Document_And_Entity_Informatio
Document And Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Aug. 18, 2014 | |
Document Information [Line Items] | ' | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 30-Jun-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
Entity Registrant Name | 'NaturalNano, Inc. | ' |
Entity Central Index Key | '0000863895 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Trading Symbol | 'NNAN | ' |
Entity Common Stock, Shares Outstanding | ' | 597,473,866 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Current assets: | ' | ' |
Cash | $182 | $0 |
Accounts Receivable | 8,400 | 23,206 |
Inventory | 13,131 | 13,246 |
Prepaid expenses and other current assets | 12,040 | 7,040 |
Bitcoin auction deposit | 200,000 | 0 |
Receivable due from MJ Enterprises | 200,000 | 0 |
Total current assets | 433,753 | 43,492 |
Total Assets | 433,753 | 43,492 |
Current Liabilities | ' | ' |
Notes payable (Note 2) | 1,721,036 | 4,088,425 |
Accounts payable | 445,223 | 478,127 |
Accrued expenses | 101,252 | 100,331 |
Accrued interest | 211,111 | 611,261 |
Accrued payroll | 1,024,584 | 978,340 |
Registration rights liability | 12,324 | 82,489 |
Derivative liability (Note 4) | 421,714 | 32,419 |
Total current liabilities | 3,937,244 | 6,371,392 |
Total Liabilities | 3,937,244 | 6,371,392 |
Commitments and contingencies (Note 7) | ' | ' |
Stockholders' Deficiency | ' | ' |
Common Stock | 597,474 | 554,339 |
Additional paid in capital | 21,352,055 | 21,176,747 |
Accumulated deficit | -25,455,146 | -28,302,351 |
Total stockholders' deficiency | -3,505,617 | -6,571,265 |
Total liabilities and stockholders' deficiency | 433,753 | 43,492 |
Series B Preferred Stock [Member] | ' | ' |
Current Liabilities | ' | ' |
Preferred Stock - $.001 par value, 10 million shares authorized | 2,126 | 425 |
Series C Preferred Stock [Member] | ' | ' |
Current Liabilities | ' | ' |
Preferred Stock - $.001 par value, 10 million shares authorized | 0 | 242,940 |
Series D Common Stock [Member] | ' | ' |
Stockholders' Deficiency | ' | ' |
Common Stock | $0 | $0 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Preferred Stock, par value (in dollars per share) | $0.00 | $0.00 |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Common Stock, par value (in dollars per share) | $0.00 | $0.00 |
Common Stock, shares authorized | 800,000,000 | 800,000,000 |
Common Stock, shares issued | 597,473,866 | 554,339,146 |
Common Stock, shares outstanding | 597,473,866 | 554,339,146 |
Series B Preferred Stock [Member] | ' | ' |
Preferred Stock, aggregate liquidation preference (in dollars) | $10 | $10 |
Preferred Stock, shares issued | 5,000 | 5,000 |
Preferred Stock, shares outstanding | 5,000 | 5,000 |
Series C Preferred Stock [Member] | ' | ' |
Preferred Stock, aggregate liquidation preference (in dollars) | $0 | $5,175 |
Preferred Stock, shares issued | 0 | 2,857,266 |
Preferred Stock, shares outstanding | 0 | 2,857,266 |
Series D Common Stock [Member] | ' | ' |
Common Stock, shares issued | 100 | 100 |
Common Stock, shares outstanding | 100 | 100 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Income: | ' | ' | ' | ' |
Revenue | $42,534 | $117,420 | $46,174 | $123,318 |
Cost of good sold | 8,149 | 23,581 | 8,634 | 24,030 |
Gross Profit | 34,385 | 93,839 | 37,540 | 99,288 |
Operating expenses: | ' | ' | ' | ' |
Research and development | 12,259 | 12,661 | 22,994 | 27,592 |
General and administrative | 198,096 | 112,990 | 292,241 | 183,266 |
Total operating expenses | 210,355 | 125,651 | 315,235 | 210,858 |
Loss from operations | -175,970 | -31,812 | -277,695 | -111,570 |
Other income (expense): | ' | ' | ' | ' |
Interest expense (net) | -96,717 | -91,401 | -192,264 | -181,550 |
Net loss on derivative liability | -363,801 | -66,854 | -390,109 | -76,688 |
Net gain(loss) on extinguishment/modification of debt | 3,747,273 | 19,664 | 3,707,273 | -10,336 |
Other income (expense) | 3,286,755 | -138,591 | 3,124,900 | -268,574 |
Net income (loss) from continued operations | 3,110,785 | -170,403 | 2,847,205 | -380,144 |
Net income from discontinued operations | 0 | 2,022 | 0 | 11,115 |
Loss on write-off of discontinue doperations | 0 | -11,179 | 0 | -11,179 |
Consolidated net income (loss) | $3,110,785 | ($179,560) | $2,847,205 | ($380,208) |
Continuing operations income per common share - basic (in dollars per share) | $0.01 | $0 | $0 | $0 |
Continuing operations income per common share - diluted (in dollars per share) | $0 | $0 | $0 | $0 |
Discontinued operations income per common share - basic and diluted (in dollars per share) | $0 | $0 | $0 | $0 |
Weighted average shares outstanding | ' | ' | ' | ' |
Basic (in shares) | 597,473,866 | 264,395,920 | 589,371,211 | 203,953,811 |
Diluted (in shares) | 1,132,701,808 | ' | 1,124,599,153 | ' |
CONSOLIDATED_STATEMENTS_OF_STO
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY DEFICIENCY (USD $) | Total | Common Stock [Member] | Series D Preferred Stock [Member] | Additional Paid in Capital [Member] | Retained Earnings [Member] |
Balance at Dec. 31, 2013 | ($6,571,265) | $554,339 | $0 | $21,176,747 | ($28,302,351) |
Balance (in shares) at Dec. 31, 2013 | ' | 554,339,146 | 100 | ' | ' |
Series C preferred shares converted to commons stock and change in value | 112,942 | 43,135 | 0 | 69,807 | 0 |
Series C preferred shares converted to common stock and change in value (in shares) | ' | 43,134,720 | ' | ' | ' |
Warrants issued for services | 105,501 | 0 | 0 | 105,501 | 0 |
Net income for the six months ended June 30, 2014 | 2,847,205 | 0 | 0 | 0 | 2,847,205 |
Balance at Jun. 30, 2014 | ($3,505,617) | $597,474 | $0 | $21,352,055 | ($25,455,146) |
Balance (in shares) at Jun. 30, 2014 | ' | 597,473,866 | 100 | ' | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Cash flows from operating activities: | ' | ' |
Consolidated net income (loss) | $2,847,205 | ($380,208) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ' | ' |
Net gain(loss) on extinguishment/modification of debt | -3,707,273 | 10,336 |
Change in fair value of derivative liabilities | 390,109 | 76,858 |
Issuance of warrants for services | 105,501 | 5,814 |
Changes in operating assets and liabilities: | ' | ' |
Decrease (increase) in accounts receivable | 14,806 | -12,800 |
Decrease in inventory | 115 | 6,225 |
(Increase) in other current assets | -5,000 | -8,044 |
Increase in accounts payable and accrued expenses | 205,719 | 203,496 |
Net cash used in operating activities | -148,818 | -98,323 |
Cash flows from investing activities | ' | ' |
Receivable from MJ Enterprises | -200,000 | 0 |
Deposit made on bitcoin auction | -200,000 | 0 |
Net cash used in investing activities | -400,000 | 0 |
Cash flows from financing activities | ' | ' |
Proceeds from senior secured promissory notes | 649,000 | 100,506 |
Proceeds from bitcoin promissory notes | 2,150,000 | 0 |
Repayment of bitcoin promissory notes | -1,950,000 | 0 |
Payment on extinguishment of debt | -300,000 | 0 |
Net cash provided by financing activities | 549,000 | 100,506 |
Increase in cash | 182 | 2,183 |
Cash at beginning of period | 0 | 6,160 |
Cash at end of period | 182 | 8,343 |
Schedule of non-cash investing and financing activities: | ' | ' |
Common stock issued for convertible notes | 0 | 19,913 |
Common stock issued for accrued interest | $0 | $54,291 |
PRINCIPAL_BUSINESS_ACTIVITY_AN
PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended | ||
Jun. 30, 2014 | |||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | ' | ||
1 | PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES | ||
Interim Financial Statements | |||
The consolidated financial statements as of June 30, 2014 and for the three and six months ended June 30, 2014 and 2013 are unaudited. However, in the opinion of management of the Company, these financial statements reflect all material adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the financial position and results of operations for such interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results to be obtained for a full year. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X for smaller reporting companies. Accordingly, these financial statements do not include all of the information required by U.S. generally accepted accounting principles for complete financial statements. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013. | |||
