimate of an annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. The 2018 and 2017 annual effective tax rate was 0% for the U.S. federal and state statutory tax rates. The Company reviews tax uncertainties in light of changing facts and circumstances and adjusts them accordingly. As of September 30, 2018 and December 31, 2017, there were no tax contingencies recorded. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting, and the amounts recognized for income tax purposes. We had a net operating loss carry-forward for federal and state tax purposes of approximately $6,400,000 at September 30, 2018, that is potentially available to offset future taxable income. The TCJA (Tax Cut and Jobs Act) changes the rules on NOL carryforwards. The 20-year limitation was eliminated, giving the taxpayer the ability to carry forward losses indefinitely. However, NOL carry forward arising after January 1, 2018, will now be limited to 80 percent of taxable income. For financial reporting purposes, no deferred tax asset was recognized at September 30, 2018 and December 31, 2017 because management estimates that it is more likely than not that substantially all of the net operating losses will expire unused. As a result, the amount of the deferred tax assets considered realizable was reduced 100% by a valuation allowance. The change in the valuation allowances were approximately $207,000 and $442,000 for the three months ended September 30, 2018 and 2017, respectively. |
10. Subsequent Events
10. Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 10. Subsequent Events The Company has evaluated all material events or transactions that occurred after September 30, 2018 up to November 14, 2018, the date these financial statements were available to be issued and noted no material subsequent events which would require disclosure. On October 28, 2018, the Company entered into an Exclusive Sales Distribution Agreement (the Distribution Agreement) with African Horizon Technologies (Pty) Ltd (AHT), a South African company. The Distribution Agreement provides that the Company will become an exclusive distributor in the United States for the Hydraspin technology owned by AHT. The Hydraspin technology removes oil from water. The cost of the distributor rights will be $500,000 in cash, plus 500,000 shares of the Company’s common stock, with an additional 500,000 common shares upon the earlier of 24 months from the execution of the agreement or the sale of 50 units to the Company. The common shares may not be sold for a period of 12 months from date of issuance. Also payable under the agreement will be a royalty of 2% of total net profits, as defined, generated by the Company from sale of oil generated by the products acquired during the term of the agreement. The agreement has a 5-year term, and it automatically renews for five years unless terminated earlier by mutual agreement of the parties. The agreement contains certain quotas during each 12-month period during the term. The Company formed a new subsidiary, Hydraspin USA, Inc., on October 24, 2018, as the entity to be the distributor of the products. |
3. Summary of Significant Acc_2
3. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist primarily of deposit accounts with original maturities of three months or less. |
Inventory | Inventory Inventory includes manufacturing parts and work in process for the Company’s water purification equipment. Inventories are carried at the lower of cost (on a first-in, first-out (“FIFO”) basis), or net realizable value. |
Use of Accounting Estimates | Use of Accounting Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The most significant estimates and assumptions made by management related to determining the value of stock-based expenses. |
Revenue | Revenue The Company had a reversal of sale totaling $23,995 during the three months ended September 30, 2018 due to the Company writing off the sale as a charitable donation. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. The Company accounts for uncertain tax positions in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740-10, “ Income Taxes |
Stock-Based Expenses | Stock-Based Expenses The Company accounts for stock-based expenses under the provisions of ASC 718, “ Compensation—Stock Compensation and milestone based restrictions that prevented the sale of the stock granted. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the shorter of the period over which services are to be received or the vesting period. The Company accounts for stock-based expenses awards to non-employees in accordance with ASC 505-50, “ Equity-Based Payments to Non-Employees The Company estimated the fair value of stock-based awards issued to employees, directors and non-employees during the nine months ended September 30, 2018 and 2017 based on prices paid by unrelated third-parties for the purchases of its common stock during this period, which amounted to $0.50 per share. The components of stock-based compensation related to stock awards in the Company’s Statement of Operations for the three months ended September 30, 2018 and 2017, and for the nine months ended September 30, 2018 and 2017 are as follows (rounded to nearest thousand): Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Research and development expenses $ 265,000 $ 362,500 $ 440,000 $ 437,500 General and administrative expenses 50,000 102,675 565,000 102,675 Total stock-based expense $ 315,000 $ 465,175 $ 1,005,000 $ 540,175 |
