Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 24, 2016 | Jun. 30, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | TOMI Environmental Solutions, Inc. | ||
Entity Central Index Key | 314,227 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | Yes | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 120,338,596 | ||
Entity Public Float | $ 40,608,040 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current Assets: | ||
Cash and Cash Equivalents | $ 5,916,068 | $ 160,560 |
Cash - Restricted (Note 6) | 0 | 105,776 |
Accounts Receivable, net | 1,414,576 | 441,153 |
Inventories (Note 3) | 1,395,175 | 772,833 |
Deposits on Merchandise (Note 11) | 442,358 | 0 |
Prepaid Expenses | 76,730 | 35,404 |
Other Assets | 36,613 | 36,644 |
Deferred Financing Costs - net (Note 6) | 0 | 199,625 |
Total Current Assets | 9,281,519 | 1,751,995 |
Property & Equipment - net (Note 4) | 250,264 | 288,159 |
Other Assets: | ||
Intangible Assets - net (Note 5) | 2,287,548 | 2,657,056 |
Security Deposits | 4,700 | 6,552 |
Total Other Assets | 2,292,248 | 2,663,608 |
TOTAL ASSETS | 11,824,031 | 4,703,762 |
Current Liabilities: | ||
Accounts Payable and Accrued Expenses | 1,087,978 | 448,063 |
Accrued Interest on Convertible Notes (Note 6) | 0 | 211,417 |
Accrued Officers Compensation (Note 9) | 0 | 41,000 |
Common Stock to be Issued (Note 13) | 52,721 | 35,925 |
Customer Deposits | 35,111 | 19,716 |
Deferred Rent | 14,745 | 15,236 |
Advances on Grant (Note 11) | 210,503 | 0 |
Derivative Liability (Note 7) | 0 | 1,728,883 |
Convertible Notes Payable, net of discount at December 31, 2014 of $3,996,033 (Note 6) | 0 | 1,077,967 |
Total Current Liabilities | 1,401,057 | 3,578,207 |
Total Liabilities | $ 1,401,057 | $ 3,578,207 |
Commitments and Contingencies | ||
Stockholders' Equity ( Deficiency): | ||
Cumulative Convertible Series A Preferred Stock; par value $0.01, 1,000,000 shares authorized; 510,000 shares issued and outstanding at December 31, 2015 and 2014 | $ 5,100 | $ 5,100 |
Cumulative Convertible Series B Preferred Stock; $1,000 stated value; 7.5% Cumulative dividend; 4,000 shares authorized; none issued and outstanding at December 31, 2015 and 2014 | 0 | 0 |
Common stock; par value $0.01, 200,000,000 shares authorized; 120,063,180 and 83,646,275 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively. | 1,200,632 | 836,463 |
Additional Paid-in Capital | 40,391,216 | 19,281,647 |
Accumulated Deficit | (31,173,973) | (18,997,655) |
Total Stockholders' Equity | 10,422,974 | 1,125,555 |
Total Liabilities and Stockholders' Equity | $ 11,824,031 | $ 4,703,762 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Stockholders' Equity ( Deficiency): | ||
Cumulative Convertible Preferred Stock Series A, Par Value | $ 0.01 | $ 0.01 |
Cumulative Convertible Preferred Stock Series A, Shares Authorized | 1,000,000 | 1,000,000 |
Cumulative Convertible Preferred Stock Series A, Shares Issued | 510,000 | 510,000 |
Cumulative Convertible Preferred Stock Series A, Shares Outstanding | 510,000 | 510,000 |
Cumulative Convertible Preferred Stock Series B, Stated Value | $ 1,000 | $ 1,000 |
Cumulative Convertible Preferred Stock Series B, Shares Authorized | 4,000 | 4,000 |
Cumulative Convertible Preferred Stock Series B, Shares Issued | 0 | 0 |
Cumulative Convertible Preferred Stock Series B, Shares Outstanding | 0 | 0 |
Cumulative Convertible Preferred Stock Series B, Dividend Percentage | 7.50% | 7.50% |
Common Stock; Par Value | $ 0.01 | $ 0.01 |
Common Stock; Shares Authorized | 200,000,000 | 200,000,000 |
Common Stock; Stock Issued | 120,063,180 | 83,646,275 |
Common Stock; Stock Outstanding | 120,063,180 | 83,646,275 |
Discount on convertible notes payable | $ 0 | $ 3,996,033 |
CONSOLIDATED STATEMENT OF OPERA
CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Statement [Abstract] | ||
Sales, net | $ 4,191,783 | $ 2,248,341 |
Cost of Sales | 1,644,039 | 873,990 |
Gross Profit | 2,547,744 | 1,374,351 |
Costs and Expenses: | ||
Professional Fees | 455,626 | 349,546 |
Depreciation and Amortization | 499,344 | 470,327 |
Selling Expenses | 704,069 | 380,303 |
Research and Development | 100,321 | 155,984 |
Consulting fees | 476,513 | 179,809 |
Equity Compensation Expense | 1,706,393 | 2,564,707 |
General and Administrative | 1,591,102 | 1,083,885 |
Total Costs and Expenses | 5,533,368 | 5,184,561 |
Loss From Operations | (2,985,624) | (3,810,210) |
Other Income (Expense): | ||
Amortization of Deferred Financing Costs | (199,625) | (342,492) |
Amortization of Debt Discounts | (3,996,033) | (1,007,525) |
Fair Value Adjustment of Derivative Liability | (3,810,955) | 5,936,619 |
Induced Conversion Costs | (930,383) | 0 |
Interest expense | (253,700) | (507,956) |
Total Other Income (Expense) | (9,190,695) | 4,078,646 |
Net Income (Loss) | $ (12,176,319) | $ 268,436 |
Income (Loss) Per Common Share | ||
Basic | $ (0.12) | $ 0 |
Diluted | $ (0.12) | $ 0 |
Basic Weighted Average Common Shares Outstanding | 102,840,185 | 81,281,030 |
Diluted Weighted Average Common Shares Outstanding | 102,840,185 | 127,398,990 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY) - USD ($) | Series A Preferred | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2013 | 510,000 | 79,867,217 | |||
Beginning Balance, Amount at Dec. 31, 2013 | $ 5,100 | $ 798,672 | $ 15,674,958 | $ (19,266,090) | $ (2,787,360) |
Options and warrants issued to executives for services | 2,564,707 | 2,564,707 | |||
Common stock issued for services provided, Shares | 901,580 | ||||
Common stock issued for services provided, Amount | $ 9,016 | 340,827 | 349,843 | ||
Common stock issued for executive compensation, Shares | 178,125 | ||||
Common stock issued for executive compensation, Amount | $ 1,781 | 52,219 | $ 54,000 | ||
Exercise of stock options as payment for legal services, Shares | 20,000 | ||||
Exercise of stock options as payment for legal services, Amount | $ 200 | (200) | |||
Proceeds from issuance of common stock, net, Shares | 377,778 | ||||
Proceeds from issuance of common stock, net, Amount | $ 3,778 | 95,162 | $ 98,940 | ||
Proceeds from issuance of common stock and warrants, net, Shares | 2,290,243 | ||||
Proceeds from issuance of common stock and warrants, net, Amount | $ 22,902 | 574,013 | $ 596,915 | ||
Issuance of common stock as finder's fee, Shares | 11,332 | 11,332 | |||
Issuance of common stock as finder's fee, Amount | $ 113 | (113) | |||
Value of common stock to be issued as finder's fee | (19,925) | $ (19,925) | |||
Net Income (Loss) | 268,435 | 268,436 | |||
Ending Balance, Shares at Dec. 31, 2014 | 510,000 | 83,646,275 | |||
Ending Balance, Amount at Dec. 31, 2014 | $ 5,100 | $ 836,462 | 19,281,647 | (18,997,655) | 1,125,555 |
Options and warrants issued to executives for services | 1,706,393 | 1,706,393 | |||
Common stock issued for services provided, Shares | 1,319,679 | ||||
Common stock issued for services provided, Amount | $ 13,197 | 542,472 | 555,668 | ||
Common stock issued for executive compensation, Shares | 437,145 | ||||
Common stock issued for executive compensation, Amount | $ 4,371 | 187,779 | 192,150 | ||
Proceeds from issuance of common stock, net, Shares | 17,986,111 | ||||
Proceeds from issuance of common stock, net, Amount | $ 179,862 | 8,045,126 | 8,224,988 | ||
Proceeds from issuance of common stock and warrants, net, Shares | 1,760,002 | ||||
Proceeds from issuance of common stock and warrants, net, Amount | $ 17,600 | 441,614 | 459,214 | ||
Conversion of notes payable and accrued interest into common stock, Shares | 14,913,968 | ||||
Conversion of notes payable and accrued interest into common stock, Amount | $ 149,140 | 3,748,776 | 3,897,916 | ||
Induced conversion costs | 912,883 | 912,883 | |||
Reclassification of derivative liability | 5,539,838 | 5,539,838 | |||
Value of common stock to be issued as finder's fee | (15,312) | (15,312) | |||
Net Income (Loss) | (12,176,319) | (12,176,319) | |||
Ending Balance, Shares at Dec. 31, 2015 | 510,000 | 120,063,180 | |||
Ending Balance, Amount at Dec. 31, 2015 | $ 5,100 | $ 1,200,632 | $ 40,391,215 | $ (31,173,974) | $ 10,422,974 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Cash Flow From Operating Activities: | ||
Net Income (Loss) | $ (12,176,319) | $ 268,436 |
Adjustments to Reconcile Net Income (loss) to Net Cash Used In Operating Activities: | ||
Depreciation and Amortization | 499,344 | 470,328 |
Amortization of Deferred Financing Costs | 199,625 | 342,492 |
Amortization of Debt Discount | 3,996,033 | 1,007,525 |
Fair Value Adjustment of Derivative Liability | 3,810,955 | (5,936,619) |
Induced Conversion Costs | 912,883 | 0 |
Equity Based Compensation | 1,706,393 | 2,564,707 |
Value of Equity Issued for Services | 747,819 | 403,843 |
Reserve for Bad Debts | 7,500 | 37,500 |
Decrease (increase) in: | ||
Accounts Receivable | (980,923) | 327,156 |
Inventory | (633,787) | (508,200) |
Prepaid Expenses | (41,326) | (27,424) |
Deposits on Merchandise | (442,358) | 0 |
Other Assets | 31 | (36,644) |
Deposits | 1,853 | (4,010) |
Increase (Decrease) in: | ||
Accounts Payable and Accrued Expenses | 639,914 | 61,655 |
Accrued Interest | (87,500) | 222 |
Accrued Officers Compensation | (41,000) | 16,000 |
Common Stock to be Issued | 1,484 | (134,872) |
Customer Deposits | 15,394 | 5,611 |
Deferred Rent | (491) | 15,236 |
Advances on Grant | 210,503 | 0 |
Net Cash Used in Operating Activities | (1,653,971) | (1,127,059) |
Cash Flow From Investing Activities: | ||
Purchase of Property and Equipment | (80,496) | (81,994) |
Net Cash Used in Investing Activities | (80,496) | (81,994) |
Cash Flow From Financing Activities: | ||
Proceeds From Issuance of Common Stock and Warrants | 8,735,200 | 765,262 |
Repayment of Principal Balance of Convertible Notes | (1,300,000) | 0 |
Decrease (Increase) in Bond Sinking Fund | 105,776 | (35,653) |
Payment of Finder's Fee | (51,000) | (66,347) |
Net Cash Provided by Financing Activities | 7,489,976 | 663,262 |
Net Increase (Decrease) in Cash and Cash Equivalents | 5,755,509 | (545,792) |
Cash and Cash Equivalents - Beginning | 160,560 | 706,350 |
Cash and Cash Equivalents - Ending | 5,916,068 | 160,560 |
Supplemental Cash Flow Information: | ||
Cash Paid For Interest | 341,200 | 507,956 |
Cash Paid For Income Taxes | 0 | 0 |
Non-Cash Investing and Finance Activities: | ||
Common Stock issued as payment of accrued interest | 123,917 | 0 |
Reclassification of derivative liability to additional paid in capital | 5,539,838 | 0 |
Reclassification of demo equipment from inventory to property and equipment | 19,615 | 142,916 |
Cash Finder's Fee Accrual | 0 | 3,060 |
Common Stock Finder's Fee Accrual | 15,312 | 19,925 |
Reclassification of property and equipment, net to inventory | 8,170 | 0 |
Issuance of common stock on conversion of convertible debt | $ 3,774,000 | $ 0 |
1. DESCRIPTION OF BUSINESS
1. DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 1. DESCRIPTION OF BUSINESS | TOMI Environmental Solutions is a leading provider of infection prevention and decontamination products and services, focused primarily on life sciences including healthcare, bio-safety, pharmaceutical, clean-room and research. Our mission is to help our customers create a healthier world thru TOMI’s product line. TOMI’s motto is “innovating for a safer world” for healthcare and life. As a global decontamination and infectious disease control company, TOMI provides environmental solutions for indoor and outdoor surface decontamination through the sale of equipment, services and licensing of our SteraMistTM Binary Ionization Technology® (“BIT™”) which is a EPA registered hydrogen peroxide based mist and fog. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation The accompanying consolidated financial statements include the accounts of TOMI Environmental Solutions, Inc. (a Florida Corporation) (TOMI-Florida), and its wholly-owned subsidiary, TOMI Environmental Solutions, Inc. (a Nevada Corporation) (TOMI-Nevada). The Company’s 55% owned subsidiary, TOMI Environmental-China (TOMI-China), has been dormant since its formation in April 2011. All significant intercompany accounts and transactions have been eliminated in consolidation. Reclassification of Accounts Certain reclassifications have been made to prior-year comparative financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or financial position. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the accompanying consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, fair values of financial instruments, intangible assets, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities. Fair Value Measurements The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv)willing to transact. The guidance describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities. The Company’s financial instruments include cash and equivalents, accounts receivable, and accounts payable and accrued expenses. All these items were determined to be Level 1 fair value measurements. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments. At December 31, 2014, the recorded value of convertible debt approximates its fair value as the terms and rates approximate market rates (See also Note 6). Cash and Cash Equivalents For purposes of the statement of cash flows, cash and cash equivalents includes cash on hand held at financial institutions and other liquid investments with original maturities of three months or less. Accounts Receivable Our accounts receivable are typically from credit worthy customers or, for international customers are supported by pre-payments. For those customers to whom we extend credit, we perform periodic evaluations of them and maintain allowances for potential credit losses as deemed necessary. We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Bad debt expense for the years ended December 31, 2015 and 2014 was $39,081 and $134,540, respectively. At December 31, 2015 and 2014, the allowance for doubtful accounts was $45,000 and $37,500, respectively. As of December 31, 2015, three customers accounted for 42% of net accounts receivable. Two customers accounted for 26% of net revenues for the year ended December 31, 2015. Inventories Inventories are valued at the lower of cost or market using the first-in, first-out (”FIFO”) method. Inventories consist primarily of finished goods and raw materials. At December 31, 2015 and 2014, we did not have a reserve for slow-moving or obsolete inventory. Deposits on Merchandise Deposits on merchandise primarily consist of amounts incurred or paid in advance of the receipt of inventory. (See note 11) Property and Equipment We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, generally three to five years. Depreciation for equipment, furniture and fixtures and vehicles commences once placed in service for its intended use. Leasehold improvements are amortized using the straight-line method over the lives of the respective leases or service lives of the improvements, whichever is shorter. Deferred Financing Costs The Company follows authoritative guidance for accounting for financing costs as it relates to convertible debt issuance cost. These costs are deferred and amortized over the term of the debt period or until redemption of the convertible debentures. Amortization of deferred financing costs amounted to approximately $200,000 and $342,000 for the year ended December 31, 2015 and 2014, respectively. Accounts Payable As of December 31, 2015 and December 31, 2014, one vendor accounted for approximately 72% and 44% of total accounts payable. One vendor accounted for 84% of cost of goods sold for the year ended December 31, 2015. One vendor accounted for 82% of cost of goods sold for the year ended December 31, 2014. Accrued Warranties Accrued warranties represent the estimated costs that will be incurred during the warranty period of our products. We make an estimate of expected costs that will be incurred by us during the warranty period and charge that expense to the consolidated statement of operations at the date of sale. Our manufacturer assumes warranty against product defects for one year which we extend to our customers. We assume responsibility for product reliability and results. As of December 31, 2015 and 2014, the Company did not establish a reserve because warranty costs are covered by the Company’s manufacturer. Income taxes Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits, which are, on a more likely than not basis, not expected to be realized; in accordance with ASC guidance for income taxes. Net deferred tax benefits have been reserved at December 31, 2015 and 2014. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. Income (Loss) Per Share Basic income (loss) per share is computed by dividing the Company’s net income (loss) by the weighted average number of common shares outstanding during the period presented. Diluted income per share is based on the treasury stock method and includes the effect from potential issuance of common stock such as shares issuable pursuant to the exercise of warrants and conversions of debentures. Potentially dilutive securities as of December 31, 2015, consisted of 35,676,413 common shares from outstanding warrants, 100,000 common shares from options and 510,000 common shares from convertible Series A preferred stock. Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive. Potentially dilutive securities as of December 31, 2014, consisted of 17,496,552 common shares from convertible debentures, 28,051,408 common shares from outstanding warrants (including 7,611,000 warrants issued in conjunction with the above convertible notes), 60,000 common shares from options and 510,000 common shares from convertible Series A preferred stock. The following provides a reconciliation of the shares used in calculating the per share amounts for the periods presented: For the years Ended December 31, 2015 2014 Numerator: Net Income (Loss) $ (12,176,319 ) $ 268,435 Denominator: Basic weighted-average shares 102,840,185 81,281,030 Effect of dilutive securities Warrants - 28,051,408 Convertible Debt - 17,496,552 Options - 60,000 Preferred Stock - 510,000 Diluted Weighted Average Shares 102,840,185 127,398,990 Income (Loss) per common share Basic $ (0.12 ) $ 0.00 Diluted $ (0.12 ) $ 0.00 Note: Warrants, Options, and Preferred Stock for the year ended December 31, 2015, are not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive. Loss from Operations Data: For the years Ended December 31, 2015 2014 Loss from Operations $ (2,985,624 ) $ (3,810,211 ) Basic and Diluted Weighted Average Shares 102,840,185 81,281,030 Basic and Diluted Loss per Share $ (0.03 ) $ (0.05 ) Revenue Recognition For revenue from services and product sales, the Company recognized revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (SAB No. 104), which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB No. 101). SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) service has been rendered or delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the services rendered or products delivered and the collectability of those amounts. Provisions for discounts to customers, and allowance, and other adjustments will be provided for in the same period the related sales are recorded. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with Financial Accounting Standards Board (“FASB”), ASC 718, Compensation- “Stock Compensation.” Under the provisions of FASB ASC 718, stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period. The Company had one active stock-based compensation plan (“2008 Plan”), TOMI Environmental Solutions, Inc. Stock Option and Restricted Stock Plan (the “Plan”). The Plan calls for the Company, through a committee of its Board of Directors, to issue up to 2,500,000 shares of restricted common stock or stock options. The Company generally issues grants to its employees, consultants, and board members. Stock options are granted with an exercise price equal to the closing price of its common stock on the date of the grant with a term no greater than 10 years. Generally, stock options vest over two to four years. Incentive stock options granted to shareholders who own 10% or more of the Company’s outstanding equity securities are granted at an exercise price that may not be less than 110% of the closing price of the Company’s common stock on the date of grant and have a term no greater than five years. On the date of a grant, the Company determines the fair value of the stock option award and recognizes compensation expense over the requisite service period, which is generally the vesting period of the award. The fair value of the stock option award is calculated using the Black-Scholes option-pricing model. On August 25, 2015 the plan was terminated. On January 29, 2016, the board adopted the 2016 Equity Plan subject to its approval by stockholders(see note 15). Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains cash balances at financial institutions which exceed the current Federal Deposit Insurance Corporation (“FDIC”) limit of $250,000 at times during the year. Long-Lived Assets Including Acquired Intangible Assets The Company assesses long-lived assets for potential impairments at the end of each year, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset. In evaluating long-lived assets for impairment, the Company measures recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If the Company’s long-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value. The Company bases its calculations of the estimated fair value of its long-lived assets on the income approach. For the income approach, The Company uses an internally developed discounted cash flow model that include, among others, the following assumptions: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. We have had no long-lived asset impairment charges for the years ended December 31, 2015 and 2014. Advertising and Promotional Expenses The Company expenses advertising costs in the period in which they are incurred. For the years ended December 31, 2015 and 2014, advertising and promotional expenses were approximately $52,000 and $11,000, respectively. Research and Development Expenses The Company expenses research and development expenses in the period in which they are incurred. For the years ended December 31, 2015 and 2014, research and development expenses were approximately $100,000 and $156,000, respectively. Shipping and Handling Costs The Company includes shipping and handling costs relating to the delivery of products directly from vendors to the Company in cost of sales. Shipping and handling costs, which include third-party delivery costs relating to the delivery of products from the Company to customers, are classified as a general and administrative expense. Shipping and handling costs included in general and administrative expense were $61,000 and $28,000 for the years ended December, 31, 2015 and 2014, respectively. Recent Accounting Pronouncements In May of 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09) “Revenue from Contracts with Customers.” ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflect the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements. In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (ASU 2015-17), which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as non-current. We have retrospectively adopted this standard as of December 31, 2015, and as a result there was no impact to the Company as all of the deferred tax assets for the year ended December 31, 2014 were classified as noncurrent. In February of 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases.” ASU 2016-02 provides new lease accounting guidance. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements. |
3. INVENTORIES
3. INVENTORIES | 12 Months Ended |
Dec. 31, 2015 | |
Inventory Disclosure [Abstract] | |
NOTE 3: INVENTORIES | Inventories consist of the following: December 31, 2015 December 31, 2014 Raw materials $ 13,024 $ 159,807 Finished goods 1,382,151 613,026 $ 1,395,175 $ 772,833 |
4. PROPERTY AND EQUIPMENT
4. PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 4. PROPERTY AND EQUIPMENT | Property and equipment consists of the following: December 31, December 31, 2015 2014 Furniture and fixtures $ 79,743 $ 69,555 Equipment 421,442 374,620 Vehicles Software Leasehold Improvements 44,344 34,999 15,554 44,344 12,167 8,630 596,082 509,316 Less: Accumulated depreciation 345,818 221,157 $ 250,264 $ 288,159 For the year ended December 31, 2015 and 2014, depreciation was $129,836 and $100,819, respectively. |
5. INTANGIBLE ASSETS
5. INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 5. INTANGIBLE ASSETS | Intangible assets consist of Patents and Trademarks related to our Binary Ionization Technology. All of these assets were pledged as collateral for the convertible notes as described below in Note 6. The patents are being amortized over the estimated remaining lives of the related patents. The trademarks have an indefinite life. Amortization expense was $369,508 and $369,508 for the year ended December 31, 2015 and 2014. Definite life intangible assets consist of the following: December 31, 2015 December 31, 2014 Intellectual Property and Patents $ 2,848,300 $ 2,848,300 Less: Accumulated Amortization 1,000,752 631,244 Intangible Assets, net $ 1,847,548 $ 2,217,056 Indefinite life intangible assets consist of the following: Trademarks $ 440,000 $ 440,000 Total Intangible Assets, net $ 2,287,548 $ 2,657,056 Approximate amortization over the next five years is as follows: Twelve Month Period Ending December 31, Amount 2016 $ 370,000 2017 370,000 2018 370,000 2019 370,000 2020 368,000 $ 1,848,000 |
6. CONVERTIBLE DEBT
6. CONVERTIBLE DEBT | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 6. CONVERTIBLE DEBT | In November 2012, the Company initiated a Private Placement offering a maximum of 240 Units of the CompanyÂ’s securities at a price of $25,000 per Unit or $6,000,000. The initial closing of the offering occurred in April 2013 as the bulk of the net proceeds of the offering were to be allocated for the asset purchase from L-3 Applied Technologies, Inc., which was finalized April 2013. The Company sold 202.96 Units for gross proceeds of $5,074,000 and issued 7,611,000 warrants in connection with the Units. Net proceeds amounted to $4,462,693 after expenses of offering totaling $611,307. In addition, the placement agent received 1,014,800 warrants valued at $165,180. The convertible notes were convertible, at the option of the note holder, into shares of our common stock at an initial conversion price of $.29 (which conversion price is subject to adjustment upon the occurrence of events specified in the Convertible Notes, including stock dividends, stock splits, certain fundamental corporate transactions, and certain issuances of common stock by the Company). The Warrants are exercisable into shares of Common Stock (the "Warrant Shares") at an initial exercise price of $0.30 (which may be subject to certain adjustments as set forth in the Warrants). The Company evaluated the warrants under ASC 815-40-15 due to the exercise price being adjustable upon certain events occurring. The company determined that the warrants are considered indexed to the CompanyÂ’s own stock and thus meet the scope exception under FASB ASC 815-10-15-74 and are therefore not considered a derivative. The estimated fair value of the warrants, which contain reset provisions, were calculated using the Monte Carlo valuation model. The Company recorded the warrantÂ’s relative fair value of $956,712 as an increase to additional paid in capital and a discount against the related debt. The Convertible Notes contained a provision whereby the conversion price is adjustable upon the occurrence of certain events, including the issuance of common stock or common stock equivalents at a price which is lower than the current conversion price. Under FASB ASC 815-40-15-5, the embedded conversion feature was not considered indexed to the CompanyÂ’s own stock and, therefore, did not meet the scope exception in FASB ASC 815-10-15 and thus needed to be accounted for as a derivative liability. The initial fair value of the embedded conversion feature was estimated at $7,316,092 and recorded as a derivative liability, resulting in an additional discount of $4,117,288 to the convertible notes and a finance charge of $3,198,804 included in the statement of operations for the year ended December 31, 2013. The fair value of the embedded conversion feature was estimated at the end of each quarterly reporting period using the Monte Carlo model. Inherent in the Monte Carlo Valuation model are assumptions related to expected volatility, remaining life, risk-free rate and expected dividend yield. For the Convertible Notes using a Monte Carlo model, we estimate the probability and timing of potential future financing and fundamental transactions as applicable. The Company applied various assumptions into the Monte Carlo Valuation models to determine the change in the fair value of the derivative liability as of the retirement dates of the convertible notes. The debt discount was amortized over the life of the convertible note using the effective interest method and was fully amortized upon the retirement of the convertible notes during the quarter ended June 30, 2015. In June 2015, the Company offered the noteholders options to convert to cash or at a reduced conversion price on the convertible notes from $.29 per share provided the conversion feature was exercised prior to June 30, 2015. If the note holder agreed to lock up the converted shares for six (6) months or an uplift to the NYSE or NASDAQ, whichever is shorter, the conversion price was reduced to $.26 per share. Absent the lock up, the note holder could convert at $.275 per share. All note holders except two converted at $.26. Pursuant to the terms of the conversion offer, an aggregate of $3,774,000 of the convertible notes and $124,000 of accrued interest were converted into 14,913,968 shares of the CompanyÂ’s common stock. The Company recognized an induced conversion cost of $930,383 related to all conversions and retirements. In addition, during the quarter ended June 30, 2015, an aggregate of $1,300,000 of the convertible notes and $87,500 in accrued interest were repaid in the form of cash. Convertible Notes The assumptions used in the Monte Carlo Models are as follows: June 30, December 31, 2015 2014 Inception Closing stock price $ 0.55-.64 $ 0.27 $ 0.13-0.55 Conversion price $ 0.29 $ 0.29 $ 0.29 Expected volatility 125 % 114 % 185%-190 % Remaining term (years) 0.09 - 0.11 0.58 2.30-2.07 Risk-free rate 0.00 % 0.13 % .25%-.43 % Expected dividend yield 0 % 0 % 0 % Warrants Inception Closing stock price 0.13-0.55 Conversion price 0.30 Expected volatility 250 % Remaining term (years) 5.30-5.09 Risk-free rate .76% -(1.61% ) Expected dividend yield 0 % Convertible notes consist of the following at December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Convertible notes $ - $ 5,074,000 Less: Debt discount - 3,996,033 Convertible notes, net $ - $ 1,077,967 |
7. FAIR VALUE
7. FAIR VALUE | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 7. FAIR VALUE | Level 3 financial instruments consist of certain embedded conversion features. The fair value of these embedded conversion features that have exercise reset features are estimated using a Monte Carlo valuation model. The Company adopted the disclosure requirements of ASU 2011-04, “Fair Value Measurements.” The following table summarizes the changes in fair value of the Company’s Level 3 financial instruments for the period ended December 31, 2015 and December 31, 2014. Upon the retirement of the convertible notes in June of 2015, the fair value of the derivative liability was $0. December 31, December 31, 2015 2014 Beginning Balance $ 1,728,883 $ 7,665,502 Change in fair value 3,810,955 (5,936,619 ) Reclassification to additional paid in capital due to retirement of convertible notes (5,539,838 ) - Ending Balance $ - $ 1,728,883 Changes in the unobservable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments. The significant unobservable input used in the fair value measurement is the estimation of the likelihood of the occurrence of a change to the conversion price based on the contractual terms of the financial instruments. A significant increase (decrease) in this likelihood would result in a higher (lower) fair value measurement. As of December 31, 2015, the balance of the derivative liability was $0 as the convertible notes were retired during the second quarter of 2015. |
8. STOCKHOLDERS' EQUITY
8. STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 8. STOCKHOLDERS' EQUITY | The Company’s Board of Directors may, without further action by the Company’s stockholders, from time to time, direct the issuance of any authorized but unissued or unreserved shares of preferred stock in series and at the time of issuance, determine the rights, preferences and limitations of each series. The holders of such preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of our common stock. Furthermore, the Board of Directors could issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of our common stock. Convertible Series A Preferred Stock The Company has authorized 1,000,000 shares of Convertible Series A Preferred Stock, $0.01 par value. At December 31, 2015 and 2014, there were 510,000 shares issued and outstanding, respectively. The Convertible Series A Preferred Stock is convertible at the rate of one share of common stock for one share of Convertible Series A Preferred Stock. Convertible Series B Preferred Stock The Company has authorized 4,000 shares of Convertible Series B Preferred Stock, $1,000 stated value, 7.5% Cumulative dividend. At December 31, 2015 and 2014, there were no shares issued and outstanding, respectively. Common Stock During the year ended December 31, 2014, the Company issued 326,035 shares of common stock valued at approximately $105,893 for professional services rendered. During the year ended December 31, 2014, the Company issued 44,319 shares of common stock valued at $15,000 to Harold Paul as payment for legal services rendered. During the year ended December 31, 2014, the Company issued 455,000 shares to the Rolyn Companies, Inc. (“Rolyn”) for labor and services support valued at $203,950 of which 230,000 shares valued at $128,800 were recorded as common stock to be issued at December 31, 2013. In addition, the Company issued 76,226 shares valued at $25,000 to a consultant for services rendered for the year ended December 31, 2014. During the year ended December 31, 2014, the Company issued 78,125 shares as consideration for payment of accrued compensation to the CEO amounting to $25,000. The Company also issued 100,000 shares to the COO amounting to $29,000 as part of his employment agreement. During the year ended December 31, 2014, the Company sold 377,778 shares of common stock at $.27 per share for gross proceeds of $102,000. In connection with the sale, the Company incurred a cash finder fee in the amount of $3,060 in addition to a finder’s fee paid in common stock of 11,332 shares valued at $3,060. During the year ended December 31, 2014, the Company sold 2,290,243 equity units. Each unit consisted of 1 share of common stock and 2.5 warrants. The warrants have an exercise price of $.29 per share and a term of five years. Gross proceeds to the Company amounted to $663,262. In connection with the sale, the Company incurred a cash finder’s fee in the amount of $66,347 in addition to a finder’s fee to be paid in common stock of 68,707 shares valued at $19,925. During the year ended December 31, 2015, the Company issued 1,094,679 shares of common stock valued at approximately $454,418 for services rendered (Note 11). In addition, the Company issued 225,000 shares of common stock valued at $101,250 to Harold Paul as payment for legal services rendered (Note 9). During the year ended December 31, 2015, the Company’s Board of Directors approved the issuance of 225,000 