Liquidity and Going Concern | |||
Going Concern – The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated net income for the six months ended June 30, 2014 of approximately $2,847,000, primarily from a non-cash gain on the extinguishment of debt in the second quarter of 2014, had negative working capital of approximately $3,503,000 and a stockholders’ deficiency of approximately $3,506,000 at June 30, 2014. Since inception the Company’s growth has been funded through a combination of convertible and non-convertible debt from private investors and from cash advances from its former parent Technology Innovations, LLC. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations, to obtain additional financing, renegotiate the terms of existing financing obligations and ultimately to attain successful operations. The ability to successfully achieve those items is uncertain. The financial statements do not include any adjustments that might result from the uncertainty. | |||
As of June 30, 2014, the Company continued to require waivers for debt covenant violations and extensions of maturity dates. Refer to Note 2 for lenders waivers and maturity extensions received from the lenders. | |||
Basis of Consolidation | |||
The consolidated financial statements include the accounts of NaturalNano, Inc. (“NaturalNano” or the “Company”), a Nevada corporation, and its wholly owned subsidiaries NaturalNano Research, Inc. (“NN Research”) a Delaware corporation and Bitcoin Bidder, Inc. a Nevada corporation. All significant inter-company accounts and transactions have been eliminated in consolidation. | |||
NaturalNano established its subsidiary, Bitcoin Bidder, Inc. in June, 2014 for the sole purpose of bidding on bitcoins which were seized by the FBI and were sold at auction June 27, 2014. Bitcoin Bidder, Inc. was not successful at the auction and is expected to be dissolved in 2014. | |||
Description of the Business | |||
NaturalNano (the “Company”), located in Rochester, New York, is engaged in the development and commercialization of material science technologies with an emphasis on additives to polymers and other industrial and consumer products by taking advantage of technology advances developed in-house. The Company’s current activities are directed toward research, development, production and marketing of its proprietary technologies relating to the treatment and separation of nanotubes from halloysite clay and the development of related commercial applications for: | |||
• | cosmetics, health and beauty products; and | ||
• | polymers, plastics and composites | ||
During the six months ended June 30, 2014 and 2013 the Company derived 94% of its total revenue from one customer. | |||
Estimates | |||
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate such estimates. 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 assets and liabilities. | |||
Fair Value of Financial Instruments | |||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: | |||
⋅ | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. | ||
⋅ | Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. | ||
⋅ | Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. | ||
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The carrying amounts reported in the balance sheet of cash, accounts receivable, prepaids, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes payable approximates their carrying value as the terms of this debt reflects market conditions. The Company’s derivative liability was determined utilizing Level 3 inputs. | |||
Derivative Financial Instruments | |||
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, the Company estimated the total enterprise value based upon trending the firm value from December 2006 to June 2014 considering company specific factors including the changes in forward estimated revenues and market factors, market multiples for comparable companies, and the Company’s market share price, all equally weighted. Once the enterprise value was determined an option pricing model was used to allocate the enterprise value to the individual derivative securities in the Company’s capital structure. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. | |||
Reclassifications | |||
Certain prior year amounts have been reclassified to conform to the current year presentation. | |||
Income Taxes | |||
The Company accounts for income taxes in accordance with ASC 740 which requires the recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized. The Company recognizes penalties and accrued interest related to unrecognized tax benefits in income tax expense. Income tax expense was $0 for the six month periods ending June 30, 2014 and 2013. | |||
Income (Loss) Per Share | |||
Basic loss per common share is computed by dividing net income or loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income or loss per common share gives effect to dilutive convertible preferred stock, convertible debt, options and warrants outstanding during the period. Shares to be issued upon the exercise of these instruments have not been included in the computation of diluted loss per share as their effect is anti-dilutive based on the net loss incurred. | |||
As of June 30, 2014 and 2013 there were 1,125,518,683 and 5,292,124,009 shares, respectively, underlying preferred stock, convertible debt, outstanding options and warrants that could potentially dilute future earnings. These potentially dilutive shares have been limited by certain debt and equity agreements with lenders. These agreements provide limitations on the conversion of the dilutive instruments such that the number of shares of Common Stock that may be acquired by the holder upon conversion of such instruments shall be limited to ensure that following such conversion the total number of shares of Common Stock then beneficially owned by the holder does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock. The Company does not have sufficient authorized shares to satisfy conversion of all the potentially dilutive instruments. Approximately 5 million shares were excluded from the calculation of diluted earnings per share as of June 30, 2014 as their inclusion would have been anti-dilutive. | |||
Recent Accounting Pronouncements | |||
In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The updated guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We have not yet selected a transition method and we are currently evaluating the effect the updated standard will have on our consolidated financial statements and related disclosures. | |||
NOTES_PAYABLE
NOTES PAYABLE | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Debt Disclosure [Abstract] | ' | |||||||
Debt Disclosure [Text Block] | ' | |||||||
2 | NOTES PAYABLE | |||||||
Notes payable consisted of the following: | ||||||||
Notes Payable | June 30, | December 31, | ||||||
2014 | 2013 | |||||||
Senior Secured Convertible Notes | $ | 441,998 | $ | 3,124,403 | ||||
Senior Secured Promissory Notes | 398,938 | 692,922 | ||||||
Subordinated Secured Convertible Note | 311,100 | 271,100 | ||||||
2014 Convertible Promissory Notes | 369,000 | - | ||||||
Bitcoin Promissory Notes | 200,000 | - | ||||||
$ | 1,721,036 | $ | 4,088,425 | |||||
Senior Secured Convertible Notes and Senior Secured Promissory Notes | ||||||||
