| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting
Policies Principles of Consolidation The accompanying
condensed consolidated financial statements of the Company are prepared in accordance with United States generally accepted accounting
principles (“GAAP”) and include the financial statements of Alltemp and its wholly-owned subsidiary, CSES. Intercompany
balances and transactions have been eliminated in consolidation. Use of Estimates The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting
period. Significant estimates include the accounting for potential liabilities, the assumptions utilized in valuing stock-based
compensation issued for services, and the realization of deferred tax assets. Actual results could differ from those estimates. Cash Concentrations The Company maintains
cash balances with financial institutions in federally-insured accounts. The Company may periodically have cash balances in banks
in excess of FDIC insurance limits. The Company maintains its accounts with financial institutions with high credit ratings. The
Company has not experienced any losses to date resulting from this practice. Research and Development Research and development
costs consist primarily of manufactured products utilized in research activities, fees paid to consultants and outside service
providers, laboratories and universities, and other expenses relating to the research and development of new products and technology. Research and development
costs were $104,636 and $125,790 for the three months ended June 30, 2017 and 2016, respectively, and $276,476 and $245,162 for
the six months ended June 30, 2017 and 2016, respectively. Concentration of Risk During the three
months and six months ended June 30, 2017, 90% and 78%, respectively, of the Company’s revenues were derived from two customers. The Company purchased
storage tanks from one supplier during the year ended December 31, 2016. No purchases of storage tanks were made during the six
months ended June 30, 2017. The Company believes that there are alternate suppliers of such storage tanks. Income Taxes The Company accounts
for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly, the
Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements
and the tax basis of assets and liabilities. The Company records
a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. In the event
the Company was to determine that it would be able to realize its deferred tax assets in the future in excess of its recorded amount,
an adjustment to the deferred tax assets would be credited to operations in the period such determination was made. Likewise, should
the Company determine that it would not be able to realize all or part of its deferred tax assets in the future, an adjustment
to the deferred tax assets would be charged to operations in the period such determination was made. The Company is subject
to U.S. federal income taxes and income taxes of various state tax jurisdictions. As the Company’s net operating losses have
yet to be utilized, all previous tax years remain open to examination by Federal authorities and other jurisdictions in which the
Company currently operates or has operated in the past. The Company had no unrecognized tax benefits as of June 30, 2017 and December
31, 2016 and does not anticipate any material amount of unrecognized tax benefits within the next 12 months. The Company accounts
for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement, presentation
and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The tax effects
of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the
reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the
position are recognized. As of June 30, 2017, the Company had not recorded any liability for uncertain tax positions. In subsequent
periods, any interest and penalties related to uncertain tax positions will be recognized as a component of income tax expense. The Company is currently
delinquent with respect to certain of its U.S. federal income tax filings. Stock-Based Compensation The Company may
periodically issue common stock options to members of the Board of Directors, officers, employees and consultants for services
rendered. Options will vest and expire according to terms established at the issuance date of each grant. The Company accounts
for stock-based payments to officers, employees and directors by measuring the cost of services received in exchange for equity
awards based on the grant date fair value of the awards, with the cost recognized as compensation expense on the straight-line
basis in the Company’s financial statements over the vesting period of the awards. The Company accounts for stock-based payments
to consultants by determining the value of the stock compensation based upon the measurement date at either (a) the date at which
a performance commitment is reached or (b) at the date at which the necessary performance to earn the equity instruments is complete. Stock options granted
to outside consultants are revalued each reporting period to determine the amount to be recorded as an expense in the respective
period. As the stock options vest, they are valued on each vesting date and an adjustment is recorded for the difference between
the value already recorded and the value on the date of vesting. The fair value of
stock options granted as stock-based compensation is determined utilizing the Black-Scholes option-pricing model, and is affected
by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option as
compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock over
the term of the equity award. Prior to the April 27, 2017 reverse merger date, expected volatilities were based on an average historical
stock price volatility of comparable public companies that were deemed to be representative of future stock price trends, as the
Company did not have a trading history for its own common stock. Since the reverse merger date, volatilities are based on the historical
volatility of the Company’s common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect
at the time of grant. The fair market value of common stock is determined by reference to the quoted market price of the Company’s
common stock. The Company recognizes
the fair value of stock-based compensation awards in selling, general and administrative costs and in research and development
costs, as appropriate, in the Company’s condensed consolidated statement of operations. The Company issues new shares of
common stock to satisfy stock option exercises. Revenue Recognition The
Company recognizes revenue when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists;
(ii) delivery of the products and/or services has occurred; (iii) the fees earned can be readily determined; and (iv) collectability
of the fees is reasonably assured. As
part of the Company’s product commercialization efforts, the Company periodically ships product to potential customers on
a trial basis under an “early adopter” program. As the Company maintains ownership of these products during the trial
period, these products are carried in inventory, at standard cost. At such time that the customer has completed evaluation of the
product’s performance and has formally confirmed that it will retain and utilize the product in its HVAC system, revenues
from such arrangements will be recorded on a cost recovery basis, without interest, which are generally expected within one year
of such installation. The Company does not recognize any revenues until all of the Company’s costs have been recovered. Costs
under this program are charged to selling, general and administrative costs. The Company reviews the status of such products at
each quarter end and records a loss for any products for which it does not expect to recover its costs. Through June 30, 2017,
the Company had not recognized any revenues under the early adopter program. Accounts Receivable The Company evaluates
the collectability of its accounts receivable based on a number of factors. In circumstances where the Company becomes aware of
a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated
and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected.
In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s
historical losses and an overall assessment of past due trade accounts receivable outstanding. The allowance for
doubtful accounts is established through a provision reducing the carrying value of receivables. At June 30, 2017 and December
31, 2016, management did not believe an allowance for doubtful accounts was necessary. The Company has not incurred any losses
from uncollectible accounts receivable to date. Inventories Inventories consist
of raw materials, work in progress and finished goods, which includes all direct material, labor and other overhead costs, and
purchased components. Inventories are stated at the lower of cost (first-in, first-out) or market. Inventories also include finished
goods and purchased components under the Company’s “early adopter” program of $13,166 at June 30, 2017. Cost of Sales Cost of sales includes
salaries, benefits, raw materials, packaging, overhead, and other direct and indirect costs incurred to manufacture the Company’s
proprietary alltemp® Selling Expenses Selling expenses
consist of commissions, advertising, marketing, conferences, travel and other similar costs incurred to market the Company’s
proprietary alltemp® Comprehensive Income (Loss) Components of comprehensive
income or loss, including net income or loss, are reported in the financial statements in the period in which they are recognized.
Comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances
from non-owner sources. Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive
at comprehensive income (loss). The Company did not have any items of comprehensive income (loss) for the three months and six
months ended June 30, 2017 and 2016. Earnings (Loss) Per Share The Company’s
computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income
(loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted EPS
is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible notes
payable, warrants and stock options) as if they had been converted at the beginning of the periods presented, or issuance date,
if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss
per share) are excluded from the calculation of diluted EPS. Loss per common
share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective
periods. Basic and diluted loss per common share is the same for all periods presented because all preferred shares, warrants and
stock options outstanding are anti-dilutive. Weighted average
common shares outstanding has been retroactively restated for the equivalent number of shares received by the accounting acquirer
as a result of the reverse merger as if these shares had been outstanding as of the beginning of the earliest period presented. At June 30, 2017
and 2016, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares
of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.