shares of common stock from the 2008 Plan valued at $101,250 as a bonus to Halden Shane, CEO, in August of 2015 (Note 9). During the year ended December 31, 2015, the Company issued 50,146 shares of common stock valued at $18,000 to Nick Jennings, CFO, as part of his annual compensation from the Company. In addition, the Company’s Board of Directors approved the issuance of 62,000 shares of common stock under the Company’s 2008 plan valued at $27,900 as a bonus in August of 2015 (Note 9). During the year ended December 31, 2015, the Company’s Board of Directors approved the issuance of 100,000 shares of common stock from the 2008 Plan valued at $45,000 as a bonus to Norris Gearhart, COO, in August of 2015 (Note 9). During the year ended December 31, 2015, the Company sold, 1,760,002 equity units. Each unit consisted of 1 share of common stock and 2.5 warrants. The warrants have an exercise price of $.29 per share and a term of seven years. Gross proceeds to the Company amounted to $510,213. In connection with the sale, the Company incurred a cash finder’s fee in the amount of $51,000 in addition to a finder’s fee to be paid in common stock of 52,800 shares valued at $15,312. During the year ended December 31, 2015, the Company issued 14,913,968 shares of common stock in connection with the conversion of the convertible notes and the related accrued interest amounting to $3,897,916 (Note 6). During the year ended December 31, 2015, the Company directly sold to two investors, 17,986,111 shares of common stock. Gross proceeds to the Company in connection with the shares sold amounted to approximately $8,225,000. Stock Options The Company issued 20,000 options valued at $8,723 to a director in January 2014. The options have an exercise price of $0.44 per share. The options expire in January 2024. The options were valued using the Black-Scholes model using the following assumptions: volatility: 233%; dividend yield: 0%; zero coupon rate: 1.72%; and a life of 10 years. The Company issued a total of 40,000 options valued at $10,798 to two directors in January 2015. The options have an exercise price of $0.27 per share. The options expire in January 2025. The options were valued using the Black-Scholes model using the following assumptions: volatility: 237%; dividend yield: 0%; zero coupon rate: 1.61%; and a life of 10 years. The following table summarizes stock options outstanding as of December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price Outstanding, beginning of period 60,000 $ 1.42 60,000 $ 1.42 Granted 40,000 0.27 20,000 0.44 Exercised - - (20,000 ) 0.44 Outstanding, end of period 100,000 $ 0.96 60,000 $ 1.42 Options outstanding and exercisable by price range as of December 31, 2015 were as follows: Outstanding Options Average Weighted Exercisable Options Range Number Remaining Contractual Life in Years Number Weighted Average Exercise Price $ 2.10 40,000 4.01 40,000 $ 2.10 $ 0.05 20,000 5.02 20,000 $ 0.05 $ 0.27 40,000 9.02 40,000 $ 0.27 100,000 100,000 Stock Warrants On February 11, 2014, as part of the employment agreements entered into with its three executive officers (CEO, President and COO), the Board of Directors approved the grant of 3,000,000 stock warrants to each of them as executive compensation. The warrants have a term of five years and vest as follows: 1,000,000 warrants will vest upon issuance; 1,000,000 warrants will vest as of February 11, 2015, and 1,000,000 warrants will vest as of February 11, 2016. The exercise price of the warrants is $0.30 per share based on the closing price of the Company’s common stock on the grant date of $0.32. If employment is terminated, the terms of any then outstanding warrant held by the holder shall extend for a period ending on the earlier of the date on which such warrant would otherwise expire or three months after such termination of employment and the warrant shall be exercisable to the extent it was exercisable as of the date of termination of employment. Any unvested warrants shall immediately vest on termination. The Company utilized the Black-Scholes method to fair value the 3,000,000 warrants received by these individuals totaling approximately $952,000 for each executive with the following assumptions: volatility, 233%; expected dividend yield, 0%; risk free interest rate, 1.54%; and a life of 5 years. The grant date fair value of each warrant was $0.32. Effective September 25, 2014, the President and COO resigned from their positions with the Company and accordingly, the remaining unvested warrants immediately vested. As of December 31, 2014, their warrants expired. On February 11, 2014, the Company’s Board of Directors approved the granting of 300,000 stock warrants to its CFO Chris Chipman as incentive compensation. Effective July 18, 2014, Chris Chipman resigned from his position of Chief Financial Officer of the Company and accordingly, his unvested share of warrants were deemed to be null and void. For the year ended December 31, 2014, the Company recorded approximately $2,531,000 in equity based compensation expense on the vested and accrued portion of the warrants issued to executives. During the year ended December 31, 2014, the Company issued 5,725,608 warrants in connection with the private placement of common stock equity units. See note 8 (common stock) for additional details. For the year ended December 31, 2015, the Company recognized equity based compensation of approximately $316,000 on the warrants issued to the CEO in connection with the employment agreement (Note 9). In addition, the Company recognized approximately $10,800 for director options (See Note 8-Stock Options), $1,350,000 to consultant’s (Note 9 and 11), and $30,000 on the vesting of warrants issued to the CFO on October 1, 2014 (Note 9). During the year ended December 31, 2015, the Company issued 4,400,005 warrants in connection with the equity units sold to investors. See note 8 (common stock) for additional details. In addition, the Company issued 3,225,000 warrants to two consultants during the year ended December 31, 2015. See note 11 (contracts and agreements) for additional details. The following table summarizes the outstanding common stock warrants as of December 31, 2015 and December 31, 2014: December 31, 2015 December 31, 2014 Number of Warrants Weighted Average Exercise Price Number of Warrants Weighted Average Exercise Price Outstanding, beginning of period 28,051,408 $ 0.23 19,325,800 $ 0.21 Granted 7,625,005 0.58 15,325,608 0.30 Expired - - (300,000 ) 0.77 Expired - - (6,300,000 ) 0.30 Outstanding, end of period 35,676,413 $ 0.30 28,051,408 $ 0.23 Warrants outstanding and exercisable by price range as of December 31, 2015 were as follows: Outstanding Warrants Exercisable Warrants Range Number Average Number Weighted Remaining Weighted Contractual Average Life in Years Exercise Price $ 0.01 1,575,000 1.53 1,575,000 $ 0.01 $ 0.05 975,000 1.62 975,000 $ 0.05 $ 0.15 7,750,000 1.80 7,750,000 $ 0.15 $ 0.26 100,000 2.49 100,000 $ 0.26 $ 0.29 10,125,613 4.80 10,125,613 $ 0.29 $ 0.30 11,925,800 2.75 10,825,800 $ 0.30 $ 0.33 75,000 2.75 75,000 $ 0.33 $ 0.50 75,000 2.31 75,000 $ 0.50 $ 0.62 75,000 2.50 75,000 $ 0.62 $ 1.00 3,000,000 4.34 3,000,000 $ 1.00 35,676,413 34,576,413 Unvested warrants outstanding as of December 31, 2015 were as follows: Unvested Warrants Weighted Average Exercise Price Number Average Weighted Remaining Contractual Life in Years $ 0.30 1,100,000 5.0 |
9. RELATED PARTY TRANSACTIONS
9. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 9. RELATED PARTY TRANSACTIONS | Employment Agreement On February 11, 2014, the Company entered into an amended employment agreement with its CEO that provides for a base salary of $36,000 per year. The agreement provided for an increase in the base salary to $120,000 if annual gross revenue exceeds five million and $175,000 if annual gross revenue were to exceed ten million on a calendar year basis. Any bonuses awarded will be based upon the Company’s performance and be made at the discretion of the Board of Directors. The CEO will also have the right to receive expense reimbursements and certain employee benefits. The terms of the employment agreement will be three years terminating on December 31, 2016. In addition, the Company’s board of directors approved the issuance of 225,000 shares from the 2008 Plan valued at $101,250 as a bonus to Dr. Shane in August of 2015. In January of 2016, the Company entered into a new agreement with its CEO (See Note 15). On September 25, 2014, the Company appointed Norris Gearhart as Principal Operating Officer of the Company and entered into an employment agreement. The agreement provides for a base salary of $126,000 per year and performance based bonuses. In September of 2015, the Company entered into a new agreement with Mr. Gearhart as Principal Operating Officer of the Company. The new agreement provides for a base salary of $145,000 per year and performance based bonuses. In addition, the Company’s board of directors approved the issuance of 100,000 shares from the 2008 Plan valued at $45,000 as a bonus to Mr. Gearhart in August of 2015. The Company appointed Nick Jennings as its Principal Financial Officer effective September 25, 2014. Mr. Jennings employment with the Company commenced on October 1, 2014. The employment agreement between Mr. Jennings and the Company provides for an annual base salary of $60,000 to be paid in the form of cash and $24,000 to be paid in the form of the Company’s restricted stock. As part of Mr. Jennings’s agreement, 300,000 warrants were issued with a term of five years vesting 100,000 upon the grant date (October 1, 2014), 100,000 on October 1, 2015 and 100,000 on October 1, 2016. The exercise price of the warrant is $0.30 per share based on the volume weighted average price of the Company’s common stock for the five days prior to the grant date. In September of 2015, the Company entered into a new agreement with Mr. Jennings as Principal Financial Officer of the Company. The new agreement provides for a base salary of $132,000 per year and performance based bonuses. The new agreement also provides for 100,000 stock warrants with an exercise price of $.50 per share to be issued January of 2016. In addition, the Company’s board of directors approved the issuance of 62,000 shares from the 2008 Plan valued at $27,900 as a bonus to Mr. Jennings in August of 2015. In August 2015, the Company’s board of directors approved the issuance of 225,000 shares of common stock valued at $101,250 to Harold Paul as payment for legal services rendered. In addition, Mr. Paul received cash compensation for the year ended December 31, 2015 in the amount of $60,000 in exchange for legal services rendered. During the year ended December 31, 2014, the Company issued 44,319 shares of common stock valued at $15,000 and cash in the amount of $44,000 to Harold Paul as payment for legal services rendered. In September of 2015, the Company issued 100,000 shares of restricted stock valued at $47,000 as an incentive to accept the position as the Chief Compliance and Regulatory Officer. The Chief Compliance and Regulatory Officer is the daughter of the CEO. Consulting Agreement In May of 2015, the Company entered into a consulting agreement that provides for the issuance of 600,000 shares of restricted common stock which was issued in July of 2015 and valued at $264,000. In addition, the agreement provides for the issuance of 3,000,000 common stock warrants that vest upon issuance with an exercise price of $1.00 and have a term of 5 years. The Company utilized the Black-Scholes method to fair value the 3,000,000 warrants with the following assumptions: volatility, 191%; expected dividend yield, 0%; risk free interest rate, 1.49%; and a life of 5 years. The grant date fair value of each warrant was $0.42. For the year ended December 31, 2015, the Company recognized approximately $1,259,000 in equity based compensation on the warrants issued. In December of 2015, the Company paid a sales commissions to the consultant in the amount of $152,442. During 2015, the consultant was a shareholder with greater than 5% ownership in the Company During the year ended December 31, 2015, the Company made sales in the amount of $256,285 to three entities under common control and owned by a Consultant that performed services for the Company during 2015. As of December 31, 2015, there was $210,686 in accounts receivables due from these three entities. During 2015 the consultant was the acting director of the TOMI Service Network. Distribution and Licensing Agreement On March 21, 2014, the Company entered into a distribution and licensing agreement with Plascencia Universal, S. de R.L. de C.V. (“Plascencia Universal”), a Mexican company that will act as the exclusive distributor of TOMI’s products and services in Mexico. The principal of Plascencia Universal is also the broker for the Company’s insurance policies and was appointed a director of the Company. In April of 2015, the Company modified its agreement with Plascencia Universal with respect to the license fee included in the original agreement. In December of 2015, the principal of Plascencia Universal resigned from the board of directors. |