As of June 30, 2014, Notes payable on the balance sheet includes $840,936 ($3,817,325 at December 31, 2013) for senior secured convertible and non-convertible senior secured promissory notes. The conversion rate for principal and accrued interest on Senior Secured Convertible Notes is 75% of the lowest volume weighted average price (VWAP) of the Company’s common stock for the 1, 5 or 10 days immediately prior to the conversion. As further described below, the Company has defaulted on certain provisions of the notes. The Company has obtained a waiver of default on the outstanding principal through November 20, 2014. As a condition of this forbearance the interest rate on these notes has been increased to 18% effective July 18, 2014. | ||||||||
2014 Senior Secured Promissory Notes | ||||||||
During the first quarter of 2014, the Company entered into various Senior Secured Promissory Notes aggregating to $280,000. The 2014 Senior Secured Promissory Notes are secured by, among other things, (i) the continuing security interest in certain assets of the Company pursuant to the terms of the Initial Notes dated March 7, 2007, (ii) the Pledge Agreement, as defined in the Initial Notes, and (iii) the Patent Security Agreement, dated as of March 6, 2007. The proceeds from the 2014 Senior Secured Promissory Notes are available for general working capital purposes and cannot be used to redeem or make any payment on account of any securities due to the Lenders. The 2014 Senior Secured Promissory Notes bear interest, in arrears, at a rate of 18% per annum as a condition of forbearance and are payable in cash on November 20, 2014. | ||||||||
Payoff Agreement with Platinum Long Term Growth IV, LLC and Merit Consulting LLC | ||||||||
On June 26, 2014, the Company entered into a Payoff Agreement with two of its lenders (collectively referred to as “the holders”) where the holders agreed to surrender their outstanding promissory notes and debentures in the aggregate principal amount of $3,256,399 plus all accrued and unpaid interest amounting to $592,414 in consideration for an aggregate payment of $300,000. As further consideration, one of the lenders agreed to return its 2,587,674 shares of Series C Preferred Stock for cancellation. The Company reversed $70,165 in registration rights liabilities in connection with this Payoff Agreement. Effective upon the consummation of this Payoff Agreement, the Company had no further obligation to the holders pursuant to the terms of the preferred stock and the notes as defined in the Payoff Agreement. As a result of this Payoff Agreement, the Company recognized a gain on extinguishment of debt during the second quarter of 2014 in the amount of $3,747,273. | ||||||||
Subordinated Secured Convertible Note | ||||||||
As of June 30, 2014, Notes payable on the balance sheet includes $311,100 ($271,100 at December 31, 2013) for Subordinated Secured Convertible Notes. The conversion rate for principal and accrued interest on Subordinated Secured Convertible Notes is 75% of the lowest volume weighted average price (VWAP) of the Company’s common stock for the 1, 5 or 10 days immediately prior to the conversion. During the six month periods ended June 30, 2014 and June 30, 2013, the Company entered into forbearance agreements with Cape One which extended the due dates of certain outstanding notes and accrued interest. As consideration for this forbearance, the lender increased its principal balance outstanding by $40,000 and $30,000 in the respectively periods cited above. These amounts were added to the principal balance of the Initial Notes and the Company recognized a loss on modification of debt of $40,000 and $30,000, respectively in the six month periods ended June 30, 2014 and June 30, 2013. Also as a condition of forbearance, the interest rate on this note had been increased to 18% in a prior year. On July 23, 2014, the Company and Cape One Master Fund II LLP agreed to exchange all outstanding notes and related accrued and unpaid interest in exchange for 2 billion reserved shares of the Company’s common stock. See Note 7 Subsequent Events. | ||||||||
2014 Convertible Promissory Notes | ||||||||
On June 27, 2014, the Company sold $300,000 in 8% convertible promissory notes to certain accredited investors due and payable on September 27, 2014. The Company used the proceeds from the sale of these notes for the payment described in the Payoff Agreement above with Platinum and Merit. These notes are convertible into shares of the Company’s common stock at an initial conversion price of $0.001 per share subject to adjustment in the event of lower price issuances, subject to customary exceptions. The Company may prepay any amount due under the notes prior to the maturity date. The notes are subject to certain events of default which would cause all amounts due to become immediately payable. The Company is prohibited from effecting the conversion of the notes to the extent that as a result of such conversion, the note holders would beneficially own more than 4.99% of the issued and outstanding shares of the Company’s common stock. | ||||||||
On May 8, 2014 the Company issued an 8% convertible promissory note in the amount of $45,000 that was due on June 30, 2014. The note holder has granted a forbearance agreement which extends the due date of this note to August 30, 2014 and increases the interest rate to 18%. The Company used the proceeds of this note for operating purposes. The May 8, 2014 note is convertible into shares of the Company’s common stock at a conversion price of $0.22 per share subject to adjustment in the event of lower price issuances, subject to customary exceptions. Based on the Company’s issuance of new notes subsequent to May 8, 2014, the conversion price was modified to $0.001 per share. The Company may prepay any amount due under the notes prior to the maturity date. The notes are subject to certain events of default which would cause all amounts due to become immediately payable. The Company is prohibited from effecting the conversion of the notes to the extent that as a result of such conversion, the note holders would beneficially own more than 4.99% of the issued and outstanding shares of the Company’s common stock. | ||||||||
On June 12, 2014 the Company issued an 8% convertible promissory note in the amount of $24,000 that is due and payable on September 27, 2014. The Company used the proceeds of this note for operating purposes. The June 12, 2014 note is convertible into shares of the Company’s common stock at a conversion price of $0.22 per share subject to adjustment in the event of lower price issuances, subject to customary exceptions. Based on the Company’s issuance of new notes subsequent to June 12, 2014 (see Note 7), the conversion price was modified to $0.001 per share. The Company may prepay any amount due under the notes prior to the maturity date. The notes are subject to certain events of default which would cause all amounts due to become immediately payable. The Company is prohibited from effecting the conversion of the notes to the extent that as a result of such conversion, the note holders would beneficially own more than 4.99% of the issued and outstanding shares of the Company’s common stock. | ||||||||
Bitcoin Promissory Notes | ||||||||
The Company established its subsidiary, Bitcoin Bidder, Inc. in June, 2014 for the sole purpose of bidding on bitcoins which had been seized by the FBI and were sold at auction June 27, 2014. In connection with this, the Company issued notes aggregating $2,150,000 under a Securities Purchase Agreement. Bitcoin Bidder, Inc. was not successful at the auction and $1,950,000 in borrowings was repaid to the lenders on June 30, 2014. The remaining $200,000 was repaid to the lenders in July, 2014 without any penalty or interest charges to NaturalNano. The Company intends to dissolve Bitcoin Bidder, Inc. in 2014. | ||||||||
DERIVATIVE_LIABILITY
DERIVATIVE LIABILITY | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | |||||||
Derivative Instruments and Hedging Activities Disclosure [Text Block] | ' | |||||||
3 | DERIVATIVE LIABILITY | |||||||