Research and Development Costs | Research and development costs The Company expenses research and development costs as incurred in accordance with ASC 730, “ Research and Development |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per share are computed by dividing the net income (loss) by the weighted-average number of shares of common stock and common stock equivalents such as outstanding stock options and warrants. Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method. The calculation of fully diluted earnings (loss) per share assumes the dilutive effect of the exercise of outstanding options and warrants at either the beginning of the respective period presented or the date of issuance, whichever is later. |
Recently Accounting Pronouncements | Recently Adopted Accounting Pronouncements Going Concern Presentation of Financial Statements – Going Concern – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, continue as a going concern. The updated accounting guidance was effective for the Company on December 31, 2016. We have implemented this new accounting standard and we will update our liquidity disclosures as necessary. Revenue Revenue from Contracts with Customers Leases Leases Debt Issuance Costs Simplifying the Presentation of Debt Issuance Costs Stock Compensation Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting Statement of Cash Flows |
3. Summary of Significant Acc_3
3. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Schedule of stock-based compensation | Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Research and development expenses $ 265,000 $ 362,500 $ 440,000 $ 437,500 General and administrative expenses 50,000 102,675 565,000 102,675 Total stock-based expense $ 315,000 $ 465,175 $ 1,005,000 $ 540,175 |
8. Commitments and Contingenc_2
8. Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum lease | Year ending December 31, 2018 26,000 2019 102,000 2020 85,000 Total minimum payments $ 213,000 |
1. Basis of Presentation, Bac_2
1. Basis of Presentation, Background and Description of Business (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 27, 2016 |
Common Stock, shares issued | 34,433,000 | 30,522,000 | |
VCAB merger [Member] | |||
Common Stock, shares issued | 900,000 | ||
Restructing expense for merger with VCAB | $ 615,000 | ||
Consulting fees related to merger with VCAB | 165,000 | ||
Issuance of plan shares for settlement of claims held by claim holders from VCAB merger | $ 450,000 |
2. Going Concern (Details Narra
2. Going Concern (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Going Concern | ||||||
Cash | $ 18,909 | $ 301,955 | $ 18,909 | $ 301,955 | $ 2,049 | $ 336 |
Working capital | (306,000) | (306,000) | ||||
Net Loss | $ (985,481) | $ (897,172) | $ (2,776,856) | $ (1,300,305) |
3. Summary of Significant Acc_4
3. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Details - Share based compensation) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Total stock-based compensation expense | $ 315,000 | $ 465,175 | $ 1,005,000 | $ 540,175 |
Research and Development Expense [Member] | ||||
Total stock-based compensation expense | 265,000 | 362,500 | 440,000 | 437,500 |
General and Administrative Expense [Member] | ||||
Total stock-based compensation expense | $ 50,000 | $ 102,675 | $ 565,000 | $ 102,675 |
3. Summary of Significant Acc_5
3. Summary of Significant Accounting Policies and Recent Accounting Pronouncements (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Research and development expenses | $ 506,340 | $ 571,557 | $ 998,734 | $ 854,624 |
Reversal of revenue | (19,995) | $ 4,400 | $ 39,200 | $ 4,400 |
Reversal of Revenue [Member] | ||||
Reversal of revenue | $ 23,995 |
4. Notes Payable-Stockholder (D
4. Notes Payable-Stockholder (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Interest Expense | $ 89,272 | $ 1,000 | $ 96,608 | $ 7,000 |
Note Payable - Stockholder [Member] | ||||
Debt face value | $ 112,000 | $ 112,000 | ||
Debt issuance date | Nov. 2, 2017 | |||
Debt payment terms | monthly, interest-only | |||
Debt maturity date | Apr. 30, 2019 | |||
Interest Expense | $ 10,080 | $ 0 | ||
Debt interest rate | 12.00% |
5. Convertible Notes Payable (D