10. COMMITMENTS AND CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 10. COMMITMENTS AND CONTINGENCIES | Lease Commitments In September of 2014 the Company entered into a lease agreement for office and warehouse space in Fredrick Maryland. As part of the lease agreement, the Company received a rent holiday in the first 5 months of the lease. The lease also provides for an escalation clause where the Company will be subject to an annual rent increase of 3%, year over year. The lease expires on January 31, 2018. The Company accounts for the lease using the straight line method and recorded $45,709 in rent expense for the year ended December 31, 2015. Approximate minimum annual rents under the lease are as follows: Twelve Month Period Ending December 31, Amount 2016 $ 52,000 2017 53,000 2018 5,000 $ 110,000 Legal Contingencies We may become a party to litigation in the normal course of business. In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon our financial condition, results of operations or cash flows. Product Liability As of December 31, 2015 and 2014, there were no claims against the Company for product liability. |
11. CONTRACTS AND AGREEMENTS
11. CONTRACTS AND AGREEMENTS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
11. CONTRACTS AND AGREEMENTS | In September 2014, the Company entered into a Sales and Distribution Agreement, superseding previous agreements, with TOMI Panama S.A. (“TOMI Panama”) covering Panama. TOMI Panama is the exclusive distributor of the Company’s products and services within the country of Panama. For the years ended December 31, 2015 and 2014, the Company made sales and provided services to TOMI Panama for approximately $118,000 and $400,000, respectively. On October 15, 2014, the Company entered into a manufacturing and development agreement with RG Group, Inc. The agreement does not provide for any minimum purchase agreements and is for a term of 2 years. For the years ended December 31, 2015 and 2014, RG Group, Inc. manufactured substantially all of the Company’s equipment. At December 31, 2015, the Company maintained deposits on outstanding purchase orders in the amount of $442,358. In January of 2015, the Company entered into a consulting agreement which has since been terminated that provided for a fee based on revenue received from existing and prospective clients assigned and revenue from sales related to customers the consultant finds for the Company. The agreement also provided for the issuance of 100,000 shares of the Company’s common restricted stock that were issued in February of 2015 and valued at $25,000. In addition, the agreement provides for the issuance of 75,000 common stock warrants on a quarterly basis that vest upon issuance with a strike price equal to the VWAP for the 5 day period prior to the close of the quarter with a term of 3 years. The exercise price for the warrants issued was $0.50, $0.62 and $0.33. During the year ended December 31, 2015, the Company utilized the Black-Scholes method to fair value the 225,000 warrants with the following range of assumptions: volatility, 157%-174%; expected dividend yield, 0%; risk free interest rate, 1.01%-1.42%; and a life of 3 years. The grant date fair value of the warrant issued was $0.37, $0.54 and $0.30. For the year ended December 31, 2015, the Company recognized approximately $91,000 in equity based compensation on the issuance of the warrants. This consulting agreement was terminated October 1, 2015 when the consultant accepted a full time employment position with the Company. In May 2015, the Company was awarded a grant by the United States Agency for International Development (“USAID”) in the amount of $559,000 for the development of SteraMistTM Mobile Decontamination Chambers to fight the Ebola epidemic. The grant is based on milestones set forth on the agreement between the Company and USAID. During the year ended December 31, 2015 the Company met the first five milestones and received gross proceeds from the grant in the amount of $537,272. The Company has incurred costs in connection with the grant through December 31, 2015 in the amount of $326,769. The proceeds received as part of the grant in excess of the costs incurred has been presented on the Company’s balance sheet as a liability in the amount of $210,503 as of December 31, 2015. |
12. INCOME TAXES
12. INCOME TAXES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Note 12. INCOME TAXES | The CompanyÂ’s income tax expense consisted of: December 31, December 31, 2015 2014 Current: United States $ - $ - Foreign - - - - Deferred: United States - - Foreign - - - - Total $ - $ - The CompanyÂ’s net income (loss) before income tax consisted of: December 31, December 31, 2015 2014 United States $ (12,176,319 ) $ 268,435 Foreign - - Total $ (12,176,319 ) $ 268,435 The CompanyÂ’s income tax expense differed from the amounts computed by applying the United States statutory corporate income tax rate for the following reasons: December 31, December 31, 2015 2014 Income (Loss) before income tax $ ($12,176,319 ) $ 268,435 US statutory corporate income tax rate 39.45 % 34.00 % Income tax expense computed at US statutory corporate income tax rate (4,803,558 ) 91,268 Reconciling items: Change in valuation allowance on deferred tax assets 592,550 698,631 Incentive stock options and warrants 673,172 872,000 Finance charges related to convertible notes 1,776,059 116,447 Amortized debt discount 269,787 269,787 Meals and Entertainment 5,527 4,079 Change in fair value of derivative liability 1,503,422 (2,018,450 ) Other (16,958 ) (33,762 ) Income tax expense $ - $ - During 2015, the Company increased its US statutory corporate income tax rate from 34% to 39.45% as result of the the income allocated to the various states it operates and files state income tax returns in. Components of the CompanyÂ’s deferred income tax assets (liabilities) are as follows: December 31, December 31, 2015 2014 Deferred tax assets: Reserve for Bad Debt $ 17,750 $ - Inventory Capitalization 51,000 - Deferred Rent 5,800 - Intangible Assets 229,000 - Net operating losses 3,392,000 3,042,000 Valuation Allowance (3,634,550 ) (3,042,000 ) Deferred Tax Assets 61,000 - Deferred tax liabilities: Property Plant and Equipment $ (61,000 ) $ - Net Deferred Tax Assets and Liabilities $ - $ - Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits, which are, on a more likely than not basis, not expected to be realized; in accordance with ASC guidance for income taxes. As of December 31, 2015, we recorded a valuation allowance of $3,634,550 for the portion of the deferred tax asset that we do not expect to be realized. The valuation on our net deferred taxes increased by $592,550 during the year ended December 31, 2015, primarily due to additional U.S. deferred tax assets incurred in the current year that cannot be realized. Management believes that based on the available information, it is more likely than not that the U.S. deferred tax assets will not be realized, such that a valuation allowance is required against U.S. deferred tax assets. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. For income tax purposes in the United States, the Company had available federal net operating loss carryforwards ("NOL") as of December 31, 2015 and 2014 of approximately $8,890,000 and $7,516,000 respectively to reduce future federal taxable income. For income tax purposes in the United States, the Company had available state net operating loss carryforwards ("NOL") as of December 31, 2015 and 2014 of approximately $6,779,000 and $5,405,000 respectively to reduce future state taxable income. If any of the NOL's are not utilized, they will expire at various dates through 2035. There may be certain limitations as to the future annual use of the NOLs due to certain changes in the Company's ownership. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. As of December 31, 2015 and 2014, the management of the Company determined there were no reportable uncertain tax positions. |
13. COMMON STOCK TO BE ISSUED
13. COMMON STOCK TO BE ISSUED | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
13. COMMON STOCK TO BE ISSUED | As of December 31, 2014, the Company was obligated to issue 155,619 shares of common stock valued at approximately $36,000 primarily to certain vendors and consultants. As of December 31, 2015, the Company was obligated to issue 202,000 shares of common stock valued at approximately $53,000 primarily to certain vendors and consultants. |
14. CUSTOMER CONCENTRATION
14. CUSTOMER CONCENTRATION | 12 Months Ended |
Dec. 31, 2015 | |
Risks and Uncertainties [Abstract] | |
14. CUSTOMER CONCENTRATION | The Company had certain customers whose revenue individually represented 10% of more of the CompanyÂ’s total revenue, or whose accounts receivable balances individually represented 10% of more of the CompanyÂ’s accounts receivable. For the year ended December 31, 2015, two customers accounted for 26% of revenue. At December 31, 2015, three customers accounted for 42% of accounts receivable. |
15. SUBSEQUENT EVENTS
15. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