For stock based derivative financial instruments, the Company estimated the total enterprise value based upon trending of the firm value from December 2006 to June 2014 considering company specific factors including the changes in forward estimated revenues and market factors. Once the enterprise value was determined an option pricing model was used to allocate the enterprise value to the individual derivative and other securities in the Company’s capital structure. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. | ||||||||
The Company’s derivative liabilities as of June 30, 2014 and December 31, 2013 are as follows: | ||||||||
· | The debt conversion feature embedded in the Senior Secured Convertible Notes entered into in March 2007 which contain anti-dilution provisions that would be triggered if the Company issued instruments with rights to the Company’s common stock at prices below this exercise price (described in Note 2.) | |||||||
· | The debt conversion feature and the 2,647,059 warrants exercisable at $0.425 per share granted in connection with the Subordinated Secured Convertible Note entered into in November 2009. These agreements contain anti-dilution provisions that would be triggered if the Company issued instruments with rights to the Company’s common stock at prices below the exercise price (described in Note 2.) | |||||||
· | The debt conversion feature embedded in the 2014 Convertible Promissory Notes entered into in 2014 which contain anti-dilution provisions that would be triggered if the Company issued instruments with rights to the Company’s common stock at prices below this exercise price (described in Note 2.) | |||||||
· | Derivative liabilities related to outstanding warrants and options due to the Company having insufficient authorized shares to satisfy the exercise or conversion of all outstanding instruments as of June 30, 2014 and December 31, 2013. | |||||||
The fair value of the derivative liabilities as of June 30, 2014 and December 31, 2013 are as follows: | ||||||||
June 30 | December 31, | |||||||
2014 | 2013 | |||||||
Derivative Instrument | ||||||||
Senior Secured Convertible Notes conversion feature | $ | 43,666 | $ | 18,045 | ||||
Subordinated Secured Convertible Note conversion feature | 35,731 | 3,946 | ||||||
2014 Convertible Promissory Notes conversion feature | 244,117 | - | ||||||
Warrant liability | 98,200 | 10,428 | ||||||
Total | $ | 421,714 | $ | 32,419 | ||||
The increase in the fair value of the derivative liability of $390,109 was recognized as a loss on change in derivative liability in the statement of operations for the six months ended June 30, 2014. Significant fluctuations in the variables used in calculating the value of the Company’s derivative liabilities could have significant impact on the fair market valuation. | ||||||||
Fair Value Valuation Hierarchy Measurement | ||||||||
ASC 820 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. | ||||||||
· | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. | |||||||
· | Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. | |||||||
· | Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. | |||||||
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The Company’s derivative liability was determined utilizing Level 3 inputs. | ||||||||
STOCKHOLDERS_EQUITY
STOCKHOLDERS EQUITY | 6 Months Ended | ||||||||||
Jun. 30, 2014 | |||||||||||
Stockholders' Equity Note [Abstract] | ' | ||||||||||
Stockholders' Equity Note Disclosure [Text Block] | ' | ||||||||||
4 | STOCKHOLDERS EQUITY | ||||||||||
As of June 30, 2014 the Company was authorized to issue up to 800,000,000 shares of common stock and 10,000,000 shares of preferred stock. | |||||||||||
Increase in Authorized Common Stock: On July 1, 2013 the Company received a unanimous written consent in lieu of a meeting from the members of the Board of Directors and a written consent from the Series D stockholder to amend its articles of incorporation to increase the Company’s authorized common shares to 800,000,000 common shares. As of June 30, 2014 there were 1,125,518,683 shares underlying preferred stock, convertible debt, outstanding options and warrants that could potentially dilute future earnings. The Company does not have sufficient authorized shares to satisfy conversion of all the potentially dilutive instruments. (See Note 7 Subsequent Events.) | |||||||||||
Preferred Stock Issuances | |||||||||||
Each share of the Series B and Series C Convertible Preferred Stock is convertible into 160 shares of the Company’s common stock and votes on an as-converted basis (with each share having 160 votes). Both the Series B and Series C designations limits the holders’ rights to convert its Convertible Preferred Stock, and the aggregate voting powers, to no more than 4.99% of the votes attributable to the total outstanding common shares. Accordingly, the votes attributable to the Series B and Series C Convertible Preferred constitutes 4.99% of the aggregate votes attributable to the Company’s outstanding shares on an as converted basis and the votes attributable to Series B and Series C Convertible Preferred, voting together represent approximately 9.98% of the aggregate votes attributable to the Company’s outstanding shares (on an as converted basis). | |||||||||||
As a result of the Company not having sufficient authorized shares to satisfy the conversion of all outstanding convertible debt, convertible preferred stock, warrants and options, the Series B and C preferred shares have been moved into temporary equity classification on the balance sheet. | |||||||||||
During the six months ended June 30, 2014, Platinum elected to convert 269,592 shares of their Series C preferred shares into 43,134,720 common shares at the conversion rate of 160 common shares per each Series C share. | |||||||||||
In connection with the June 27, 2014 Payoff Agreement (Note 2) all shares of the remaining Series C preferred shares were cancelled. | |||||||||||
Warrants Grants | |||||||||||
The Company has issued warrants to purchase shares of its common stock to certain consultants and debt holders. As of June 30, 2014 and December 31, 2013 there were common stock warrants outstanding to purchase an aggregate of 118,235,294 and 166,235,294 shares of common stock, respectively, pursuant to the warrant grant agreements. | |||||||||||
On May 8, 2014, the Company granted a total of 48,000,000 warrants to certain consultants, the Company’s CEO and the Company’s independent board member. These warrants, included in the summary below, grant the right to purchase one share of common stock at an exercise price of $0.0014 per share. The warrants were fully vested as of the grant date and contain a cashless exercise provision. The fair value of the warrants on the date of grant was determined using the Black-Scholes model and was measured on the date of grant at $105,501. An expected volatility assumption of 289% was used based on the volatility of the Company’s stock price utilizing a look-back basis and the risk-free interest rate of 1.63% which was derived from the U.S. treasury yields on the date of grant. The market price of the Company’s common stock on the grant date was $0.0022 per share. The expiration date used in the valuation model aligns with the warrant life of five years as indicated in the agreements. The dividend yield was assumed to be zero. | |||||||||||
A summary of the outstanding warrants is presented below: | |||||||||||
2014 | |||||||||||
Shares | Weighted | Weighted | |||||||||
Average | Average | ||||||||||
Exercise | Remaining | ||||||||||
Price | Life-years | ||||||||||
Outstanding at January 1, 2014 | 118,235,294 | $ | 0.0142 | 5.9 | |||||||
Granted | 48,000,000 | 0.0014 | |||||||||
Cancelled or forfeited | - | ||||||||||
Warrants outstanding at June 30, 2014 | 166,235,294 | $ | 0.0105 | 5.24 | |||||||
Warrants exercisable at June 30, 2014 | 166,235,294 | $ | 0.0105 | 5.24 | |||||||
INCENTIVE_STOCK_PLANS
INCENTIVE STOCK PLANS | 6 Months Ended | ||||||||||
Jun. 30, 2014 | |||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | ' | ||||||||||
5 | INCENTIVE STOCK PLANS | ||||||||||