5. Convertible Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Interest Expense | $ 89,272 | $ 1,000 | $ 96,608 | $ 7,000 | |
Shares granted, shares | 34,433,000 | 34,433,000 | 30,522,000 | ||
Shares granted, value | $ 6,180,486 | $ 6,180,486 | $ 3,831,205 | ||
Three Shareholders [Member] | |||||
Debt face value | $ 187,500 | $ 187,500 | |||
Debt issuance date | Jun. 18, 2018 | ||||
Debt stated interest rate | 10.00% | 10.00% | |||
Debt payment terms | Lump sum | ||||
Debt maturity date | Jun. 18, 2019 | ||||
Interest Expense | $ 5,500 | 0 | |||
Beneficial conversion | 187,500 | ||||
Interest expense on beneficial conversion | 54,687 | ||||
Shareholder 1 [Member] | |||||
Debt face value | $ 120,000 | $ 120,000 | |||
Debt issuance date | Aug. 27, 2018 | ||||
Debt stated interest rate | 8.00% | 8.00% | |||
Debt payment terms | Lump sum | ||||
Debt maturity date | Feb. 27, 2019 | ||||
Interest Expense | $ 800 | 0 | |||
Beneficial conversion | 88,800 | ||||
Interest expense on beneficial conversion | 14,800 | ||||
Lender [Member] | |||||
Debt face value | $ 68,000 | $ 68,000 | |||
Debt issuance date | Sep. 4, 2018 | ||||
Debt stated interest rate | 8.00% | 8.00% | |||
Debt payment terms | Lump sum | ||||
Debt maturity date | Sep. 4, 2019 | ||||
Interest Expense | $ 450 | 0 | |||
Beneficial conversion | 39,748 | ||||
Shareholder 2 [Member] | |||||
Debt face value | $ 50,000 | $ 50,000 | |||
Debt issuance date | Sep. 13, 2018 | ||||
Debt stated interest rate | 10.00% | 10.00% | |||
Debt payment terms | Lump sum | ||||
Debt maturity date | Mar. 13, 2019 | ||||
Interest Expense | $ 200 | 0 | |||
Beneficial conversion | 42,000 | ||||
Interest expense on beneficial conversion | 3,500 | ||||
Lender 2 [Member] | |||||
Debt face value | $ 200,000 | $ 200,000 | |||
Debt issuance date | Sep. 17, 2018 | ||||
Debt stated interest rate | 10.00% | 10.00% | |||
Debt payment terms | Monthly | ||||
Debt maturity date | Sep. 17, 2021 | ||||
Interest Expense | $ 800 | $ 0 | |||
Beneficial conversion | 37,333 | ||||
Interest expense on beneficial conversion | $ 1,330 | ||||
Shares granted, shares | 60,000 | 60,000 | |||
Shares granted, value | $ 53,400 | $ 53,400 | |||
Debt issuance paid | $ 5,000 | $ 5,000 |
6. Advances from Related Party
6. Advances from Related Party (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Related Party Transactions [Abstract] | ||
Advance from related party | $ 52,501 | $ 32,115 |
7. Equity Transactions (Details
7. Equity Transactions (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Proceeds from issuance of stock | $ 1,470,500 | $ 1,250,030 | |||||
Principal Shareholder [Member] | |||||||
Stock surrendered, shares | 2,779,850 | ||||||
Stock surrendered, value | $ 0 | ||||||
Executives and Employees [Member] | |||||||
Stock issued for services, shares | 705,000 | 770,000 | 610,000 | 1,230,350 | |||
Stock issued for services, value | $ 352,500 | $ 385,000 | $ 305,000 | $ 615,175 | |||
Convertible Notes [Member] | |||||||
Debt converted, stock issued | 200,000 | ||||||
Debt converted, amount converted | $ 100,000 | ||||||
Investors [Member] | |||||||
Stock issued new, shares | 660,000 | 625,000 | 1,656,000 | 2,922,000 | |||
Proceeds from issuance of stock | $ 330,000 | $ 312,500 | $ 828,000 | $ 1,436,030 |
8. Commitments and Contingenc_3
8. Commitments and Contingencies (Details - Future minimum operating lease) | Jun. 30, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,018 | $ 26,000 |
2,019 | 102,000 |
2,020 | 85,000 |
Total minimum payments | $ 213,000 |
8. Commitments and Contingenc_4
8. Commitments and Contingencies (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2018 | |
Settlement expenses | $ 150,000 | ||
Settlement payable | $ 175,000 | ||
Stock to be cancelled, shares | 1,250,000 | ||
President [Member] | |||
Stock issued for compensation, shares | 500,000 | ||
Stock issued for compensation, value | $ 250,000 | ||
Rental property [Member] | |||
Lease commencement date | Oct. 15, 2017 | ||
Lease expiration date | Oct. 30, 2020 | ||
Lease term | 36 months 15 days | ||
Lease payment terms | Monthly payments of $9,000 including triple net charges |
9. Income Taxes (Details Narrat
9. Income Taxes (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |||
Annual effective tax rate | 0.00% | 0.00% | |
Operating loss carry-forward | $ 6,400,000 | ||
Change in valuation allowance | 207,000 | $ 442,000 | |
Deferred taxes | $ 0 | $ 0 |
10. Subsequent Events (Details
10. Subsequent Events (Details Narrative) - USD ($) | 60 Months Ended | |
Oct. 28, 2023 | Oct. 28, 2018 | |
Contingency to get additional shares | 24 months from execution or sale of 50 units to company | |
Agreement term | P5Y | |
Renewal term | P5Y | |
Hydraspin Technology [Member] | ||
Distribution rights costs | $ 500,000 | |
Stock issued for distribution rights, shares | 500,000 | |
Additional shares issued for compensation, shares | 500,000 | |
Royalty | 200.00% |