NOTE 15. SUBSEQUENT EVENTS | The Company has evaluated subsequent events through the date the financial statements were issued and up to the time of filing of the financial statements with the Securities and Exchange Commission. In January of 2016, the Company entered into a new employment agreement with its CEO. The agreement provides for a base annual salary of $360,000. The agreement also provides for the quarterly issuance of 250,000 options to purchase the CompanyÂ’s common stock in 2016 with an exercise price equal to the three day trailing VWAP of the stock. The Company appointed Mr. Walter C. Johnsen as a Director on January 29, 2016. The term of his agreement as director commenced on February 1, 2016 for 1 year and until a successor is elected, or resignation or removal. The agreement between the Company and Mr. Johnsen provides for an annual fee in the amount of $25,000 paid on a quarterly basis and an annual grant of 25,000 options to purchase shares of the CompanyÂ’s common stock. The Company issued 25,000 options to Mr. Johnsen in February of 2016. The options have an exercise price of $0.55 per share and expire in January 2026. The Company appointed Ms. Kelly J. Anderson as a Director on January 29, 2016. Ms. Anderson will serve as the chair of the CompanyÂ’s audit committee. The term of her agreement as director commenced on February 1, 2016 for 1 year and until a successor is elected, or resignation or removal. The agreement between the Company and Ms. Anderson provides for an annual fee in the amount of $26,000 paid on a quarterly basis and an annual grant of 25,000 options to purchase shares of the CompanyÂ’s common stock. The Company issued 25,000 options to Ms. Anderson in February of 2016. The options have an exercise price of $0.55 per share and expire in January 2026. The Company appointed Mr. Edward J. Fred as a Director on January 29, 2016. The term of his agreement as director commenced on February 1, 2016 for 1 year and until a successor is elected, or resignation or removal. The agreement between the Company and Mr. Fred provides for an annual fee in the amount of $25,000 paid on a quarterly basis and an annual grant of 25,000 options to purchase shares of the CompanyÂ’s common stock. The Company issued 25,000 options to Mr. Fred in February of 2016. The options have an exercise price of $0.55 per share and expire in January 2026. In January 29, 2016, the board adopted the 2016 Equity Plan subject to its approval by stockholders. The 2016 Plan provides for authorizes the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and performance units / shares. Up to 5,000,000 shares of the Common Stock are authorized for issuance under the 2016 Plan. Shares issued under the 2016 Plan may be either authorized but unissued shares, treasury shares, or any combination thereof. Provisions in the 2016 Plan permit the reuse or reissuance by the 2016 Plan of shares of Common Stock for numerous reasons, including, but not limited to, shares of Common Stock underlying canceled, expired, or forfeited awards of stock-based compensation and stock appreciation rights paid out in the form of cash. Stock-based compensation will typically be awarded in consideration for the future performance of services to the Company. All recipients of awards under the 2016 Plan are required to enter into award agreements with the Company at the time of the award; awards under the 2016 Plan are expressly conditioned upon such agreements. |
2. SUMMARY OF SIGNIFICANT ACC22
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Policies | |
Principles of Consolidation | The accompanying consolidated financial statements include the accounts of TOMI Environmental Solutions, Inc. (a Florida Corporation) (TOMI-Florida), and its wholly-owned subsidiary, TOMI Environmental Solutions, Inc. (a Nevada Corporation) (TOMI-Nevada). The CompanyÂ’s 55% owned subsidiary, TOMI Environmental-China (TOMI-China), has been dormant since its formation in April 2011. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Reclassification of Accounts | Certain reclassifications have been made to prior-year comparative financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or financial position. |
Use of Estimates | The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the accompanying consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, fair values of financial instruments, intangible assets, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities. |
Fair Value Measurements | The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv)willing to transact. The guidance describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities. The CompanyÂ’s financial instruments include cash and equivalents, accounts receivable, and accounts payable and accrued expenses. All these items were determined to be Level 1 fair value measurements. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments. At December 31, 2014, the recorded value of convertible debt approximates its fair value as the terms and rates approximate market rates (See also Note 6). |
Cash and Cash Equivalents | For purposes of the statement of cash flows, cash and cash equivalents includes cash on hand held at financial institutions and other liquid investments with original maturities of three months or less. |
Accounts Receivable | Our accounts receivable are typically from credit worthy customers or, for international customers are supported by pre-payments. For those customers to whom we extend credit, we perform periodic evaluations of them and maintain allowances for potential credit losses as deemed necessary. We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Bad debt expense for the years ended December 31, 2015 and 2014 was $39,081 and $134,540, respectively. At December 31, 2015 and 2014, the allowance for doubtful accounts was $45,000 and $37,500, respectively. As of December 31, 2015, three customers accounted for 42% of net accounts receivable. Two customers accounted for 26% of net revenues for the year ended December 31, 2015. |
Inventories | Inventories are valued at the lower of cost or market using the first-in, first-out (”FIFO”) method. Inventories consist primarily of finished goods and raw materials. At December 31, 2015 and 2014, we did not have a reserve for slow-moving or obsolete inventory. |
Deposits on Merchandise | Deposits on merchandise primarily consist of amounts incurred or paid in advance of the receipt of inventory. (See note 11). |
Property and Equipment | We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, generally three to five years. Depreciation for equipment, furniture and fixtures and vehicles commences once placed in service for its intended use. Leasehold improvements are amortized using the straight-line method over the lives of the respective leases or service lives of the improvements, whichever is shorter. |
Deferred Financing Costs | The Company follows authoritative guidance for accounting for financing costs as it relates to convertible debt issuance cost. These costs are deferred and amortized over the term of the debt period or until redemption of the convertible debentures. Amortization of deferred financing costs amounted to approximately $200,000 and $342,000 for the year ended December 31, 2015 and 2014, respectively. |
Accounts Payable | As of December 31, 2015 and December 31, 2014, one vendor accounted for approximately 72% and 44% of total accounts payable. One vendor accounted for 84% of cost of goods sold for the year ended December 31, 2015. One vendor accounted for 82% of cost of goods sold for the year ended December 31, 2014. |
Accrued Warranties | Accrued warranties represent the estimated costs that will be incurred during the warranty period of our products. We make an estimate of expected costs that will be incurred by us during the warranty period and charge that expense to the consolidated statement of operations at the date of sale. Our manufacturer assumes warranty against product defects for one year which we extend to our customers. We assume responsibility for product reliability and results. As of December 31, 2015 and 2014, the Company did not establish a reserve because warranty costs are covered by the CompanyÂ’s manufacturer. |
Income taxes | Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits, which are, on a more likely than not basis, not expected to be realized; in accordance with ASC guidance for income taxes. Net deferred tax benefits have been reserved at December 31, 2015 and 2014. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. |
Income (Loss) Per Share | Basic income (loss) per share is computed by dividing the CompanyÂ’s net income (loss) by the weighted average number of common shares outstanding during the period presented. Diluted income per share is based on the treasury stock method and includes the effect from potential issuance of common stock such as shares issuable pursuant to the exercise of warrants and conversions of debentures. Potentially dilutive securities as of December 31, 2015, consisted of 35,676,413 common shares from outstanding warrants, 100,000 common shares from options and 510,000 common shares from convertible Series A preferred stock. Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive. Potentially dilutive securities as of December 31, 2014, consisted of 17,496,552 common shares from convertible debentures, 28,051,408 common shares from outstanding warrants (including 7,611,000 warrants issued in conjunction with the above convertible notes), 60,000 common shares from options and 510,000 common shares from convertible Series A preferred stock. The following provides a reconciliation of the shares used in calculating the per share amounts for the periods presented: For the years Ended December 31, 2015 2014 Numerator: Net Income (Loss) $ (12,176,319 ) $ 268,435 Denominator: Basic weighted-average shares 102,840,185 81,281,030 Effect of dilutive securities Warrants - 28,051,408 Convertible Debt - 17,496,552 Options - 60,000 Preferred Stock - 510,000 Diluted Weighted Average Shares 102,840,185 127,398,990 Income (Loss) per common share Basic $ (0.12 ) $ 0.00 Diluted $ (0.12 ) $ 0.00 Note: Warrants, Options, and Preferred Stock for the year ended December 31, 2015, are not included in the computation of diluted weighted average shares as such inclusion would be anti-dilutive. Loss from Operations Data: For the years Ended December 31, 2015 2014 Loss from Operations $ (2,985,624 ) $ (3,810,211 ) Basic and Diluted Weighted Average Shares 102,840,185 81,281,030 Basic and Diluted Loss per Share $ (0.03 ) $ (0.05 ) |
Revenue Recognition | For revenue from services and product sales, the Company recognized revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (SAB No. 104), which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB No. 101). SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) service has been rendered or delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgment regarding the fixed nature of the selling prices of the services rendered or products delivered and the collectability of those amounts. Provisions for discounts to customers, and allowance, and other adjustments will be provided for in the same period the related sales are recorded. |
Stock-Based Compensation | The Company accounts for stock-based compensation in accordance with Financial Accounting Standards Board (“FASB”), ASC 718, Compensation- “Stock Compensation.” Under the provisions of FASB ASC 718, stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period. The Company had one active stock-based compensation plan (“2008 Plan”), TOMI Environmental Solutions, Inc. Stock Option and Restricted Stock Plan (the “Plan”). The Plan calls for the Company, through a committee of its Board of Directors, to issue up to 2,500,000 shares of restricted common stock or stock options. The Company generally issues grants to its employees, consultants, and board members. Stock options are granted with an exercise price equal to the closing price of its common stock on the date of the grant with a term no greater than 10 years. Generally, stock options vest over two to four years. Incentive stock options granted to shareholders who own 10% or more of the Company’s outstanding equity securities are granted at an exercise price that may not be less than 110% of the closing price of the Company’s common stock on the date of grant and have a term no greater than five years. On the date of a grant, the Company determines the fair value of the stock option award and recognizes compensation expense over the requisite service period, which is generally the vesting period of the award. The fair value of the stock option award is calculated using the Black-Scholes option-pricing model. On August 25, 2015 the plan was terminated. On January 29, 2016, the board adopted the 2016 Equity Plan subject to its approval by stockholders(see note 15). |
Concentrations of Credit Risk | Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains cash balances at financial institutions which exceed the current Federal Deposit Insurance Corporation (“FDIC”) limit of $250,000 at times during the year. |
Long-Lived Assets Including Acquired Intangible Assets | The Company assesses long-lived assets for potential impairments at the end of each year, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset. In evaluating long-lived assets for impairment, the Company measures recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If the CompanyÂ’s long-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value. The Company bases its calculations of the estimated fair value of its long-lived assets on the income approach. For the income approach, The Company uses an internally developed discounted cash flow model that include, among others, the following assumptions: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. We have had no long-lived asset impairment charges for the years ended December 31, 2015 and 2014. |
Advertising and Promotional Expenses | The Company expenses advertising costs in the period in which they are incurred. For the years ended December 31, 2015 and 2014, advertising and promotional expenses were approximately $52,000 and $11,000, respectively. |
Research and Development Expenses | The Company expenses research and development expenses in the period in which they are incurred. For the years ended December 31, 2015 and 2014, research and development expenses were approximately $100,000 and $156,000, respectively. |
Shipping and Handling Costs | The Company includes shipping and handling costs relating to the delivery of products directly from vendors to the Company in cost of sales. Shipping and handling costs, which include third-party delivery costs relating to the delivery of products from the Company to customers, are classified as a general and administrative expense. Shipping and handling costs included in general and administrative expense were $61,000 and $28,000 for the years ended December, 31, 2015 and 2014, respectively. |
Recent Accounting Pronouncements | In May of 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09) “Revenue from Contracts with Customers.” ASU 2014-09 supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605)”, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflect the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2014-09 on our consolidated financial statements. In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (ASU 2015-17), which simplifies the presentation of deferred income taxes by requiring that deferred tax assets and liabilities be classified as non-current. We have retrospectively adopted this standard as of December 31, 2015, and as a result there was no impact to the Company as all of the deferred tax assets for the year ended December 31, 2014 were classified as noncurrent. In February of 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases.” ASU 2016-02 provides new lease accounting guidance. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements. |
2. SUMMARY OF SIGNIFICANT ACC23
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Tables | |
Schedule of earning per share | For the years Ended December 31, 2015 2014 Numerator: Net Income (Loss) $ (12,176,319 ) $ 268,435 Denominator: Basic weighted-average shares 102,840,185 81,281,030 Effect of dilutive securities Warrants - 28,051,408 Convertible Debt - 17,496,552 Options - 60,000 Preferred Stock - 510,000 Diluted Weighted Average Shares 102,840,185 127,398,990 Income (Loss) per common share Basic $ (0.12 ) $ 0.00 Diluted $ (0.12 ) $ 0.00 |
Schedule of weighted average shares | For the years Ended December 31, 2015 2014 Loss from Operations $ (2,985,624 ) $ (3,810,211 ) Basic and Diluted Weighted Average Shares 102,840,185 81,281,030 Basic and Diluted Loss per Share $ (0.03 ) $ (0.05 ) |
3. INVENTORIES (Tables)
3. INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | December 31, 2015 December 31, 2014 Raw materials $ 13,024 $ 159,807 Finished goods 1,382,151 613,026 $ 1,395,175 $ 772,833 |
4. PROPERTY AND EQUIPMENT (Tabl
4. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property And Equipment Tables | |
PROPERTY AND EQUIPMENT | December 31, December 31, 2015 2014 Furniture and fixtures $ 79,743 $ 69,555 Equipment 421,442 374,620 Vehicles Software Leasehold Improvements 44,344 34,999 15,554 44,344 12,167 8,630 596,082 509,316 Less: Accumulated depreciation 345,818 221,157 $ 250,264 $ 288,159 |
5. INTANGIBLE ASSETS AND ASSET
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets And Asset Acquisition Tables | |
Definite life intangible assets | December 31, 2015 December 31, 2014 Intellectual Property and Patents $ 2,848,300 $ 2,848,300 Less: Accumulated Amortization 1,000,752 631,244 Intangible Assets, net $ 1,847,548 $ 2,217,056 |
Indefinite life intangible assets | Trademarks $ 440,000 $ 440,000 Total Intangible Assets, net $ 2,287,548 $ 2,657,056 |
Approximate amortization over the next five years | Twelve Month Period Ending December 31, Amount 2016 $ 370,000 2017 370,000 2018 370,000 2019 370,000 2020 368,000 $ 1,848,000 |
6. CONVERTIBLE DEBT (Tables)
6. CONVERTIBLE DEBT (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Convertible Debt Tables | |
Convertible Notes and Warrants potential future financing and fundamental transactions | June 30, December 31, 2015 2014 Inception Closing stock price $ 0.55-.64 $ 0.27 $ 0.13-0.55 Conversion price $ 0.29 $ 0.29 $ 0.29 Expected volatility 125 % 114 % 185%-190 % Remaining term (years) 0.09 - 0.11 0.58 2.30-2.07 Risk-free rate 0.00 % 0.13 % .25%-.43 % Expected dividend yield 0 % 0 % 0 % Warrants Inception Closing stock price 0.13-0.55 Conversion price 0.30 Expected volatility 250 % Remaining term (years) 5.30-5.09 Risk-free rate .76% -(1.61% ) Expected dividend yield 0 % |
Convertible notes | December 31, 2015 December 31, 2014 Convertible notes $ - $ 5,074,000 Less: Debt discount - 3,996,033 Convertible notes, net $ - $ 1,077,967 |
7. FAIR VALUE (Tables)
7. FAIR VALUE (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Fair Value Tables | |
Financial instruments | December 31, December 31, 2015 2014 Beginning Balance $ 1,728,883 $ 7,665,502 Change in fair value 3,810,955 (5,936,619 ) Reclassification to additional paid in capital due to retirement of convertible notes (5,539,838 ) - Ending Balance $ - $ 1,728,883 |
8. STOCKHOLDERS' EQUITY (Tables
8. STOCKHOLDERS' EQUITY (Tables) - Options [Member] | 12 Months Ended |
Dec. 31, 2015 | |
Summary of stock options outstanding | December 31, 2015 December 31, 2014 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price Outstanding, beginning of period 60,000 $ 1.42 60,000 $ 1.42 Granted 40,000 0.27 20,000 0.44 Exercised - - (20,000 ) 0.44 Outstanding, end of period 100,000 $ 0.96 60,000 $ 1.42 |
Options outstanding and exercisable by price range | Outstanding Options Average Weighted Exercisable Options Range Number Remaining Contractual Life in Years Number Weighted Average Exercise Price $ 2.10 40,000 4.01 40,000 $ 2.10 $ 0.05 20,000 5.02 20,000 $ 0.05 $ 0.27 40,000 9.02 40,000 $ 0.27 100,000 100,000 |
Summary of outstanding common stock warrants | December 31, 2015 December 31, 2014 Number of Warrants Weighted Average Exercise Price Number of Warrants Weighted Average Exercise Price Outstanding, beginning of period 28,051,408 $ 0.23 19,325,800 $ 0.21 Granted 7,625,005 0.58 15,325,608 0.30 Expired - - (300,000 ) 0.77 Expired - - (6,300,000 ) 0.30 Outstanding, end of period 35,676,413 $ 0.30 28,051,408 $ 0.23 |
Warrants outstanding and exercisable by price range | Outstanding Warrants Exercisable Warrants Range Number Average Number Weighted Remaining Weighted Contractual Average Life in Years Exercise Price $ 0.01 1,575,000 1.53 1,575,000 $ 0.01 $ 0.05 975,000 1.62 975,000 $ 0.05 $ 0.15 7,750,000 1.80 7,750,000 $ 0.15 $ 0.26 100,000 2.49 100,000 $ 0.26 $ 0.29 10,125,613 4.80 10,125,613 $ 0.29 $ 0.30 11,925,800 2.75 10,825,800 $ 0.30 $ 0.33 75,000 2.75 75,000 $ 0.33 $ 0.50 75,000 2.31 75,000 $ 0.50 $ 0.62 75,000 2.50 75,000 $ 0.62 $ 1.00 3,000,000 4.34 3,000,000 $ 1.00 35,676,413 34,576,413 |
Unvested warrants outstanding | Unvested Warrants Weighted Average Exercise Price Number Average Weighted Remaining Contractual Life in Years $ 0.30 1,100,000 5.0 |
10. COMMITMENTS AND CONTINGEN30
10. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
Minimum annual rents | Twelve Month Period Ending December 31, Amount 2016 $ 52,000 2017 53,000 2018 5,000 $ 110,000 |
12. INCOME TAXES (Tables)
12. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes Details 2 | |
Schedule of Components of Income Tax Expense | December 31, December 31, 2015 2014 Current: United States $ - $ - Foreign - - - - Deferred: United States - - Foreign - - - - Total $ - $ - |
Schedule of Income before Income Tax, Domestic and Foreign | December 31, December 31, 2015 2014 United States $ (12,176,319 ) $ 268,435 Foreign - - Total $ (12,176,319 ) $ 268,435 |
Schedule of Effective Income Tax Rate Reconciliation | December 31, December 31, 2015 2014 Income (Loss) before income tax $ ($12,176,319 ) $ 268,435 US statutory corporate income tax rate 39.45 % 34.00 % Income tax expense computed at US statutory corporate income tax rate (4,803,558 ) 91,268 Reconciling items: Change in valuation allowance on deferred tax assets 592,550 698,631 Incentive stock options and warrants 673,172 872,000 Finance charges related to convertible notes 1,776,059 116,447 Amortized debt discount 269,787 269,787 Meals and Entertainment 5,527 4,079 Change in fair value of derivative liability 1,503,422 (2,018,450 ) Other (16,958 ) (33,762 ) Income tax expense $ - $ - |
Schedule of Deferred Tax Assets and Liabilities | December 31, December 31, 2015 2014 Deferred tax assets: Reserve for Bad Debt $ 17,750 $ - Inventory Capitalization 51,000 - Deferred Rent 5,800 - Intangible Assets 229,000 - Net operating losses 3,392,000 3,042,000 Valuation Allowance (3,634,550 ) (3,042,000 ) Deferred Tax Assets 61,000 - Deferred tax liabilities: Property Plant and Equipment $ (61,000 ) $ - Net Deferred Tax Assets and Liabilities $ - $ - |
2. SUMMARY OF SIGNIFICANT ACC32
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Numerator: | ||
Net Income (Loss) | $ (12,176,319) | $ 268,436 |
Denominator: | ||
Basic weighted-average shares | 102,840,185 | 81,281,030 |
Effect of dilutive securities | ||
Warrants | 0 | 28,051,408 |
Convertible Debt | 0 | 17,496,552 |
Options | 0 | 60,000 |
Preferred Stock | 0 | 510,000 |
Diluted Weighted Average Shares | 102,840,185 | 127,398,990 |
Net Income (Loss) | ||
Basic | $ (0.12) | $ 0 |
Diluted | $ (0.12) | $ 0 |
2. SUMMARY OF SIGNIFICANT ACC33
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Summary Of Significant Accounting Policies Details 1 | ||
Loss from Operations | $ (2,985,624) | $ (3,810,210) |
Basic and Diluted Weighted Average Shares | 102,840,185 | 81,281,030 |
Basic and Diluted Loss per Share | $ (0.03) | $ (0.05) |
2. SUMMARY OF SIGNIFICANT ACC34
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Summary Of Significant Accounting Policies Details Narrative | ||
Amortization of deferred financing cost | $ 200,000 | $ 342,000 |
Advertising and promotional expenses | $ 52,000 | $ 11,000 |
Potentially dilutive securities, convertible debentures | 17,496,552 | |
Potentially dilutive securities, outstanding warrants | 35,676,413 | 28,051,408 |
Warrants issued in conjunction with the above convertible notes | 7,611,000 | |
Potentially dilutive securities, outstanding options | 100,000 | 60,000 |
Potentially dilutive securities, convertible Series A preferred stock | 510,000 | 510,000 |
FDIC Expense | $ 250,000 | $ 250,000 |
3. INVENTORIES (Details)
3. INVENTORIES (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 13,024 | $ 159,807 |
Finished goods | 1,382,151 | 613,026 |
Inventory, end of period | $ 1,395,175 | $ 772,833 |
4. PROPERTY AND EQUIPMENT (Deta
4. PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Property And Equipment Details | ||
Furniture and fixtures | $ 79,743 | $ 69,555 |
Equipment | 421,442 | 374,620 |
Vehicles | 44,344 | 44,344 |
Software | 34,999 | 12,167 |
Leasehold Improvements | 15,554 | 8,630 |
Property and Equipment Gross | 596,082 | 509,316 |
Less: Accumulated depreciation | 345,818 | 221,157 |
Property and Equipment Net | $ 250,264 | $ 288,159 |
4. PROPERTY AND EQUIPMENT (De37
4. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Property and Equipment | ||
Depreciation | $ 129,836 | $ 100,819 |
5. INTANGIBLE ASSETS AND ASSE38
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
INTANGIBLE ASSETS | ||
Intellectual property and patents | $ 2,848,300 | $ 2,848,300 |
Less: Accumulated Amortization | 1,000,752 | 631,244 |
Intangible Assets, net | $ 1,847,548 | $ 2,217,056 |
5. INTANGIBLE ASSETS AND ASSE39
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Details 1) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Intangible Assets And Asset Acquisition Details 1 | ||
Trademarks | $ 440,000 | $ 440,000 |
Total Intangible Assets | $ 2,287,548 | $ 2,657,056 |
5. INTANGIBLE ASSETS AND ASSE40
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Details 2) | Dec. 31, 2015USD ($) |
Amortization | |
2,016 | $ 370,000 |
2,017 | 370,000 |
2,018 | 370,000 |
2,019 | 370,000 |
2,020 | 368,000 |
Total | $ 1,848,000 |
5. INTANGIBLE ASSETS AND ASSE41
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
INTANGIBLE ASSETS | ||
Amortization expense | $ 369,508 | $ 369,508 |
6. CONVERTIBLE DEBT (Details)
6. CONVERTIBLE DEBT (Details) - $ / shares | 12 Months Ended | 21 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Apr. 12, 2014 | |
Convertible Notes [Member] | ||||
Closing stock price | $ 0.27 | |||
Conversion price | $ 0.29 | $ 0.29 | $ 0.29 | $ 0.29 |
Expected volatility | 125.00% | 114.00% | 125.00% | |
Remaining term (years) | 6 months 29 days | |||
Risk-free rate | 0.00% | 0.13% | 0.00% | |
Expected dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Convertible Notes [Member] | Minimum [Member] | ||||
Closing stock price | $ 0.55 | $ 0.55 | $ 0.13 | |
Expected volatility | 185.00% | |||
Remaining term (years) | 1 month 2 days | 2 years 3 months 18 days | ||
Risk-free rate | 0.25% | |||
Convertible Notes [Member] | Maximum [Member] | ||||
Closing stock price | $ 0.64 | $ 0.64 | $ 0.55 | |
Expected volatility | 190.00% | |||
Remaining term (years) | 1 month 10 days | 2 years 26 days | ||
Risk-free rate | 0.43% | |||
Warrant 1 [Member] | ||||
Conversion price | $ 0.30 | |||
Expected volatility | 250.00% | |||
Expected dividend yield | 0.00% | |||
Warrant 1 [Member] | Minimum [Member] | ||||
Closing stock price | $ 0.13 | |||
Remaining term (years) | 5 years 3 months 18 days | |||
Risk-free rate | 0.76% | |||
Warrant 1 [Member] | Maximum [Member] | ||||
Closing stock price | $ 0.55 | |||
Remaining term (years) | 5 years 1 month 2 days | |||
Risk-free rate | (1.61%) |
6. CONVERTIBLE DEBT (Details 1)
6. CONVERTIBLE DEBT (Details 1) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Convertible Debt Details 1 | ||
Convertible notes | $ 0 | $ 5,074,000 |
Less: Debt discount | 0 | 3,996,033 |
Total convertible notes | $ 0 | $ 1,077,967 |
6. CONVERTIBLE DEBT (Details Na
6. CONVERTIBLE DEBT (Details Narrative) | 12 Months Ended |
Dec. 31, 2014USD ($)shares | |
Convertible Debt Details Narrative | |
Warrants issued | shares | 7,611,000 |
Proceeds with convertible debt | $ 5,074,000 |
Net proceeds amount of convertible debt | 4,462,693 |
Total offering expenses | $ 611,307 |
Agent received warrants | shares | 1,014,800 |
Agent received warrants value | $ 165,180 |
Fair value of the embedded conversion feature derivative liability | |
Additional discount on convertible notes | $ 956,712 |
Finance charge |
7. FAIR VALUE (Details)
7. FAIR VALUE (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Fair Value Details | ||
Beginning Balance | $ 1,728,883 | $ 7,665,502 |
Change in fair value | 3,810,955 | (5,936,619) |
Reclassification to additional paid in capital due to retirement of convertible notes | (5,539,838) | 0 |
Ending Balance | $ 0 | $ 1,728,883 |
8. STOCKHOLDERS' EQUITY (Detail
8. STOCKHOLDERS' EQUITY (Details) - Warrant [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Warrants | ||
Outstanding, beginning of year | 60,000 | 60,000 |
Granted | 40,000 | 20,000 |
Exercised | 0 | (20,000) |
Outstanding, end of year | 100,000 | 60,000 |
Weighted Average Exercise Price | ||
Outstanding, beginning of year | $ 1.42 | $ 1.42 |
Granted | 0.27 | 0.44 |
Exercised | 0 | 0.44 |
Outstanding, end of year | $ 0.96 | $ 1.42 |
8. STOCKHOLDERS' EQUITY (Deta47
8. STOCKHOLDERS' EQUITY (Details 1) | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
2.10 Range [Member] | |
Options outstanding and exercisable by price range | |
Number | 40,000 |
Average Weighted Remaining Contractual Life in Years | 4 years 4 days |
Exercisable Options, Number | 40,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 2.10 |
0.05 Range [Member] | |
Options outstanding and exercisable by price range | |
Number | 20,000 |
Average Weighted Remaining Contractual Life in Years | 5 years 7 days |
Exercisable Options, Number | 20,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 0.05 |
0.27 Range [Member] | |
Options outstanding and exercisable by price range | |
Number | 40,000 |
Average Weighted Remaining Contractual Life in Years | 9 years 7 days |
Exercisable Options, Number | 40,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 0.27 |
Option Member | |
Options outstanding and exercisable by price range | |
Number | 100,000 |
Exercisable Options, Number | 100,000 |
8. STOCKHOLDERS' EQUITY (Deta48
8. STOCKHOLDERS' EQUITY (Details 2) - Common Stock Warrant [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Warrants | ||
Outstanding, beginning of year | 28,051,408 | 19,325,800 |
Granted | 7,625,005 | 15,325,608 |
Expired | 0 | (300,000) |
Expired | 0 | (6,300,000) |
Outstanding, end of year | 35,676,413 | 28,051,408 |
Weighted Average Exercise Price | ||
Outstanding, beginning of year | $ 0.23 | $ 0.21 |
Granted | 0.58 | 0.30 |
Expired | 0 | 0.77 |
Expired | 0 | 0.30 |
Outstanding, end of year | $ 0.30 | $ 0.23 |
8. STOCKHOLDERS' EQUITY (Deta49
8. STOCKHOLDERS' EQUITY (Details 3) | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 35,676,413 |
Exercisable Warrants, Number | 34,576,413 |
0.01 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 1,575,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 1 year 6 months 11 days |
Exercisable Warrants, Number | 1,575,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.01 |
0.05 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 975,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 1 year 7 months 13 days |
Exercisable Warrants, Number | 975,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.05 |
0.15 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 7,750,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 1 year 9 months 18 days |
Exercisable Warrants, Number | 7,750,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.15 |
0.261 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 100,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 5 months 26 days |
Exercisable Warrants, Number | 100,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.26 |
0.29 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 10,125,613 |
Average Weighted Remaining Contractual Life in Years, Warrant | 4 years 9 months 18 days |
Exercisable Warrants, Number | 10,125,613 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.29 |
0.30 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 11,925,800 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 9 months |
Exercisable Warrants, Number | 10,825,800 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.30 |
0.33 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 75,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 9 months |
Exercisable Warrants, Number | 75,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.33 |
0.50 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 75,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 3 months 22 days |
Exercisable Warrants, Number | 75,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.50 |
0.62 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 75,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 6 months |
Exercisable Warrants, Number | 75,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.62 |
1.00 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 3,000,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 4 years 4 months 2 days |
Exercisable Warrants, Number | 3,000,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 1 |
8. STOCKHOLDERS' EQUITY (Deta50
8. STOCKHOLDERS' EQUITY (Details 4) - Unvested Warrants [Member] | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Weighted Average Exercise Price, Unvested Warrants | $ / shares | $ 0.30 |
Unvested Warrants, Number | shares | 1,100,000 |
Average Weighted Remaining Contractual Life in Years, Unvested Warrants | 5 years |
8. STOCKHOLDERS' EQUITY (Deta51
8. STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | Dec. 31, 2015 | Dec. 31, 2014 |
Stockholders Equity Details Narrative | ||
Cumulative Convertible Preferred Stock Series A, Par Value | $ 0.01 | $ 0.01 |
Cumulative Convertible Preferred Stock Series A, Shares Authorized | 1,000,000 | 1,000,000 |
Cumulative Convertible Preferred Stock Series A, Shares Issued | 510,000 | 510,000 |
Cumulative Convertible Preferred Stock Series A, Shares Outstanding | 510,000 | 510,000 |
Convertible Preferred Stock Series B, Stated Value | $ 1,000 | $ 1,000 |
Convertible Preferred Stock Series B, Shares Authorized | 4,000 | 4,000 |
Convertible Preferred Stock Series B, Shares Issued | 0 | 0 |
Convertible Preferred Stock Series B, Shares Outstanding | 0 | 0 |
Convertible Preferred Stock, Dividend Percentage | 7.50% | 7.50% |
10. COMMITMENTS AND CONTINGEN52
10. COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2015USD ($) |
Notes to Financial Statements | |
2,016 | $ 52,000 |
2,017 | 53,000 |
2,018 | 5,000 |
Total | $ 110,000 |
10. COMMITMENTS AND CONTINGEN53
10. COMMITMENTS AND CONTINGENCIES (Details Narrative) | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Commitments And Contingencies Details Narrative | |
Rent expense | $ 45,709 |
12. INCOME TAXES (Details)
12. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Current: | ||
United States | $ 0 | $ 0 |
Foreign | 0 | 0 |
Total current taxes | 0 | 0 |
Deferred: | ||
United States | 0 | 0 |
Foreign | 0 | 0 |
Total deferred taxes | 0 | 0 |
Total | $ 0 | $ 0 |
12. INCOME TAXES (Details 1)
12. INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details 2 | ||
United States | $ (12,176,319) | $ 268,435 |
Foreign | 0 | 0 |
Total | $ (12,176,319) | $ 268,435 |
12. INCOME TAXES (Details 2)
12. INCOME TAXES (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details 2 | ||
Income (Loss) before income tax | $ (12,176,319) | $ 268,435 |
US statutory corporate income tax rate | 39.45% | 34.00% |
Income tax expense computed at US statutory corporate income tax rate | $ (4,803,558) | $ 91,268 |
Reconciling items: | ||
Change in valuation allowance on deferred tax assets | 592,550 | 698,631 |
Incentive stock options and warrants | 673,172 | 872,000 |
Finance charges related to convertible notes | 1,776,059 | 116,447 |
Amortized debt discount | 269,787 | 269,787 |
Meals and Entertainment | 5,527 | 4,079 |
Change in fair value of derivative liability | 1,503,422 | (2,018,450) |
Other | (16,958) | (33,762) |
Income tax expense | $ 0 | $ 0 |
12. INCOME TAXES (Details 3)
12. INCOME TAXES (Details 3) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Deferred tax assets: | ||
Reserve for Bad Debt | $ 17,750 | $ 0 |
Inventory Capitalization | 51,000 | 0 |
Deferred Rent | 5,800 | 0 |
Intangible Assets | 229,000 | 0 |
Net operating losses | 3,392,000 | 3,042,000 |
Valuation Allowance | (3,634,550) | (3,042,000) |
Deferred Tax Assets | 61,000 | 0 |
Deferred tax liabilities: | ||
Property Plant and Equipment | (61,000) | 0 |
Net Deferred Tax Assets and Liabilities | $ 0 | $ 0 |
12. INCOME TAXES (Details Narra
12. INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details Narrative | ||
Net operating loss carryforwards | $ 8,890,000 | $ 7,516,000 |
State net operating loss carryforwards | 6,779,000 | $ 5,405,000 |
Increase in the valuation allowance and various permanent differences | $ 592,550 |
13. COMMON STOCK TO BE ISSUED (
13. COMMON STOCK TO BE ISSUED (Details Narrative) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Common Stock To Be Issued Details Narrative | ||
Common stock shares issued | 202,000 | 155,619 |
Common stock value | $ 53,000 | $ 36,000 |