A summary of the status of the outstanding incentive stock plans is presented below at June 30, 2014 and December 31, 2013: | |||||||||||
Shares | Weighted | Weighted Average | |||||||||
Average | Remaining | ||||||||||
Exercise Price | Life-years | ||||||||||
Options outstanding at January 1, 2014 | 709,020 | $ | 3.57 | 2.11 | |||||||
Options granted/exercises/cancelled/forfeited | - | ||||||||||
Options outstanding at June 30, 2014 | 709,020 | $ | 3.57 | 1.61 | |||||||
Options exercisable at June 30, 2014 | 709,020 | $ | 3.57 | 1.61 | |||||||
All compensation costs for the above options have been previously recognized in operations. | |||||||||||
DISCONTINUED_OPERATIONS
DISCONTINUED OPERATIONS | 6 Months Ended | |
Jun. 30, 2014 | ||
Discontinued Operations and Disposal Groups [Abstract] | ' | |
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] | ' | |
6 | DISCONTINUED OPERATIONS | |
In the second quarter of 2013, the Company ceased all activities associated with the Medical Board business segment. The Company assessed this segment and determined that inadequate income had been generated relative to the efforts of production and administrative support. The Statement of Operations for the six month period ended June 30, 2013 reflects the Medical Board business as a discontinued operation. The six months ended June 30, 2013 included revenues from this discontinued operation of $14,750, cost of goods sold of $3,635 and gross margin of $11,115. In connection with this decision to exit the Medical Board business, the Company filed a Certificate of Dissolution on May 10, 2013 with the state of New York under section 1003 of the Business Corporation Law in connection with the unanimous written consent of the shareowners of Combotexs. The Nanotechnology business remains as the Company’s only reportable operating segment. | ||
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 6 Months Ended | |
Jun. 30, 2014 | ||
Subsequent Events [Abstract] | ' | |
Subsequent Events [Text Block] | ' | |
7 | SUBSEQUENT EVENTS | |
8% Convertible Promissory Notes – Alpha Capital Anstalt LLC | ||
On July 28, 2014, the Company issued a $30,000 convertible promissory note with Alpha Capital Anstalt LLC. The note is due on September 27, 2014, bears interest at 8% per annum. The note and the interest accrued on the note are convertible into the Company’s common stock at any time prior to maturity (provided that such conversion does not result in the holder and its affiliates beneficially owning in excess of 4.99% of the issued and outstanding Common Stock) at $0.001 per share subject to adjustment upon the occurrence of certain anti-dilution events. | ||
On July 29, 2014, the Company issued a $5,000 convertible promissory note with Marlin Capital Investments LLC. The note is due on November 20, 2014, bears interest at 8% per annum. The note and the interest accrued on the note are convertible into the Company’s common stock at any time prior to maturity (provided that such conversion does not result in the holder and its affiliates beneficially owning in excess of 4.99% of the issued and outstanding Common Stock) at $0.001 per share subject to adjustment upon the occurrence of certain anti-dilution events. | ||
Increase in Authorized Shares and Reverse Split | ||
On July 18, 2014 the holder of the Company’s preferred D shares which control 51% of all votes in matters subject to shareholder approval, approved an amendment to the Company’s articles of incorporation to increase the number of authorized common and preferred shares from 800,000,000 and 10,000,000, respectively, to 1,800,000,000 and 100,000,000, respectively. Additionally, a reverse split was authorized for issued and outstanding shares of common stock in a range of 100 to one to 600 to one. None of these approved changes have been affected as of August 14, 2014. | ||
Exchange and Right to Shares Agreement – Cape One Master Fund II LP | ||
On July 23, 2014, the Company and Cape One Master Fund II LLP agreed to exchange the Subordinated Secured Convertible Note and related accrued and unpaid interest in exchange for 2 billion reserved shares of the Company’s common stock. The Company and Cape One agreed that a beneficial ownership limitation of 4.99% shall be maintained at all times as to the number of the shares of the common stock outstanding immediately after giving effect to the issuance of the common stock issuable under this agreement. Cape One also agreed to a Lockup provision in the agreement that specifies that Cape One will not sell, transfer or hypothecate any of the reserved shares until Alpha Capital Anstalt has received $3,500,000 from the proceeds of sales of shares obtained upon conversion of notes issued by the Company and held by Alpha as of the date of this agreement. Upon expiration of the Lockup period, Cape One shall be allowed to sell the lesser of (i) 5% of the daily trading volume of the Company’s common stock or, (ii) 10% of the reserved shares in any calendar month. The Company has agreed to reserve 10 million shares (based upon a one-for 200 reverse stock split) in connection with this agreement. | ||
Bitcoin Bidder, Inc. return of $200,000 deposit and Note Payoff Agreement | ||
On July 3, 2014, the $200,000 deposit submitted by Bitcoin Bidder, Inc. was refunded to the Company (see Note 2.) The Company repaid the remaining $200,00010% promissory notes with no penalty or interest charges incurred. The note holders agreed to waive any and all interest accrued on the notes as of the date of the payoff agreement. | ||
PRINCIPAL_BUSINESS_ACTIVITY_AN1
PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended | ||
Jun. 30, 2014 | |||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' | ||
Interim Financial Statements [Policy Text Block] | ' | ||
Interim Financial Statements | |||
The consolidated financial statements as of June 30, 2014 and for the three and six months ended June 30, 2014 and 2013 are unaudited. However, in the opinion of management of the Company, these financial statements reflect all material adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the financial position and results of operations for such interim periods. The results of operations for the interim periods presented are not necessarily indicative of the results to be obtained for a full year. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X for smaller reporting companies. Accordingly, these financial statements do not include all of the information required by U.S. generally accepted accounting principles for complete financial statements. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013. | |||
Liquidity Disclosure [Policy Text Block] | ' | ||
Liquidity and Going Concern | |||
Going Concern – The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated net income for the six months ended June 30, 2014 of approximately $2,847,000, primarily from a non-cash gain on the extinguishment of debt in the second quarter of 2014, had negative working capital of approximately $3,503,000 and a stockholders’ deficiency of approximately $3,506,000 at June 30, 2014. Since inception the Company’s growth has been funded through a combination of convertible and non-convertible debt from private investors and from cash advances from its former parent Technology Innovations, LLC. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations, to obtain additional financing, renegotiate the terms of existing financing obligations and ultimately to attain successful operations. The ability to successfully achieve those items is uncertain. The financial statements do not include any adjustments that might result from the uncertainty. | |||
As of June 30, 2014, the Company continued to require waivers for debt covenant violations and extensions of maturity dates. Refer to Note 2 for lenders waivers and maturity extensions received from the lenders. | |||
Consolidation, Policy [Policy Text Block] | ' | ||
Basis of Consolidation | |||