June 30,
2017 2016
8% convertible note payable 532,687 —
Common stock options 31,961,250 21,307,500
Common stock warrants 18,409,680 —
Total 50,903,617 21,307,500 Fair Value of Financial Instruments The authoritative
guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques used
to measure fair value into three levels, and requires that assets and liabilities carried at fair value be classified and disclosed
in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level
3 fair value measurements, is also required. Level 1. Observable
inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to access as
of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities and
exchange-based derivatives. Level 2. Inputs,
other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable
through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income
securities, non-exchange based derivatives, mutual funds, and fair-value hedges. Level 3. Unobservable
inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop its
own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently-traded non-exchange-based derivatives
and commingled investment funds, and are measured using present value pricing models. The Company determines
the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level
input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs
an analysis of the assets and liabilities at each reporting period end. The carrying value
of financial instruments (consisting of cash, accounts receivable, and accounts payable and accrued expenses) is considered to
be representative of their respective fair values due to the short-term nature of those instruments. Property and Equipment Property and equipment
is recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains
and losses from disposition of property and equipment are included in income and expense when realized. Depreciation of property
and equipment is provided using the straight-line method over the following estimated useful lives:
Plant equipment 5 years
Computer equipment 5 years
Furniture and fixtures 7 years The Company recognizes
depreciation costs in manufacturing, selling, general and administrative costs, and research and development costs in the Company’s
statements of operations. Maintenance and repairs that do not improve or extend the useful life of the respective assets are expensed. Long-Lived Assets The Company reviews
long-lived assets, consisting primarily of property and equipment, for impairment at each fiscal year end or when events or changes
in circumstances indicate the carrying value of these assets may exceed their current fair values. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment
charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the assets. Assets to be
disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs
to sell, and are no longer depreciated. The Company has not historically recorded any impairment to its long-lived assets. In the
future, if events or market conditions affect the estimated fair value to the extent that a long-lived asset is impaired, the Company
will adjust the carrying value of these long-lived assets in the period in which the impairment occurs. As of June 30, 2017 and
December 31, 2016, the Company had not deemed any long-lived assets as impaired, and was not aware of the existence of any indicators
of impairment at such dates. Recent Accounting Pronouncements In May 2014, the
Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts
with Customers (“ASU 2014-09”). ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance
under current GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require
that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. ASU 2014-09
also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from
customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain
or fulfill a contract. The FASB has issued ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, and ASU 2016-20, all of which clarify
certain implementation guidance within ASU 2014-09. ASU 2014-09 is effective for reporting periods beginning after December 15,
2017, with early adoption permitted. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect
adjustment as of the date of adoption. The Company will adopt the provisions of ASU 2014-09 in the quarter beginning January 1,
2018. Management is currently assessing the impact of the adoption of ASU 2014-09 and has not determined its effect on the Company’s
consolidated financial statements. In February 2016,
the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842)(“ASU 2016-02”). ASU 2016-02 requires a
lessee to record a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease
payments, on the balance sheet for all leases with terms longer than 12 months, as well as the disclosure of key information about
leasing arrangements. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that
the cost of the lease is allocated over the lease term, generally on a straight-line basis. ASU 2016-02 requires classification
of all cash payments within operating activities in the statement of cash flows. Disclosures are required to provide the amount,
timing and uncertainty of cash flows arising from leases. A modified retrospective transition approach is required for lessees
for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented
in the financial statements, with certain practical expedients available. ASU 2016-02 is effective for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company will adopt
the provisions of ASU 2016-02 in the quarter beginning January 1, 2019. The Company generally does not finance purchases of property
and equipment, but does lease its operating facilities. While the Company is continuing to assess the potential impact of ASU 2016-02,
it currently expects that most of its lease commitments will be subject to ASU 2016-02 and accordingly, upon adoption will be recognized
as lease liabilities and right-of-use assets in the Company’s balance sheet. In July 2017, the
FASB issued Accounting Standards Update No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic
480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part
II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). ASU 2017-11 allows companies
to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered
indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features
may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature
only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments,
an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders
in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions,
entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-11
is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption
is permitted. The guidance in ASU 2017-11 can be applied using a full or modified retrospective approach. The adoption of ASU 2017-11
is not expected to have any impact on the Company’s financial statement presentation or disclosures. Management does
not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a
material impact on the Company’s financial statement presentation or disclosures. |