The consolidated financial statements include the accounts of NaturalNano, Inc. (“NaturalNano” or the “Company”), a Nevada corporation, and its wholly owned subsidiaries NaturalNano Research, Inc. (“NN Research”) a Delaware corporation and Bitcoin Bidder, Inc. a Nevada corporation. All significant inter-company accounts and transactions have been eliminated in consolidation. | |||
NaturalNano established its subsidiary, Bitcoin Bidder, Inc. in June, 2014 for the sole purpose of bidding on bitcoins which were seized by the FBI and were sold at auction June 27, 2014. Bitcoin Bidder, Inc. was not successful at the auction and is expected to be dissolved in 2014. | |||
Business Description [Policy Text Block] | ' | ||
Description of the Business | |||
NaturalNano (the “Company”), located in Rochester, New York, is engaged in the development and commercialization of material science technologies with an emphasis on additives to polymers and other industrial and consumer products by taking advantage of technology advances developed in-house. The Company’s current activities are directed toward research, development, production and marketing of its proprietary technologies relating to the treatment and separation of nanotubes from halloysite clay and the development of related commercial applications for: | |||
• | cosmetics, health and beauty products; and | ||
• | polymers, plastics and composites | ||
During the six months ended June 30, 2014 and 2013 the Company derived 94% of its total revenue from one customer. | |||
Use of Estimates, Policy [Policy Text Block] | ' | ||
Estimates | |||
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate such estimates. 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 assets and liabilities. | |||
Fair Value of Financial Instruments, Policy [Policy Text Block] | ' | ||
Fair Value of Financial Instruments | |||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Fair Value Measurement Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: | |||
⋅ | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. | ||
⋅ | Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. | ||
⋅ | Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. | ||
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The carrying amounts reported in the balance sheet of cash, accounts receivable, prepaids, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes payable approximates their carrying value as the terms of this debt reflects market conditions. The Company’s derivative liability was determined utilizing Level 3 inputs. | |||
Derivatives, Policy [Policy Text Block] | ' | ||
Derivative Financial Instruments | |||
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and then is revalued at each reporting date, with changes in fair value reported in the consolidated statement of operations. For stock based derivative financial instruments, the Company estimated the total enterprise value based upon trending the firm value from December 2006 to June 2014 considering company specific factors including the changes in forward estimated revenues and market factors, market multiples for comparable companies, and the Company’s market share price, all equally weighted. Once the enterprise value was determined an option pricing model was used to allocate the enterprise value to the individual derivative securities in the Company’s capital structure. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date. | |||
Reclassification, Policy [Policy Text Block] | ' | ||
Reclassifications | |||
Certain prior year amounts have been reclassified to conform to the current year presentation. | |||
Income Tax, Policy [Policy Text Block] | ' | ||
Income Taxes | |||
The Company accounts for income taxes in accordance with ASC 740 which requires the recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income items is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized. The Company recognizes penalties and accrued interest related to unrecognized tax benefits in income tax expense. Income tax expense was $0 for the six month periods ending June 30, 2014 and 2013. | |||
Earnings Per Share, Policy [Policy Text Block] | ' | ||
Income (Loss) Per Share | |||
Basic loss per common share is computed by dividing net income or loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income or loss per common share gives effect to dilutive convertible preferred stock, convertible debt, options and warrants outstanding during the period. Shares to be issued upon the exercise of these instruments have not been included in the computation of diluted loss per share as their effect is anti-dilutive based on the net loss incurred. | |||
As of June 30, 2014 and 2013 there were 1,125,518,683 and 5,292,124,009 shares, respectively, underlying preferred stock, convertible debt, outstanding options and warrants that could potentially dilute future earnings. These potentially dilutive shares have been limited by certain debt and equity agreements with lenders. These agreements provide limitations on the conversion of the dilutive instruments such that the number of shares of Common Stock that may be acquired by the holder upon conversion of such instruments shall be limited to ensure that following such conversion the total number of shares of Common Stock then beneficially owned by the holder does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock. The Company does not have sufficient authorized shares to satisfy conversion of all the potentially dilutive instruments. Approximately 5 million shares were excluded from the calculation of diluted earnings per share as of June 30, 2014 as their inclusion would have been anti-dilutive. | |||
New Accounting Pronouncements, Policy [Policy Text Block] | ' | ||
Recent Accounting Pronouncements | |||
In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The updated guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We have not yet selected a transition method and we are currently evaluating the effect the updated standard will have on our consolidated financial statements and related disclosures. | |||
NOTES_PAYABLE_Tables
NOTES PAYABLE (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Debt Disclosure [Abstract] | ' | |||||||
Schedule of Debt [Table Text Block] | ' | |||||||
Notes payable consisted of the following: | ||||||||
Notes Payable | June 30, | December 31, | ||||||
2014 | 2013 | |||||||
Senior Secured Convertible Notes | $ | 441,998 | $ | 3,124,403 | ||||
Senior Secured Promissory Notes | 398,938 | 692,922 | ||||||
Subordinated Secured Convertible Note | 311,100 | 271,100 | ||||||
2014 Convertible Promissory Notes | 369,000 | - | ||||||
Bitcoin Promissory Notes | 200,000 | - | ||||||
$ | 1,721,036 | $ | 4,088,425 | |||||
DERIVATIVE_LIABILITY_Tables
DERIVATIVE LIABILITY (Tables) | 6 Months Ended | |||||||
Jun. 30, 2014 | ||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | |||||||
Schedule of Derivative Liabilities at Fair Value [Table Text Block] | ' | |||||||
The fair value of the derivative liabilities as of June 30, 2014 and December 31, 2013 are as follows: | ||||||||
June 30 | December 31, | |||||||
2014 | 2013 | |||||||
Derivative Instrument | ||||||||
Senior Secured Convertible Notes conversion feature | $ | 43,666 | $ | 18,045 | ||||
Subordinated Secured Convertible Note conversion feature | 35,731 | 3,946 | ||||||
2014 Convertible Promissory Notes conversion feature | 244,117 | - | ||||||
Warrant liability | 98,200 | 10,428 | ||||||
Total | $ | 421,714 | $ | 32,419 | ||||
STOCKHOLDERS_EQUITY_Tables
STOCKHOLDERS EQUITY (Tables) | 6 Months Ended | ||||||||||
Jun. 30, 2014 | |||||||||||
Stockholders' Equity Note [Abstract] | ' | ||||||||||
Class Of Warrant Outstanding [Table Text Block] | ' | ||||||||||
A summary of the outstanding warrants is presented below: | |||||||||||
2014 | |||||||||||
Shares | Weighted | Weighted | |||||||||
Average | Average | ||||||||||
Exercise | Remaining | ||||||||||
Price | Life-years | ||||||||||
Outstanding at January 1, 2014 | 118,235,294 | $ | 0.0142 | 5.9 | |||||||
Granted | 48,000,000 | 0.0014 | |||||||||
Cancelled or forfeited | - | ||||||||||
Warrants outstanding at June 30, 2014 | 166,235,294 | $ | 0.0105 | 5.24 | |||||||
Warrants exercisable at June 30, 2014 | 166,235,294 | $ | 0.0105 | 5.24 | |||||||
INCENTIVE_STOCK_PLANS_Tables
INCENTIVE STOCK PLANS (Tables) | 6 Months Ended | ||||||||||
Jun. 30, 2014 | |||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||
Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block] | ' | ||||||||||
A summary of the status of the outstanding incentive stock plans is presented below at June 30, 2014 and December 31, 2013: | |||||||||||
Shares | Weighted | Weighted Average | |||||||||
Average | Remaining | ||||||||||
Exercise Price | Life-years | ||||||||||
Options outstanding at January 1, 2014 | 709,020 | $ | 3.57 | 2.11 | |||||||
Options granted/exercises/cancelled/forfeited | - | ||||||||||
Options outstanding at June 30, 2014 | 709,020 | $ | 3.57 | 1.61 | |||||||
Options exercisable at June 30, 2014 | 709,020 | $ | 3.57 | 1.61 | |||||||
PRINCIPAL_BUSINESS_ACTIVITY_AN2
PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES (Details Textual) (USD $) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | |
Accounting Policies [Line Items] | ' | ' | ' | ' | ' |
Net loss attributable to controlling interest | $3,110,785 | ($179,560) | $2,847,205 | ($380,208) | ' |
Working Capital Deficit | 3,503,000 | ' | 3,503,000 | ' | ' |
Total stockholders' deficiency | -3,505,617 | ' | -3,505,617 | ' | -6,571,265 |
Weighted Average Number of Shares Outstanding, Diluted | 1,132,701,808 | ' | 1,124,599,153 | ' | ' |
Stock Conversion Limit Percentage | ' | ' | 4.99% | ' | ' |
Income Tax Expense (Benefit) | ' | ' | $0 | $0 | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | ' | ' | 5,000,000 | ' | ' |
Sales Revenue, Net [Member] | ' | ' | ' | ' | ' |
Accounting Policies [Line Items] | ' | ' | ' | ' | ' |
Concentration Risk, Percentage | ' | ' | 94.00% | 94.00% | ' |
Number of Customers | ' | ' | 1 | 1 | ' |
NOTES_PAYABLE_Details
NOTES PAYABLE (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Notes Payable [Line Items] | ' | ' |
Notes payable, Total | $1,721,036 | $4,088,425 |
Senior Secured Convertible Notes [Member] | ' | ' |
Notes Payable [Line Items] | ' | ' |
Notes payable, Total | 441,998 | 3,124,403 |
Senior Secured Promissory Notes [Member] | ' | ' |
Notes Payable [Line Items] | ' | ' |
Notes payable, Total | 398,938 | 692,922 |
Subordinated Secured Convertible Notes [Member] | ' | ' |
Notes Payable [Line Items] | ' | ' |
Notes payable, Total | 311,100 | 271,100 |
2014 Convertible Promissory Notes [Member] | ' | ' |
Notes Payable [Line Items] | ' | ' |
Notes payable, Total | 369,000 | 0 |
Bitcoin Promissory Notes [Member] | ' | ' |
Notes Payable [Line Items] | ' | ' |
Notes payable, Total | $200,000 | $0 |
NOTES_PAYABLE_Details_Textual
NOTES PAYABLE (Details Textual) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | 1 Months Ended | 6 Months Ended | 1 Months Ended | 6 Months Ended | 1 Months Ended | 6 Months Ended | 1 Months Ended | 3 Months Ended | |||||||||||||
Share data in Billions, except Per Share data, unless otherwise specified | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jun. 12, 2014 | 8-May-14 | Jun. 27, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 26, 2014 | Jul. 31, 2014 | Jun. 30, 2014 | Jul. 03, 2014 | Jun. 30, 2014 | Jun. 30, 2013 | Jul. 23, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 |
Convertible Debt Securities [Member] | Convertible Debt Securities [Member] | Convertible Debt Securities [Member] | Scenario, Forecast [Member] | Cape One [Member] | Cape One [Member] | Platinum Long Term Growth IV LLC And Merit Consulting LLC [Member] | Bitcoin Bidder Inc [Member] | Bitcoin Bidder Inc [Member] | Bitcoin Bidder Inc [Member] | Subordinated Secured Convertible Note [Member] | Subordinated Secured Convertible Note [Member] | Subordinated Secured Convertible Note [Member] | Senior Secured Convertible Promissory Notes [Member] | Senior Secured Convertible Promissory Notes [Member] | Senior Convertible Promissory Notes 2014 [Member] | Senior Convertible Promissory Notes 2014 [Member] | Subordinated Secured Convertible Notes [Member] | Subordinated Secured Convertible Notes [Member] | ||||||
Subsequent Event [Member] | Subsequent Event [Member] | Scenario, Forecast [Member] | ||||||||||||||||||||||
Notes Payable [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Notes Payable, Total | $1,721,036 | ' | $1,721,036 | ' | $4,088,425 | ' | ' | ' | ' | ' | ' | $3,256,399 | ' | ' | ' | ' | ' | ' | $840,936 | $3,817,325 | ' | ' | $311,100 | $271,100 |
Debt Instrument, Convertible, Conversion Price | ' | ' | ' | ' | ' | $0.22 | $0.22 | $0.00 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Loss On Modification Notes Payable | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 40,000 | 30,000 | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Interest Rate, Stated Percentage | ' | ' | ' | ' | ' | 8.00% | 8.00% | 8.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument For Bearance Interest Rate Percentage | 18.00% | ' | 18.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 18.00% | 18.00% | ' |
Debt Instrument For Bearance Increased Amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | 40,000 | 30,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock Issued During Period, Value, New Issues | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 280,000 | ' | ' | ' |
Interest Payable | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 592,414 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Reversal Of Registration Rights Liabilities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 70,165 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gains (Losses) on Extinguishment of Debt, Total | 3,747,273 | 19,664 | 3,707,273 | -10,336 | ' | ' | ' | ' | ' | ' | ' | 3,747,273 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Proceeds from Notes Payable | ' | ' | 2,150,000 | 0 | ' | 24,000 | 45,000 | 300,000 | ' | ' | ' | ' | ' | 2,150,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Payment of Financing and Stock Issuance Costs | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common Stock, Value, Outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,587,674 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Interest Rate, Increase (Decrease) | ' | ' | ' | ' | ' | ' | 18.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | ' | ' | ' | ' | ' | 4.99% | 4.99% | 4.99% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Repayments of Notes Payable | ' | ' | $1,950,000 | $0 | ' | ' | ' | ' | ' | ' | ' | ' | $200,000 | $1,950,000 | $20,000,010 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Conversion, Converted Instrument, Shares Issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | ' | ' | ' | ' | ' |
Debt Instrument, Maturity Date | ' | ' | ' | ' | ' | ' | 30-Aug-14 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
DebtInstrument Convertible Modified Conversion Price1 | ' | ' | ' | ' | ' | $0.00 | $0.00 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Debt Instrument, Convertible, Threshold Percentage of Stock Price Trigger | ' | ' | ' | ' | ' | ' | ' | ' | 75.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
DERIVATIVE_LIABILITIES_Details
DERIVATIVE LIABILITIES (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Derivative [Line Items] | ' | ' |
Derivative Liability, Fair Value, Net | $421,714 | $32,419 |
Warrant liability [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Derivative Liability, Fair Value, Net | 98,200 | 10,428 |
Senior Secured Convertible Notes [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Derivative Liability, Fair Value, Net | 43,666 | 18,045 |
Subordinated Secured Convertible Note [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Derivative Liability, Fair Value, Net | 35,731 | 3,946 |
2014 Convertible Promissory Notes [Member] | ' | ' |
Derivative [Line Items] | ' | ' |
Derivative Liability, Fair Value, Net | $244,117 | $0 |
DERIVATIVE_LIABILITIES_Details1
DERIVATIVE LIABILITIES (Details Textual) (USD $) | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Nov. 30, 2009 | |
Derivative [Line Items] | ' | ' | ' |
Class of Warrant or Right, Outstanding | ' | ' | 2,647,059 |
Unrealized Gain (Loss) On Derivatives | ($390,109) | ($76,858) | ' |
Class of Warrant or Right, Exercise Price of Warrants or Rights | ' | ' | $0.43 |
STOCKHOLDERS_EQUITY_Details
STOCKHOLDERS EQUITY (Details) (Warrant [Member], USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Warrant [Member] | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' |
Shares, Outstanding at beginning of year | 118,235,294 | ' |
Shares, Granted during the year | 48,000,000 | ' |
Shares, Cancelled or forfeited | 0 | ' |
Shares, Outstanding at end of year | 166,235,294 | 118,235,294 |
Shares, Exercisable at end of year | 166,235,294 | ' |
Weighted Average Exercise Price, Outstanding at beginning of year | $0.01 | ' |
Weighted Average Excercise Price, Granted | $0.00 | ' |
Weighted Average Exercise Price, Outstanding at end of year | $0.01 | $0.01 |
Weighted Average Exercise Price, Exercisable at end of year | $0.01 | ' |
Weighted Average Remaining Life-years, Outstanding | '5 years 2 months 26 days | '5 years 10 months 24 days |
Weighted Average Remaining Life years, Exercisable at end of year | '5 years 2 months 26 days | ' |
STOCKHOLDERS_EQUITY_Details_Te
STOCKHOLDERS EQUITY (Details Textual) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jul. 01, 2013 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 | Jun. 30, 2014 |
Series B and Series C Convertible Preferred Stock [Member] | Series C Preferred Stock [Member] | Platinum Partners Long Term Growth IV [Member] | Management [Member] | ||||
Series C Preferred Stock [Member] | |||||||
Schedule of Equity Method Investments [Line Items] | ' | ' | ' | ' | ' | ' | ' |
Stock Issued During Period, Shares, Conversion Of Convertible Securities | ' | ' | ' | ' | ' | 43,134,720 | ' |
Common Stock, shares authorized | 800,000,000 | 800,000,000 | 800,000,000 | ' | ' | ' | ' |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 | ' | ' | ' | ' | ' |
Stock Issued During Period, Shares, Conversion of Units | ' | ' | ' | 160 | ' | 160 | ' |
Excess Of Debt Instrument Conversion Percentage | ' | ' | ' | 4.99% | 9.98% | ' | ' |
Potential Equity Shares Outstanding | 1,125,518,683 | ' | ' | ' | ' | ' | ' |
Stock Issued During Period, Shares, Issued for Services | ' | ' | ' | ' | ' | 269,592 | ' |
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted | ' | ' | ' | ' | ' | ' | 48,000,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value | ' | ' | ' | ' | ' | ' | $105,501 |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate | ' | ' | ' | ' | ' | ' | 289.00% |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate, Minimum | ' | ' | ' | ' | ' | ' | 1.63% |
Share Price | ' | ' | ' | ' | ' | ' | $0.00 |
INCENTIVE_STOCK_PLANS_Details
INCENTIVE STOCK PLANS (Details) (Incentive Stock Plans [Member], USD $) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2014 | Dec. 31, 2013 | |
Incentive Stock Plans [Member] | ' | ' |
Stock Option Plan [Line Items] | ' | ' |
Shares, Outstanding at beginning of year | 709,020 | ' |
Shares, Granted/Exercises/Cancelled/Forfeited | 0 | ' |
Shares, Outstanding at end of year | 709,020 | 709,020 |
Shares, Exercisable at end of year | 709,020 | ' |
Weighted Average Exercise Price, Outstanding at beginning of year | $3.57 | ' |
Weighted Average Exercise Price, Outstanding at end of year | $3.57 | $3.57 |
Weighted Average Exercise Price, Exercisable at end of year | $3.57 | ' |
Weighted Average Remaining Life-years, Outstanding | '1 year 7 months 10 days | '2 years 1 month 10 days |
Weighted Average Remaining Life years, Exercisable at end of year | '1 year 7 months 10 days | ' |
DISCONTINUED_OPERATIONS_Detail
DISCONTINUED OPERATIONS (Details Textual) (USD $) | 6 Months Ended |
Jun. 30, 2013 | |
Discontinued Operations [Line Items] | ' |
Disposal Group, Including Discontinued Operation, Revenue | $14,750 |
Disposal Group, Including Discontinued Operation, Costs of Goods Sold | 3,635 |
Disposal Group, Including Discontinued Operation, Gross Profit (Loss) | $11,115 |
SUBSEQUENT_EVENTS_Details_Text
SUBSEQUENT EVENTS (Details Textual) (USD $) | 6 Months Ended | 1 Months Ended | 6 Months Ended | 1 Months Ended | 1 Months Ended | ||||||||||
Jun. 30, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jul. 01, 2013 | Jul. 23, 2014 | Jul. 31, 2014 | Jun. 30, 2014 | Jul. 18, 2014 | Jul. 28, 2014 | Jul. 29, 2014 | Jul. 18, 2014 | Jul. 18, 2014 | Jul. 23, 2014 | Jul. 31, 2014 | Jul. 03, 2014 | |
Cape One Master Fund II LP [Member] | Bitcoin Bidder Inc [Member] | Bitcoin Bidder Inc [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | Subsequent Event [Member] | |||||
Preferred Stock [Member] | Common Stock [Member] | Cape One Master Fund II LP [Member] | Cape One Master Fund II LP [Member] | Bitcoin Bidder Inc [Member] | |||||||||||
Subsequent Event [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Convertible Debt | ' | ' | ' | ' | ' | ' | ' | ' | $30,000 | $5,000 | ' | ' | ' | ' | ' |
Debt Instrument, Convertible, Terms Of Conversion Feature | ' | ' | ' | ' | ' | ' | ' | ' | 'The note is due on September 27, 2014, bears interest at 8% per annum. The note and the interest accrued on the note are convertible into the Companys common stock at any time prior to maturity (provided that such conversion does not result in the holder and its affiliates beneficially owning in excess of 4.99% of the issued and outstanding Common Stock) at $0.001 per share subject to adjustment upon the occurrence of certain anti-dilution events. | 'The note is due on November 20, 2014, bears interest at 8% per annum. The note and the interest accrued on the note are convertible into the Companys common stock at any time prior to maturity (provided that such conversion does not result in the holder and its affiliates beneficially owning in excess of 4.99% of the issued and outstanding Common Stock) at $0.001 per share subject to adjustment upon the occurrence of certain anti-dilution events | ' | ' | ' | ' | ' |
Equity Method Investment, Ownership Percentage | ' | ' | ' | ' | ' | ' | ' | 51.00% | ' | ' | ' | ' | ' | ' | ' |
Common Stock, Shares Authorized | 800,000,000 | ' | 800,000,000 | 800,000,000 | ' | ' | ' | 800,000,000 | ' | ' | ' | ' | ' | ' | ' |
Preferred Stock, Shares Authorized | 10,000,000 | ' | 10,000,000 | ' | ' | ' | ' | 10,000,000 | ' | ' | ' | ' | ' | ' | ' |
Excess Stock, Shares Authorized | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100,000,000 | 1,800,000,000 | ' | ' | ' |
Debt Conversion, Converted Instrument, Shares Issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,000,000,000 | ' |
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4.99% | ' | ' |
Debt Conversion, Converted Instrument, Amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,500,000 | ' | ' |
Common Stock, Capital Shares Reserved for Future Issuance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10,000,000 | ' | ' |
Cancelled Deposits | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 200,000 |
Repayments of Notes Payable | $1,950,000 | $0 | ' | ' | ' | $200,000 | $1,950,000 | ' | ' | ' | ' | ' | ' | ' | $20,000,010 |
Stockholders' Equity, Reverse Stock Split | ' | ' | ' | ' | ' | ' | ' | 'Additionally, a reverse split was authorized for issued and outstanding shares of common stock in a range of 100 to one to 600 to one | ' | ' | ' | ' | ' | ' | ' |
Sale of Shares Conditional Agreement Description | ' | ' | ' | ' | 'Cape One shall be allowed to sell the lesser of (i) 5% of the daily trading volume of the Companys common stock or, (ii) 10% of the reserved shares in any calendar month. | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |