Document_And_Entity_Informatio
Document And Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 2-May-14 | |
DocumentAndEntityInformationAbstract | ' | ' |
Entity Registrant Name | 'World Surveillance Group Inc. | ' |
Entity Central Index Key | '0000919742 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 31-Mar-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Trading Symbol | 'WSGI | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 698,742,163 |
Is Entity's Reporting Status Current? | 'Yes | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
CURRENT ASSETS | ' | ' |
Cash | $56,286 | $8,907 |
Accounts receivable | 35,266 | 59,651 |
Accounts receivable from related party | 53,043 | 59,833 |
Prepaid expenses | 38,940 | 38,940 |
Current assets – discontinued operations | 258,539 | 194,407 |
TOTAL CURRENT ASSETS | 442,074 | 361,738 |
PROPERTY AND EQUIPMENT | ' | ' |
Property and equipment, net of accumulated depreciation of $497,233 and $309,670, respectively. March 31, 2014 and December 31, 2013, respectively. | 2,224,216 | 2,269,966 |
OTHER NONCURRENT ASSETS | ' | ' |
Deferred financing costs | 17,229 | 22,398 |
Other assets – discontinued operations | 809,552 | 809,822 |
TOTAL NONCURRENT ASSETS | 826,781 | 832,220 |
TOTAL ASSETS | 3,493,071 | 3,463,924 |
CURRENT LIABILITIES | ' | ' |
Accounts payable | 4,591,770 | 4,520,662 |
Notes payable | 9,608,539 | 9,501,083 |
Other accrued liabilities | 2,920,186 | 2,795,027 |
Current liabilities – discontinued operations | 214,076 | 143,252 |
TOTAL CURRENT LIABILITIES | 17,334,571 | 16,960,024 |
COMMITMENTS AND CONTINGENCIES | ' | ' |
DEFICIT EQUITY | ' | ' |
Common stock, $0.00001 par value, 1,000,000,000 shares authorized; 707,257,033 shares and 681,127,043 shares issued and 695,257,033 shares and 669,127,043 shares outstanding at March 31, 2014 and December 31, 2013, respectively. | 6,953 | 6,691 |
Additional paid-in capital | 139,689,151 | 138,909,766 |
Accumulated deficit | -153,262,244 | -152,141,354 |
TOTAL STOCKHOLDERS' DEFICIT | -13,566,140 | -13,224,897 |
Non-controlling interest deficit | -275,360 | -271,203 |
TOTAL DEFICIT EQUITY | -13,841,500 | -13,496,100 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $3,493,071 | $3,463,924 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Property and equipment, accumulated depreciation | $538,420 | $49,267 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 707,257,033 | 681,127,043 |
Common stock, shares outstanding | 695,257,033 | 669,127,043 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
REVENUES | ' | ' |
Net sales | $331,153 | $454,877 |
Cost of sales | 302,549 | 329,669 |
Gross profit | 28,604 | 125,208 |
COSTS AND EXPENSES: | ' | ' |
General and administrative | 865,512 | 380,816 |
Professional fees | 124,170 | 76,784 |
Depreciation and amortization | 45,750 | 45,750 |
Research and development | ' | 136 |
TOTAL EXPENSES | 1,035,432 | 503,486 |
LOSS FROM OPERATIONS | -1,006,828 | -378,278 |
OTHER INCOME (EXPENSE) | ' | ' |
Change in fair value of derivative liabilities | ' | 300 |
Loss from conversion debt | ' | -21,597 |
Interest expense, net | -114,062 | -150,065 |
NET OTHER INCOME (EXPENSE) | -114,062 | -171,362 |
NET LOSS FROM CONTINUING OPERATIONS | -1,120,890 | -549,640 |
Net income (loss) from discontinued operations | -4,157 | 25,560 |
NET LOSS | $1,125,047 | ($524,080) |
NET LOSS PER SHARE: | ' | ' |
Basic and Diluted from continuing operations | $0 | $0 |
Basic and Diluted from discontinued operations | $0 | $0 |
WEIGHTED AVERAGE SHARES: | ' | ' |
Basic and Diluted | 579,797,908 | 489,871,669 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (USD $) | Common Stock [Member] | Additional Paid-In Capital [Member] | Retained Earnings [Member] | Noncontrolling Interest [Member] | Total |
Beginning Balance at Dec. 31, 2013 | $6,691 | $138,909,766 | ($152,141,354) | ($271,203) | ($13,224,897) |
Beginning Balance (in shares) at Dec. 31, 2013 | 669,127,043 | ' | ' | ' | ' |
Shares issued as inducement for loans | ' | ' | ' | ' | ' |
Shares issued for cash (in shares) | 6,500,000 | ' | ' | ' | ' |
Shares issued for cash | 65 | 64,935 | ' | ' | 65,000 |
Shares issued for legal settlement (in shares) | 15,696,758 | ' | ' | ' | ' |
Shares issued for legal settlement | 157 | 151,117 | ' | ' | 151,274 |
Fair value of vested options issued as share-based compensation and director’s fees | ' | 372,934 | ' | ' | 372,934 |
Fair value of vested options previously issued as share-based compensation | ' | 33,993 | ' | ' | 33,993 |
Fair value of options issued for services | ' | 22,006 | ' | ' | 22,006 |
Fair value of vested options issued as share-based compensation | ' | 95,200 | ' | ' | 95,200 |
Net loss | ' | ' | -1,120,890 | 1,125,047 | -1,125,047 |
Ending Balance at Mar. 31, 2014 | $6,953 | $139,689,151 | ($153,262,244) | $275,360 | ($13,841,500) |
Ending Balance (in shares) at Mar. 31, 2014 | 695,257,033 | ' | ' | ' | ' |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
OPERATING ACTIVITIES: | ' | ' |
Net loss | ($1,125,047) | ($549,640) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ' | ' |
Depreciation and amortization | 46,020 | 45,750 |
Share-based compensation | 502,127 | 21,284 |
Loss on conversion of convertible debt | ' | 21,597 |
Change in fair value of derivative liabilities | ' | -300 |
Loan interest capitalized to debt | 107,456 | 105,230 |
Amortization of deferred financing costs | 5,169 | 5,169 |
Shares issued as inducement to loan | ' | 34,400 |
Change in operating assets and liabilities: | ' | ' |
Accounts receivable | 24,385 | -267,876 |
Accounts receivable from related party | 6,790 | ' |
Prepaid expenses | ' | 7,194 |
Deposits | ' | 50,000 |
Accounts payable | 132,353 | 72,292 |
Other accrued liabilities | 276,433 | 201,561 |
Deferred revenues | ' | -7,500 |
NET CASH USED IN OPERATING ACTIVITIES | -20,157 | -260,839 |
INVESTING ACTIVITIES: | ' | ' |
NET CASH PROVIDED BY INVESTING ACTIVITIES IN CONTINUING OPERATIONS | ' | 0 |
FINANCING ACTIVITIES: | ' | ' |
Proceeds from notes payable | ' | 150,000 |
Proceeds from sale of common stock | 65,000 | 65,000 |
NET CASH PROVIDED BY FINANCING ACTIVITIES IN CONTINUING OPERATIONS | 65,000 | 215,000 |
NET CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS | 44,843 | -45,839 |
Net cash provided by operating activities in discontinued operations | 2,536 | 158,350 |
CASH – BEGINNING OF YEAR | 8,907 | 49,343 |
CASH – END OF YEAR | 56,286 | 161,854 |
SUPPLEMENTAL INFORMATION: | ' | ' |
Interest paid | ' | ' |
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ' | ' |
Reclassification of long-term convertible notes payable to current notes payable | ' | ' |
Common stock issued for services | 39,240 | 75,000 |
Common stock issued for settlements | 151,274 | 99,000 |
Common stock issued for acquisition | ' | 672,500 |
Options issued for services | 22,006 | ' |
LTAS acquisition payable | ' | $250,000 |
1_SUMMARY_OF_SIGNIFICANT_ACCOU
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES | 3 Months Ended | |
Mar. 31, 2014 | ||
Summary Of Significant Accounting Principles | ' | |
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES | ' | |
DESCRIPTION OF BUSINESS | ||
World Surveillance Group Inc. (the “Company”) designs, develops, markets, and sells, autonomous lighter-than-air (LTA) aerostats and unmanned aerial systems (UAS) capable of carrying payloads that provide semi-persistent intelligence, surveillance and reconnaissance (ISR), security and/or wireless communications from air to ground solutions at low and mid altitudes. The Company’s business focuses primarily on the design and development of innovative aerostats and UAS that provide situational awareness and other communications capabilities via the integration of wireless capabilities and customer payloads. The Company’s aerostats and airships, when integrated with cameras, electronics systems and other high technology payloads, are designed for use by government-related and commercial entities that require real-time ISR or communications support for military, homeland defense, border control, drug interdiction, natural disaster relief, maritime and environmental missions. | ||
The Company’s wholly owned subsidiary Global Telesat Corp. (GTC), provides mobile voice and data communications services globally via satellite to the U.S. government, defense industry and commercial users. GTC specializes in services related to the Globalstar satellite constellation, including satellite telecommunications voice airtime, tracking devices and services, and ground station construction. GTC has an e-commerce mobile satellite solutions portal and is an authorized reseller of satellite telecommunications equipment and services offered by other leading satellite network providers such as Inmarsat, Iridium, Globalstar and Thuraya. GTC also has a new subscription based online tracking portal called GTCTrack, designed to attract new satellite and GSM tracking customers by offering an easy-to-use interface and compatibility with a wide range of devices. GTC’s equipment is installed in various ground stations across Africa, Asia, Australia, Europe and South America. | ||
The Company’s wholly owned subsidiary Lighter Than Air Systems Corp. (LTAS), provides critical aerial and land-based surveillance and communications solutions to government and commercial customers. LTAS systems are designed and developed in-house utilizing proprietary technologies and processes that result in compact, rapidly deployable aerostat solutions and mast-based ISR systems. The LTAS systems have been proven to fulfill critical requirements of the military and law enforcement in the U.S. and internationally. | ||
BASIS OF PRESENTATION | ||
The accompanying unaudited condensed consolidated financial statements include the accounts of World Surveillance Group Inc. and its subsidiaries (“WSGI” or the “Company”) and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and reports and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X for scaled disclosures for smaller reporting companies. Accordingly, they do not include all, or include a condensed version of, the information and footnotes required by U.S. GAAP for complete financial statements. The Company believes, however, that the disclosures are adequate to make the information presented not misleading. Therefore, the Company’s condensed consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations of the Company for the periods shown. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year or for any future period. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements. Actual results may differ from management’s estimates. | ||
The consolidated balance sheet information as of December 31, 2013 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the fiscal year ended December 31, 2013. These interim condensed consolidated financial statements should be read in conjunction with the Company’s most recently audited financial statements and the notes thereto included in such above referenced Annual Report on Form 10-K. | ||
RECLASSIFICATIONS | ||
Certain 2013 amounts have been reclassified to conform to the 2014 presentation. | ||
GOING CONCERN | ||
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. However, as reflected in the accompanying condensed consolidated financial statements, the Company incurred a loss from operations of $1,006,828 for the three months ended March 31, 2014. The Company also had a working capital deficit of $16,892,497 and total stockholders' equity of $13,841,500, as well as an accumulated deficit for $153,537,604 at March 31, 2014. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to raise additional funds either through investments or by generating revenue from the sale of the Company’s products to continue its business operations and implement its strategic plan, which includes, among other things, continued development of its UAS, the pursuit or continued development of strategic relationships and expansion of the Company’s subsidiaries’ businesses. The Company’s business plan, which if successfully implemented, will allow it to sell UAS and other products for a profit, which in turn will reduce the Company’s dependence on raising additional funds from outside sources. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company anticipates a net loss to continue for the next several quarters. | ||
Additional cash will be needed to support our ongoing operations until such time that operations provide sufficient cash flow to cover expenditures. We are currently pursuing both short and long-term financing options from private investors as well as through institutional investors. We are also working to commercialize our Argus One airship, and our subsidiaries’ products to generate revenues from customers. While we have not yet sold any of our Argus One airships, we are already generating revenue from our subsidiaries’ products. The costs associated with our strategic plan are variable and contingent on our ability to raise capital or generate revenue from customer contracts, but we expect to need funding of approximately $3 million over the next 12 months. We are currently in litigation with La Jolla Cove Investors and do not expect any future funding under those agreements. We continue to have discussions with various entities relating to funding, but there can be no assurance that such funding will be received in the amounts required, on a timely basis, or at all. While we believe we will be able to continue to raise capital from various funding sources in such amounts sufficient to sustain operations at our current levels through the next several quarters, if we are not able to do so and if we are not able to generate sufficient revenue through the sale of our products, we would likely need to modify our strategy or cut back or terminate some of our operations. If we are able to raise additional funds through the issuance of equity securities, substantial dilution to existing shareholders may result. However, if our plans are not achieved, if significant unanticipated damaging events occur, or if we are unable to obtain the necessary additional funding on favorable terms or at all, we will likely have to modify our business plan and reduce, delay or discontinue some or all of our operations to continue as a going concern or seek a buyer for all or a portion of our assets. As of the date hereof, we continue to raise capital to sustain our current operations. | ||
REVENUE RECOGNITION | ||
The Company recognizes revenue when all four of the following criteria are met: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred and title has transferred or services have been rendered; 3) our price to the buyer is fixed or determinable; and 4) collectability is reasonably assured. The Company records unearned contract revenues and subscription fees as deferred revenues and their associated costs of sales as prepaid expenses. Deferred revenues from subscription fees and their related costs are amortized pro-ratable over the subscription term. Deferred revenues from contracts and their related costs are recognized upon completion and fulfillment of the contractual obligation using the completed contract method. | ||
INCOME TAXES | ||
The Company accounts for income taxes using the asset and liability approach. Under this approach, deferred income taxes are recognized based on the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities, as measured by current enacted tax rates. Valuation allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized. | ||
U.S. GAAP requires that, in applying the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more likely than not to occur. Under this criterion the most likely resolution of an uncertain tax position should be analyzed based on technical merits and on the outcome that will likely be sustained under examination. There were no adjustments related to uncertain tax positions recognized during the three months ended March 31, 2014 and 2013, respectively. | ||
FAIR VALUE MEASUREMENTS | ||
U.S. GAAP includes a framework for measuring fair value, which also addresses disclosure requirements for fair value measurements. Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value, in this context, should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk. | ||
Under the measurement framework, a fair valuation hierarchy for disclosure of the inputs to valuation used to measure fair value has been established. This hierarchy prioritizes the inputs into three broad levels that reflect the degree of subjectivity necessary to determine fair value measurements, as follows. Level 1 inputs are based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are based on 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 asset or liability. Level 3 inputs are unobservable inputs and reflect the Company’s estimates of assumptions that market participants would use to measure assets and liabilities at fair value. The fair values are therefore determined using model-based techniques that include option pricing models and discounted cash flow models. 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. | ||
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS | ||
The Company’s financial instruments include cash, accounts payable and notes payable. The carrying values for the current financial assets and liabilities approximate fair value due to their short maturity. | ||
USE OF ESTIMATES | ||
The process of preparing financial statements in conformity with U.S. GAAP requires the use of estimates, judgments and assumptions regarding certain types of assets, liabilities, revenues, and expenses. These estimates, judgments and assumptions are evaluated on an ongoing basis. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from the Company’s estimated amounts. | ||
BASIC AND DILUTED NET LOSS PER COMMON SHARE | ||
Basic and diluted net loss per common share has been computed by dividing the net loss by the weighted average number of shares of common stock outstanding during each period. Whenever losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would result in a diluted loss per share less than the basic loss per share and therefore would be anti-dilutive. Whenever net income is reported, the weighted average number of common shares outstanding will include common stock equivalents that are in-the-money. If all outstanding options, warrants and convertible shares were converted or exercised at March 31, 2014, the shares outstanding would be 872,535,405. | ||
PROPERTY AND EQUIPMENT | ||
Property and equipment are carried at cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated assets are retained in property and accumulated depreciation accounts until they are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred. | ||
The estimated useful lives of property and equipment are generally as follows: | ||
Appliques | 15 – 25 years | |
Machinery and equipment | 3 – 12 years | |
Office furniture and fixtures | 3 – 10 years | |
Computer hardware and software | 3 – 7 years | |
Assets held for sale are separately presented on the balance sheet and are no longer depreciated. | ||
LONG-LIVED ASSETS | ||
The Company evaluates the fair value of long-lived assets on an annual basis or whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Accordingly, any impairment of value is recognized when the carrying amount of a long-lived asset exceeds its fair value. The Company’s evaluations have not indicated any impairment of fair values. | ||
SHARE-BASED COMPENSATION | ||
The Company offers share-based compensation programs to its officers, directors and employees that consist of employee stock options, common stock and restricted stock awards. Common stock and restricted stock awards are issued at the closing price of the Company’s common stock on the date of grant. The Company recognizes compensation expense ratably over the vesting periods for restricted stock awards using the fair value of the stock on the vest date. The Black-Scholes option pricing model is used to value stock options, and compensation expense is recognized ratably over the requisite service period. Stock options typically have contractual terms of three to seven years. Share-based compensation for employees and non-employees is included in general administrative expense. Share-based compensation incurred during the three-months ended March 31, 2014 and 2013 was $502,127 and $21,284 respectively. | ||
2_ACQUISITIONS
2. ACQUISITIONS | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Business Combination, Description [Abstract] | ' | ||||||||||||
ACQUISITIONS | ' | ||||||||||||
On March 28, 2013, the Company consummated a Stock Purchase Agreement (the “Agreement”) by and among the Company, Lighter Than Air Systems Corp. (“LTAS”), Felicia Hess (the “Shareholder”) and Kevin Hess (“KHess”) pursuant to which the Company acquired 100% of the outstanding shares of capital stock of LTAS, thereby making LTAS a wholly-owned subsidiary of the Company. | |||||||||||||
The purchase price paid by the Company for LTAS consisted of $250,000 in cash payable on or before the date that is 30 days after the closing of the acquisition (the “Closing”), 25,000,000 shares of the Company’s common stock valued at the acquisition date based on the market price of $0.0269 per share, and an earn-out based on varying percentages of the gross revenues based on the level of revenue from contracts with an identified group of potential customers. No value was ascribed to the earn-out because future revenues, if any, cannot be reliably predicted. Pursuant to the Agreement and an Escrow Agreement, 7,500,000 shares of common stock out of the 25,000,000 shares issued by the Company have been placed in escrow for one year to satisfy possible indemnification claims of the Company. Felicia Hess, the President of LTAS, has entered into an employment agreement to continue in her role as President of LTAS. The Agreement also includes restrictions on the sale of the Company’s securities issued as the purchase price by the Shareholder for a one-year period following the Closing. | |||||||||||||
The Shareholder has the right pursuant to the Agreement to nominate one member of the Company’s Board of Directors, and as a result, the size of the Company’s Board of Directors has been increased and Felicia Hess has been appointed as a Class I director as of March 28, 2013. Since Ms. Hess would not be an “independent” director pursuant to the rules of the Securities and Exchange Commission, it is not expected that she will be appointed to any committees. | |||||||||||||
In connection with the Closing, LTAS, the Shareholder and the Company also entered into an Option Agreement dated March 28, 2013 pursuant to which the Shareholder was granted an exclusive option to purchase the shares of LTAS held by WSGI on the occurrence of (i) a WSGI bankruptcy event, or (ii) a decrease in the daily volume of WSGI’s common stock to below 50,000 shares for 30 consecutive days, occurring within 18 months of the Closing at a purchase price equal to the fair market value of the LTAS stock at the time of such triggering event, as determined by an independent valuation firm. | |||||||||||||
The common stock of the Company issued as purchase price pursuant to the Agreement was issued as restricted securities under an exemption provided by Section 4(2) of the Securities Act of 1933, as amended. The Agreement, however, provides the Shareholder with certain piggyback registration rights. | |||||||||||||
LTAS provides critical aerial and land-based surveillance and communications solutions to government and commercial customers. LTAS systems are designed and developed in-house utilizing proprietary technologies and processes that result in compact, rapidly deployable aerostat solutions and mast-based ISR systems. The LTAS systems have been proven to fulfill critical requirements of the military and law enforcement in the U.S. and internationally. | |||||||||||||
On December 31, 2013, the Company entered into a First Amendment to Agreement (the “First Amendment”) by and among the Company, Lighter Than Air Systems Corp. (“LTAS”), Felicia Hess (the “Shareholder”) and Kevin Hess (“KHess”), which amended and restated various terms and conditions of the Agreement and revised the purchase price from 25 million shares plus $250,000 cash payment to 45 million shares and no cash payment due the selling shareholder and deleted the earn-out payment provisions in their entirety. | |||||||||||||
The following table summarizes the original allocation of the LTAS acquisition purchase price, which has been accounted at the fair values of the assets acquired and liabilities assumed under the acquisition method of accounting: | |||||||||||||
Original | Allocation | Revised | |||||||||||
Allocation | Adjustment | Allocation | |||||||||||
Current assets | $ | 703,220 | $ | 7,195 | $ | 710,415 | |||||||
Property and equipment | 1,357 | 2,556 | 3,913 | ||||||||||
Goodwill | 479,585 | 328,239 | 807,824 | ||||||||||
Due to selling shareholder | 0 | (350,000 | ) | (350,000 | ) | ||||||||
Current liabilities assumed | (261,662 | ) | 12,010 | (249,652 | ) | ||||||||
Total Purchase Price | $ | 922,500 | $ | 0 | $ | 922,500 |
3_DISCONTINUED_OPERATIONS
3. DISCONTINUED OPERATIONS | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Discontinued Operations and Disposal Groups [Abstract] | ' | ||||||||
3. DISCONTINUED OPERATIONS | ' | ||||||||
On May 5, 2014, World Surveillance Group Inc. entered into a Securities Exchange Agreement by and among the Company, Lighter Than Air Systems Corp. (“LTAS”), and Drone Aviation Corp. (“Drone”) pursuant to which the Company exchanged 100% of the outstanding shares of capital stock of LTAS for a cash payment of $335,000 and 10,000,000 shares of common stock, par value $0.0001 per share, of Drone. Please refer to the disclosure in Note 13. Subsequent Events for additional details on this transaction. | |||||||||
The Company’s Condensed Consolidated Balance Sheets at March 31, 2014 and December 31, 2013 reflect the accounts of LTAS as discontinued operations, carried at fair value as follows: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Cash | $ | 56,741 | $ | 109,825 | |||||
Accounts receivable | 135,050 | 8,085 | |||||||
Inventories | 65,122 | 75,311 | |||||||
Prepaid expenses | 1,626 | 1,186 | |||||||
Current assets of discontinued operations | $ | 258,539 | $ | 194,407 | |||||
Property and equipment, net | 1,728 | 1,998 | |||||||
Goodwill | 807,824 | 871,256 | |||||||
Other assets of discontinued operations | $ | 809,552 | $ | 873,254 | |||||
Accounts payable | 98,625 | 72,985 | |||||||
Accounts payable due related party | 51,998 | 160,691 | |||||||
Accrued liabilities | 63,454 | 81,358 | |||||||
Deferred revenues | - | 1,650 | |||||||
Current liabilities of discontinued operations | $ | 214,077 | $ | 316,684 | |||||
Net assets of discontinued operations | $ | 854,014 | $ | 750,977 | |||||
The operating results of LTAS since the acquisition date of March 28, 2013 are also reflected in the Company’s Condensed Consolidated Statements of Operations as discontinued operations. | |||||||||
March 31, | March 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Net sales | $ | 229,350 | $ | 71,300 | |||||
Cost of sales | 140,159 | 41,640 | |||||||
General and administrative | 88,974 | 4,100 | |||||||
Professional fees | 3,603 | - | |||||||
Depreciation | 270 | - | |||||||
Interest expense | 501 | - | |||||||
Net income (loss) from discontinued operations | $ | (4,157 | ) | $ | 25,560 | ||||
4_RELATED_PARTY_TRANSACTIONS
4. RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2014 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
The accounts receivable from related party at March 31, 2014 reflects trade receivables from Global Telesat Communications, Ltd. (“GTCL”) of $53,043. GTCL is a related party based in the United Kingdom and controlled by a current officer of GTC. Total sales to GTCL for the three -months ended March 31, 2014 were $114,906, and account for 32% of GTC’s total sales during the period. | |
The accounts payable due to related party of the discontinued operations at March 31, 2014, includes allocated rent charges, aerostat envelopes, and labor charges due to Aerial Products Corp (“APC”) of $51,998. APC is a related party, controlled by a current employee of the Company. APC shares the manufacturing facilities with LTAS and provides aerostat envelopes and manufacturing labor to LTAS. Total charges from APC to LTAS during the three-month period ended March 31, 2014 were $114,906. | |
5_PROPERTY_AND_EQUIPMENT
5. PROPERTY AND EQUIPMENT | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||
Property and equipment consisted of the following: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Appliques | $ | 2,755,732 | $ | 2,755,732 | |||||
Office furniture and fixtures | 6,904 | 6,904 | |||||||
2,762,636 | 2,762,636 | ||||||||
Less: accumulated depreciation | (538,420 | ) | (492,670 | ) | |||||
$ | 2,224,216 | $ | 2,269,966 | ||||||
6_OTHER_ACCRUED_LIABILITIES
6. OTHER ACCRUED LIABILITIES | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Unsecured short term promissory notes | ' | ||||||||
OTHER ACCRUED LIABILITIES | ' | ||||||||
Accrued liabilities consisted of the following: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Payroll liabilities | $ | 2,133,452 | $ | 1,890,245 | |||||
Professional fees | 10,000 | 10,000 | |||||||
Accrued legal claims payable | 260,934 | 354,684 | |||||||
Accrued cash true-up from conversion | 353,873 | 353,873 | |||||||
Accrued interest on debenture | 34,260 | 31,133 | |||||||
GTC acquisition payable | 75,000 | 75,000 | |||||||
Other | 52,667 | 80,092 | |||||||
OTHER ACCRUED LIABILITIES | $ | 2,920,186 | $ | 2,795,027 | |||||
7_NOTES_PAYABLE
7. NOTES PAYABLE | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes Payable [Abstract] | ' | ||||||||
NOTES PAYABLE | ' | ||||||||
Notes payable consisted of the following: | |||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Unsecured promissory notes | $ | 5,997,030 | $ | 5,997,030 | |||||
Unsecured short-term promissory notes | 150,000 | 150,000 | |||||||
Convertible notes payable | 267,000 | 267,000 | |||||||
Accrued interest | 3,194,509 | 3,087,053 | |||||||
NOTES PAYABLE | $ | 9,608,539 | $ | 9,501,083 | |||||
At March 31, 2014 and December 31, 2013, notes payable included two unsecured promissory notes aggregating $5,997,030 with no stated interest rate or terms of repayment. The Company has accrued interest at 7% per annum on both notes since their inception and includes the notes in current liabilities. | |||||||||
On February 1, 2013, the Company issued a $100,000 75-day unsecured 10% promissory note to an individual investor for funds received. On March 18, 2013, the Company issued a $50,000 60-day unsecured 12% promissory note to the same investor for funds received. The Company issued 2 million common shares to the investor as an inducement for the loans, which was amortized as financing fees. As of March 31, 2014, the Company is in default and has not repaid these notes. | |||||||||
On February 2, 2012, the Company closed on a Securities Purchase Agreement with a California-based institutional investor (the “Investor”) for an aggregate of $5.5 million. The $500,000 initial tranche was funded at the closing in connection with a Convertible Debenture due in February 2015 and an Equity Investment Agreement (the “EIA”). The Debenture was converted by the Investor into shares of common stock beginning on May 3, 2012. | |||||||||
The Debenture grants the Investor with a right of first refusal on future financings of the Company subject to certain terms and conditions and contains acceleration provisions requiring 120% of the principal amount, accrued and unpaid interest, to become immediately due and payable on certain events of default described therein. | |||||||||
Pursuant to the EIA, the Investor agreed to invest an additional $5.0 million in monthly tranches beginning on May 3, 2012. The Investor also has the right to purchase an additional $5.0 million of the Company’s common stock at an exercise price of $0.21 per share for a period of three years. | |||||||||
The Company incurred customary closing costs including attorney’s fees, commissions and closing costs of $62,027, which are recorded as deferred financing costs to be amortized as additional interest expense on a straight-line basis over the 3-year term of the Debenture and EIA. | |||||||||
On July 25, 2013, the Company filed a lawsuit against La Jolla Cove Investors, Inc. in the United States District Court for the Northern District of California relating to the finance documents entered into by the Company and La Jolla in January 2012. In the lawsuit, the Company alleges breach of contract and other causes of action. The Company has reclassified the convertible notes payable from long-term to current notes payable and continues to accrue interest at the stated interest rate and amortize the deferred financing costs. | |||||||||
8_DERIVATIVE_LIABILITIES
8. DERIVATIVE LIABILITIES | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Derivative Liability [Abstract] | ' | ||||||||
8. DERIVATIVE LIABILITIES | ' | ||||||||
The Company accounts for derivative instruments at fair value. Gains and losses from changes in the fair value of derivatives are recognized in interest expense. The Company’s derivative instruments consist of stock warrants that contained anti-dilution provisions that were issued with certain debt and equity financings. During 2013, all financial instruments that gave rise to the derivative liabilities expired. | |||||||||
Warrants | |||||||||
In the past, the Company entered into financing agreements for convertible promissory notes and stock purchase agreements, which included Class A and Class B warrants. Both Class A and Class B warrants contained anti-dilution rights and were considered to be derivative liabilities under U.S. GAAP. All of the Class A and Class B warrants expired during 2013. Beginning in 2010, the Company entered into new stock purchase agreements and issued an aggregate of 9,677,167 warrants under the 2010 and 2011 stock purchase agreements. Warrants issued under the 2010 and 2011 stock purchase agreements have no anti-dilution rights and are not considered derivative liabilities. All warrants and purchase rights have 3-year terms and are exercisable for a purchase price of $0.21 per share. | |||||||||
The following table summarizes certain information about the Company’s warrants and purchase rights: | |||||||||
Warrants | Average | ||||||||
& Purchase Rights | Exercise Price | ||||||||
Outstanding at December 31, 2013 | 18,628,235 | $ | 0.21 | ||||||
Warrants Granted | 0 | 0 | |||||||
Warrants Expired | (2,333,334 | ) | 0.21 | ||||||
Outstanding at March 31, 2014 | 16,294,901 | $ | 0.21 | ||||||
The warrants outstanding and exercisable at March 31, 2014 and December 31, 2013 had no intrinsic value. All warrants were fully exercisable and there was no unamortized cost to be recognized in future periods. | |||||||||
9_LITIGATION_AND_CONTINGENCIES
9. LITIGATION AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2014 | |
Stock Issued During Period Shares Director Stock Award | ' |
LITIGATION AND CONTINGENCIES | ' |
In the ordinary conduct of business, we are subject to periodic lawsuits, investigations and litigation claims, which we account for where appropriate. We cannot predict with certainty the ultimate resolution of such lawsuits, investigations and claims asserted against us. As of the date hereof, we had the following material contingencies: | |
Brio Capital | |
Brio Capital, the holder of a warrant, filed an action against us on February 25, 2011 in the New York Supreme Court, County of New York, for the issuance of approximately 6.2 million shares of common stock upon the exercise of certain warrants. The Court granted a non-final Summary Judgment Order on a portion of the action in favor of Brio in December 2011 requiring us, among other things, to issue 6.2 million shares of common stock. We have issued the shares required by the Court order. We also entered into a settlement agreement to pay $57,661 in legal fees as required by the Court order, which has been satisfied. We reached a settlement with Brio resolving all remaining matters. Under the terms of the settlement, we are required to issue a number of shares of common stock in twelve (12) monthly installments equal to $31,250 divided by the average of the closing bid prices of our common stock for the last three (3) trading days of the month immediately preceding the month in which the shares are due to be issued. Pursuant to the Court’s Section 3(a) (10) approval, the shares of common stock issued to Brio shall be freely tradeable upon issuance. All shares issued are subject to a leak-out provision contained in the settlement agreement. | |
The DeCarlo Group | |
A lawsuit was filed by the DeCarlo Group on November 24, 2010 in Miami-Dade County Courthouse for over $400,000 claimed in connection with CFO and accounting services allegedly rendered to the Company. It is our position that we were overcharged in connection with the services rendered and that no amounts are due. DeCarlo has now filed a second amended complaint that we have responded to and intend to otherwise defend ourselves vigorously in this matter, but the outcome of the action cannot be predicted. | |
La Jolla Cove Investors, Inc. | |
On July 25, 2013, we filed a lawsuit against La Jolla Cove Investors, Inc. in the United States District Court for the Northern District of California relating to the finance documents entered into by us and La Jolla in January 2012. In the lawsuit, we allege breach of contract and other causes of action. We are seeking injunctive relief in addition to unspecified monetary damages as well as other relief. La Jolla has made counterclaims against us and is defending against our complaint. We intend to otherwise pursue this matter vigorously, but the outcome of the action cannot be predicted. | |
IRS | |
During 2010 and 2009, we, under our former name Sanswire Corp., incurred and reported to the Internal Revenue Service (“IRS”) payroll tax liabilities (and deposited the appropriate withholding amounts) during the normal course of business at each payroll cycle. We reported payroll tax liabilities for all the tax periods in 2007 and 2008, however, we failed to deposit the appropriate withholding amounts for those periods. We recognized this issue and, accordingly, contacted the IRS to make arrangements to pay any taxes due. One such matter has been resolved with the IRS, and we currently estimate the amount involved in the second matter to be approximately $200,000. We may be subject to additional penalties and interest from the IRS in connection with these payroll tax matters. We are engaged in discussions and continue to cooperate with the IRS to resolve this matter. | |
The Company provides indemnification, to the extent permitted by law, to its’ officers, directors, employees and agents for liabilities arising from certain events or occurrences while the officer, director, employee, or agent is or was serving at the Company’s request in such capacity. | |
10_SHAREBASED_COMPENSATION
10. SHARE-BASED COMPENSATION | 3 Months Ended | ||||||||||||||
Mar. 31, 2014 | |||||||||||||||
Share-based Compensation [Abstract] | ' | ||||||||||||||
SHARE-BASED COMPENSATION | ' | ||||||||||||||
The Company issues stock-based compensation that consists of common stock, restricted stock and stock options to its directors, officers, employees and consultants. All common stock and restricted stock awards are subject to the securities law restrictions of Rule 144 as promulgated under the Securities Act of 1933, as amended, unless covered by a registration statement. | |||||||||||||||
Common Stock | |||||||||||||||
The Company recognizes the cost of the common stock issued to directors, officers, and employees as compensation expense at the closing market price on the grant date. All common stock awards are fully vested on the date of grant, therefore there is no unrecognized compensation | |||||||||||||||
associated with these awards. During the three-months ended March 31, 2014, there were no share-based compensation awards of common stock. | |||||||||||||||
Restricted Stock | |||||||||||||||
Awards of restricted stock are independent of stock option grants and are generally subject to forfeiture if employment terminates prior to vesting. Prior to vesting, ownership of the restricted stock cannot be transferred. The restricted stock has the same voting rights as the common stock. The Company recognizes the grant date fair value of restricted stock awards ratably over the vesting period as compensation expense based upon the stock’s closing market price on the vest date. Restricted stock that vested during the three-months ended March 31, 2014 totaled $95,200. There is approximately $24,000 in unrecognized compensation relating to unvested restricted stock at March 31, 2014. | |||||||||||||||
Stock Options | |||||||||||||||
The Company has issued stock options at exercise prices equal to the Company’s common stock market price on the date of grant with contractual terms of three to seven years. Historically, the stock options were fully vested and expensed as compensation on the grant date. During 2010, the Company began issuing stock options with vesting schedules and such stock options are generally subject to forfeiture if employment terminates prior to vesting. During the three-months ended March 31, 2014, the Company awarded 37 million fully-vested options totaling $370,000 as retention bonuses; 400,000 fully-vested options totaling $2,934 as directors’ fees; and issued 3 million options totaling $22,006 to consultants. The fair value of options issued in a previous period that vested during the quarter were $33,993. At March 31, 2014, there is approximately $45,000 in unrecognized compensation expense relating to unvested stock options. | |||||||||||||||
The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options. The principal assumptions utilized in valuing stock options include the expected stock price volatility based on the most recent historical period equal to the expected life of the option; an estimate of the expected option life based upon historical experience; no expected dividend yield; and the risk-free interest rate based upon on the yields of Treasury constant maturities for the remaining term of the option. | |||||||||||||||
The following table summarizes information about stock options outstanding and exercisable at March 31, 2014: | |||||||||||||||
Options Outstanding and Exercisable | |||||||||||||||
Exercise prices | Number | Weighted average | Weighted | ||||||||||||
outstanding | remaining | Average | |||||||||||||
contractual | Exercise | ||||||||||||||
terms | price | ||||||||||||||
(years) | |||||||||||||||
$ | 0.0083 | 3,400,000 | 3 | $ | 0.0083 | ||||||||||
0.0096 | 12,000,000 | 6.76 | 0.0096 | ||||||||||||
0.01 | 37,000,000 | 6.91 | 0.01 | ||||||||||||
0.011 | 400,000 | 2.62 | 0.011 | ||||||||||||
0.013 | 40,355,693 | 6.49 | 0.013 | ||||||||||||
0.015 | 11,000,000 | 5.51 | 0.015 | ||||||||||||
0.016 | 250,000 | 1.93 | 0.016 | ||||||||||||
0.017 | 2,000,000 | 5.86 | 0.017 | ||||||||||||
0.021 | 250,000 | 2.12 | 0.021 | ||||||||||||
0.023 | 22,316,667 | 5.62 | 0.023 | ||||||||||||
0.024 | 12,000,000 | 6.33 | 0.024 | ||||||||||||
0.028 | 400,000 | 2.33 | 0.028 | ||||||||||||
0.045 | 4,444,444 | 0.1 | 0.045 | ||||||||||||
0.075 | 7,750,000 | 4 | 0.075 | ||||||||||||
0.08 | 1,500,000 | 0.02 | 0.08 | ||||||||||||
0.09 | 2,916,667 | 0.02 | 0.09 | ||||||||||||
157,983,471 | 5.8 | $ | 0.02 | ||||||||||||
No options were in-the-money on March 31, 2014. | |||||||||||||||
11_INCOME_TAXES
11. INCOME TAXES | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||
INCOME TAXES | ' | ||||||||||||
The Company has federal and state net operating loss (NOL) carryforwards, which can be used to offset future earnings. Accordingly, no provision for income taxes is recorded in these consolidated financial statements. A deferred tax asset for the future benefits of net operating losses and other differences is offset by a 100% valuation allowance due to the uncertainty of the Company's ability to realize future tax benefits from the losses. These net operating losses will expire in the years 2021 through 2031. | |||||||||||||
Certain income and expenses are recognized in different periods for tax and financial reporting purposes. The items that give rise to these temporary differences at the Company consist of its NOL carryforwards and the related valuation allowances. The resulting deferred tax assets and liabilities consist of the tax effects (computed at 15%) of the temporary differences and are listed below: | |||||||||||||
March 31, 2014 | 2014 | 31-Dec-13 | |||||||||||
Changes | |||||||||||||
Deferred tax assets: | |||||||||||||
Net operating loss carry-forwards | $ | 18,414,667 | $ | 168,757 | $ | 18,245,910 | |||||||
Valuation allowance | (18,414,667 | ) | (168,757 | ) | (18,245,910 | ) | |||||||
Net deferred tax asset | $ | — | $ | — | $ | — | |||||||
A reconciliation of income benefit provided at the federal statutory rate of 15% to income tax benefit is as follows: | |||||||||||||
31-Mar-14 | March 31,2013 | ||||||||||||
Income tax benefit computed at federal statutory rate | $ | (168,757 | ) | $ | (77,562 | ) | |||||||
Deferred income taxes | 168,757 | 77,562 | |||||||||||
$ | — | $ | — | ||||||||||
The Company also had net operating loss carry-forwards of its predecessor, related to its reincorporation and reorganization under the Internal Revenue Code, available to offset future taxable income. These NOL carryforwards total approximately $81,429,083 and expire at various dates through 2022. | |||||||||||||
The Company operated in multiple tax jurisdictions within the United States of America. Although management does not believe that the Company is currently under examination in any major tax jurisdiction in which it operates other than for the issues with the IRS as described in Note 15, the Company remains subject to examination in all of those tax jurisdictions until the applicable statute of limitations expire. As of March 31, 2014, 2008 and subsequent tax years remain subject to examination by the Internal Revenue Service (“IRS”) and in the Company’s major state tax jurisdictions. The Company does not expect to have a material change to unrecognized tax positions within the next twelve months. | |||||||||||||
12_PER_SHARE_INFORMATION
12. PER SHARE INFORMATION: | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Earnings Per Share [Abstract] | ' | ||||||||
PER SHARE INFORMATION: | ' | ||||||||
Basic earnings per share (“Basic EPS”) of common stock is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding. Diluted earnings per share of common stock (“Diluted EPS”) is computed by dividing the net loss by the weighted-average number of shares of common stock, and dilutive common stock equivalents and convertible securities then outstanding. U.S. GAAP requires the presentation of both Basic EPS and Diluted EPS on the face of the Company’s Condensed Consolidated Statements of Operations. There were no dilutive common stock equivalents. | |||||||||
Three-Months Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Numerator: | |||||||||
Net loss from continuing operations | $ | (1,120,890 | ) | $ | (549,640 | ) | |||
Net income (loss) from discontinued operations | $ | (4,157 | ) | $ | 25,560 | ||||
Denominator: | |||||||||
Weighted-average common shares outstanding | 579,797,908 | 489,871,669 | |||||||
Dilutive effect of stock warrants and stock options | 0 | 0 | |||||||
Weighted-average common shares outstanding, assuming dilution | 579,797,908 | 489,871,669 | |||||||
Net loss per share: | |||||||||
Basic and diluted for continuing operations | $ | (0.00 | ) | $ | (0.00 | ) | |||
Basic and diluted for discontinued operations | $ | (0.00 | ) | $ | (0.00 | ) | |||
13_SUBSEQUENT_EVENTS
13. SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2014 | |
Subsequent Events [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
On May 1, 2014, the Company’s stock began trading on the OTC Pink Marketplace. | |
On May 5, 2014 (the “Closing Date”), World Surveillance Group Inc. (the “Company”) entered into a Securities Exchange Agreement (the “Agreement”) by and among the Company, Lighter Than Air Systems Corp. (“LTAS”), and Drone Aviation Corp. (“Drone”) pursuant to which the Company exchanged 100% of the outstanding shares of capital stock of LTAS for a cash payment of $335,000 and 10,000,000 shares of common stock, par value $0.0001 per share, of Drone (the “Shares”). WSGI signed a Lock-Up Agreement that includes restrictions on the sale of the Shares by WSGI for a fifteen-month period following the Closing Date, although WSGI will be able to sell a certain volume of shares in the thirteenth through fifteenth month following the Closing Date. Following the Closing Date, the Company will focus on its Argus airship program which is currently being worked on by the Ohio Lighter Than Air UAS Consortium created by the Company and several other companies in August 2013 and the business of our Global Telesat Corp. (“GTC”) subsidiary. | |
As of the Closing Date, Felicia Hess, Kevin Hess and Dan Erdberg have each terminated his or her employment agreements with the Company. As part of the transaction, the Hesses waived certain bonuses, options and accrued wages owing to them from the Company. Effective as of the Closing Date, Felicia Hess resigned as a director of WSGI. | |
On May 5, 2014, the Company entered into a Securities Purchase Agreement (the “SPA”) for the sale and purchase of $150,000 of common stock, par value $0.00001 per share, of the Company (the “Common Stock”) at a purchase price of $0.007 per share. Pursuant to the SPA, in addition to shares of Common Stock, the purchaser received (i) a right of first refusal on certain future financings, (ii) piggyback registration rights and (iii) certain anti-dilution rights. | |
On May 5, 2014, the Company also entered into a non-binding term sheet for a registered direct offering of up to $1,000,000 (the “Offering”) of Common Stock with an investor. The Offering is subject to, among other things, the filing and effectiveness of a Registration Statement under the Securities Act of 1933, as amended, registering the shares of Common Stock sold in the Offering and the parties’ agreement to the price per share, which has not been negotiated by the parties, prior to the time the Company’s Registration Statement goes effective. The Offering is subject to additional terms and conditions as more fully described in the term sheet a copy of which is attached as exhibit 10.4 annexed hereto. | |
On May 5, 2014, the Company also simultaneously entered into two Consulting Agreements to assist the Company with restructuring its balance sheet and identifying potential acquisition targets for the Company. The Company issued an aggregate of 15,000,000 shares of Common Stock in connection with such Agreements. | |
1_SUMMARY_OF_SIGNIFICANT_ACCOU1
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Policies) | 3 Months Ended | |
Mar. 31, 2014 | ||
Summary Of Significant Accounting Principles | ' | |
DESCRIPTION OF BUSINESS | ' | |
World Surveillance Group Inc. (the “Company”) designs, develops, markets, and sells, autonomous lighter-than-air (LTA) aerostats and unmanned aerial systems (UAS) capable of carrying payloads that provide semi-persistent intelligence, surveillance and reconnaissance (ISR), security and/or wireless communications from air to ground solutions at low and mid altitudes. The Company’s business focuses primarily on the design and development of innovative aerostats and UAS that provide situational awareness and other communications capabilities via the integration of wireless capabilities and customer payloads. The Company’s aerostats and airships, when integrated with cameras, electronics systems and other high technology payloads, are designed for use by government-related and commercial entities that require real-time ISR or communications support for military, homeland defense, border control, drug interdiction, natural disaster relief, maritime and environmental missions. | ||
The Company’s wholly owned subsidiary Global Telesat Corp. (GTC), provides mobile voice and data communications services globally via satellite to the U.S. government, defense industry and commercial users. GTC specializes in services related to the Globalstar satellite constellation, including satellite telecommunications voice airtime, tracking devices and services, and ground station construction. GTC has an e-commerce mobile satellite solutions portal and is an authorized reseller of satellite telecommunications equipment and services offered by other leading satellite network providers such as Inmarsat, Iridium, Globalstar and Thuraya. GTC also has a new subscription based online tracking portal called GTCTrack, designed to attract new satellite and GSM tracking customers by offering an easy-to-use interface and compatibility with a wide range of devices. GTC’s equipment is installed in various ground stations across Africa, Asia, Australia, Europe and South America. | ||
The Company’s wholly owned subsidiary Lighter Than Air Systems Corp. (LTAS), provides critical aerial and land-based surveillance and communications solutions to government and commercial customers. LTAS systems are designed and developed in-house utilizing proprietary technologies and processes that result in compact, rapidly deployable aerostat solutions and mast-based ISR systems. The LTAS systems have been proven to fulfill critical requirements of the military and law enforcement in the U.S. and internationally. | ||
BASIS OF PRESENTATION | ' | |
The accompanying unaudited condensed consolidated financial statements include the accounts of World Surveillance Group Inc. and its subsidiaries (“WSGI” or the “Company”) and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and reports and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X for scaled disclosures for smaller reporting companies. Accordingly, they do not include all, or include a condensed version of, the information and footnotes required by U.S. GAAP for complete financial statements. The Company believes, however, that the disclosures are adequate to make the information presented not misleading. Therefore, the Company’s condensed consolidated financial statements reflect all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations of the Company for the periods shown. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year or for any future period. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements. Actual results may differ from management’s estimates. | ||
The consolidated balance sheet information as of December 31, 2013 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the fiscal year ended December 31, 2013. These interim condensed consolidated financial statements should be read in conjunction with the Company’s most recently audited financial statements and the notes thereto included in such above referenced Annual Report on Form 10-K. | ||
RECLASSIFICATIONS | ' | |
Certain 2013 amounts have been reclassified to conform to the 2014 presentation. | ||
GOING CONCERN | ' | |
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. However, as reflected in the accompanying condensed consolidated financial statements, the Company incurred a loss from operations of $1,006,828 for the three months ended March 31, 2014. The Company also had a working capital deficit of $16,892,497 and total stockholders' equity of $13,841,500, as well as an accumulated deficit for $153,537,604 at March 31, 2014. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to raise additional funds either through investments or by generating revenue from the sale of the Company’s products to continue its business operations and implement its strategic plan, which includes, among other things, continued development of its UAS, the pursuit or continued development of strategic relationships and expansion of the Company’s subsidiaries’ businesses. The Company’s business plan, which if successfully implemented, will allow it to sell UAS and other products for a profit, which in turn will reduce the Company’s dependence on raising additional funds from outside sources. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company anticipates a net loss to continue for the next several quarters. | ||
Additional cash will be needed to support our ongoing operations until such time that operations provide sufficient cash flow to cover expenditures. We are currently pursuing both short and long-term financing options from private investors as well as through institutional investors. We are also working to commercialize our Argus One airship, and our subsidiaries’ products to generate revenues from customers. While we have not yet sold any of our Argus One airships, we are already generating revenue from our subsidiaries’ products. The costs associated with our strategic plan are variable and contingent on our ability to raise capital or generate revenue from customer contracts, but we expect to need funding of approximately $3 million over the next 12 months. We are currently in litigation with La Jolla Cove Investors and do not expect any future funding under those agreements. We continue to have discussions with various entities relating to funding, but there can be no assurance that such funding will be received in the amounts required, on a timely basis, or at all. While we believe we will be able to continue to raise capital from various funding sources in such amounts sufficient to sustain operations at our current levels through the next several quarters, if we are not able to do so and if we are not able to generate sufficient revenue through the sale of our products, we would likely need to modify our strategy or cut back or terminate some of our operations. If we are able to raise additional funds through the issuance of equity securities, substantial dilution to existing shareholders may result. However, if our plans are not achieved, if significant unanticipated damaging events occur, or if we are unable to obtain the necessary additional funding on favorable terms or at all, we will likely have to modify our business plan and reduce, delay or discontinue some or all of our operations to continue as a going concern or seek a buyer for all or a portion of our assets. As of the date hereof, we continue to raise capital to sustain our current operations. | ||
REVENUE RECOGNITION | ' | |
The Company recognizes revenue when all four of the following criteria are met: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred and title has transferred or services have been rendered; 3) our price to the buyer is fixed or determinable; and 4) collectability is reasonably assured. The Company records unearned contract revenues and subscription fees as deferred revenues and their associated costs of sales as prepaid expenses. Deferred revenues from subscription fees and their related costs are amortized pro-ratable over the subscription term. Deferred revenues from contracts and their related costs are recognized upon completion and fulfillment of the contractual obligation using the completed contract method. | ||
INCOME TAXES | ' | |
The Company accounts for income taxes using the asset and liability approach. Under this approach, deferred income taxes are recognized based on the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities, as measured by current enacted tax rates. Valuation allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized. | ||
U.S. GAAP requires that, in applying the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more likely than not to occur. Under this criterion the most likely resolution of an uncertain tax position should be analyzed based on technical merits and on the outcome that will likely be sustained under examination. There were no adjustments related to uncertain tax positions recognized during the three months ended March 31, 2014 and 2013, respectively. | ||
FAIR VALUE MEASUREMENTS | ' | |
U.S. GAAP includes a framework for measuring fair value, which also addresses disclosure requirements for fair value measurements. Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value, in this context, should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk. | ||
Under the measurement framework, a fair valuation hierarchy for disclosure of the inputs to valuation used to measure fair value has been established. This hierarchy prioritizes the inputs into three broad levels that reflect the degree of subjectivity necessary to determine fair value measurements, as follows. Level 1 inputs are based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are based on 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 asset or liability. Level 3 inputs are unobservable inputs and reflect the Company’s estimates of assumptions that market participants would use to measure assets and liabilities at fair value. The fair values are therefore determined using model-based techniques that include option pricing models and discounted cash flow models. 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. | ||
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS | ' | |
The Company’s financial instruments include cash, accounts payable and notes payable. The carrying values for the current financial assets and liabilities approximate fair value due to their short maturity. | ||
USE OF ESTIMATES | ' | |
The process of preparing financial statements in conformity with U.S. GAAP requires the use of estimates, judgments and assumptions regarding certain types of assets, liabilities, revenues, and expenses. These estimates, judgments and assumptions are evaluated on an ongoing basis. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from the Company’s estimated amounts. | ||
BASIC AND DILUTED NET LOSS PER COMMON SHARE | ' | |
Basic and diluted net loss per common share has been computed by dividing the net loss by the weighted average number of shares of common stock outstanding during each period. Whenever losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would result in a diluted loss per share less than the basic loss per share and therefore would be anti-dilutive. Whenever net income is reported, the weighted average number of common shares outstanding will include common stock equivalents that are in-the-money. If all outstanding options, warrants and convertible shares were converted or exercised at March 31, 2014, the shares outstanding would be 872,535,405. | ||
PROPERTY AND EQUIPMENT | ' | |
Property and equipment are carried at cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated assets are retained in property and accumulated depreciation accounts until they are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred. | ||
The estimated useful lives of property and equipment are generally as follows: | ||
Appliques | 15 – 25 years | |
Machinery and equipment | 3 – 12 years | |
Office furniture and fixtures | 3 – 10 years | |
Computer hardware and software | 3 – 7 years | |
Assets held for sale are separately presented on the balance sheet and are no longer depreciated. | ||
LONG LIVED ASSETS | ' | |
The Company evaluates the fair value of long-lived assets on an annual basis or whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable. Accordingly, any impairment of value is recognized when the carrying amount of a long-lived asset exceeds its fair value. The Company’s evaluations have not indicated any impairment of fair values. | ||
SHARE-BASED COMPENSATION | ' | |
The Company offers share-based compensation programs to its officers, directors and employees that consist of employee stock options, common stock and restricted stock awards. Common stock and restricted stock awards are issued at the closing price of the Company’s common stock on the date of grant. The Company recognizes compensation expense ratably over the vesting periods for restricted stock awards using the fair value of the stock on the vest date. The Black-Scholes option pricing model is used to value stock options, and compensation expense is recognized ratably over the requisite service period. Stock options typically have contractual terms of three to seven years. Share-based compensation for employees and non-employees is included in general administrative expense. Share-based compensation incurred during the three-months ended March 31, 2014 and 2013 was $502,127 and $21,284 respectively. |
1_SUMMARY_OF_SIGNIFICANT_ACCOU2
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Tables) | 3 Months Ended | |
Mar. 31, 2014 | ||
Summary Of Significant Accounting Principles | ' | |
Estimated Useful Lives of Property and Equipment | ' | |
Appliques | 15 – 25 years | |
Machinery and equipment | 3 – 12 years | |
Office furniture and fixtures | 3 – 10 years | |
Computer hardware and software | 3 – 7 years |
2_ACQUISITIONS_Tables
2. ACQUISITIONS (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Business Combination, Description [Abstract] | ' | ||||||||||||
Summary of Original and Revised Allocation Acquisition Purchase Price | ' | ||||||||||||
Original | Allocation | Revised | |||||||||||
Allocation | Adjustment | Allocation | |||||||||||
Current assets | $ | 703,220 | $ | 7,195 | $ | 710,415 | |||||||
Property and equipment | 1,357 | 2,556 | 3,913 | ||||||||||
Goodwill | 479,585 | 328,239 | 807,824 | ||||||||||
Due to selling shareholder | 0 | (350,000 | ) | (350,000 | ) | ||||||||
Current liabilities assumed | (261,662 | ) | 12,010 | (249,652 | ) | ||||||||
Total Purchase Price | $ | 922,500 | $ | 0 | $ | 922,500 |
5_PROPERTY_AND_EQUIPMENT_Table
5. PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and Equipment | ' | ||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Appliques | $ | 2,755,732 | $ | 2,755,732 | |||||
Office furniture and fixtures | 6,904 | 6,904 | |||||||
2,762,636 | 2,762,636 | ||||||||
Less: accumulated depreciation | (538,420 | ) | (492,670 | ) | |||||
$ | 2,224,216 | $ | 2,269,966 |
6_OTHER_ACCRUED_LIABILITIES_Ta
6. OTHER ACCRUED LIABILITIES (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Unsecured short term promissory notes | ' | ||||||||
Accrued Liabilities | ' | ||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Payroll liabilities | $ | 2,133,452 | $ | 1,890,245 | |||||
Professional fees | 10,000 | 10,000 | |||||||
Accrued legal claims payable | 260,934 | 354,684 | |||||||
Accrued cash true-up from conversion | 353,873 | 353,873 | |||||||
Accrued interest on debenture | 34,260 | 31,133 | |||||||
GTC acquisition payable | 75,000 | 75,000 | |||||||
Other | 52,667 | 80,092 | |||||||
OTHER ACCRUED LIABILITIES | $ | 2,920,186 | $ | 2,795,027 |
7_NOTES_PAYABLE_Tables
7. NOTES PAYABLE (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Notes Payable [Abstract] | ' | ||||||||
Notes Payable | ' | ||||||||
March 31, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Unsecured promissory notes | $ | 5,997,030 | $ | 5,997,030 | |||||
Unsecured short-term promissory notes | 150,000 | 150,000 | |||||||
Convertible notes payable | 267,000 | 267,000 | |||||||
Accrued interest | 3,194,509 | 3,087,053 | |||||||
NOTES PAYABLE | $ | 9,608,539 | $ | 9,501,083 |
8_DERIVATIVE_LIABILITIES_Table
8. DERIVATIVE LIABILITIES (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Derivative Liability [Abstract] | ' | ||||||||
Warrant to Purchase Common Stock | ' | ||||||||
Warrants | Average | ||||||||
& Purchase Rights | Exercise Price | ||||||||
Outstanding at December 31, 2013 | 18,628,235 | $ | 0.21 | ||||||
Warrants Granted | 0 | 0 | |||||||
Warrants Expired | (2,333,334 | ) | 0.21 | ||||||
Outstanding at March 31, 2014 | 16,294,901 | $ | 0.21 |
10_SHAREBASED_COMPENSATION_Tab
10. SHARE-BASED COMPENSATION (Tables) | 3 Months Ended | ||||||||||||||
Mar. 31, 2014 | |||||||||||||||
Share-based Compensation [Abstract] | ' | ||||||||||||||
Stock Options Outstanding and Exercisable | ' | ||||||||||||||
Options Outstanding and Exercisable | |||||||||||||||
Exercise prices | Number | Weighted average | Weighted | ||||||||||||
outstanding | remaining | Average | |||||||||||||
contractual | Exercise | ||||||||||||||
terms | price | ||||||||||||||
(years) | |||||||||||||||
$ | 0.0083 | 3,400,000 | 3 | $ | 0.0083 | ||||||||||
0.0096 | 12,000,000 | 6.76 | 0.0096 | ||||||||||||
0.01 | 37,000,000 | 6.91 | 0.01 | ||||||||||||
0.011 | 400,000 | 2.62 | 0.011 | ||||||||||||
0.013 | 40,355,693 | 6.49 | 0.013 | ||||||||||||
0.015 | 11,000,000 | 5.51 | 0.015 | ||||||||||||
0.016 | 250,000 | 1.93 | 0.016 | ||||||||||||
0.017 | 2,000,000 | 5.86 | 0.017 | ||||||||||||
0.021 | 250,000 | 2.12 | 0.021 | ||||||||||||
0.023 | 22,316,667 | 5.62 | 0.023 | ||||||||||||
0.024 | 12,000,000 | 6.33 | 0.024 | ||||||||||||
0.028 | 400,000 | 2.33 | 0.028 | ||||||||||||
0.045 | 4,444,444 | 0.1 | 0.045 | ||||||||||||
0.075 | 7,750,000 | 4 | 0.075 | ||||||||||||
0.08 | 1,500,000 | 0.02 | 0.08 | ||||||||||||
0.09 | 2,916,667 | 0.02 | 0.09 | ||||||||||||
157,983,471 | 5.8 | $ | 0.02 |
11_INCOME_TAXES_Tables
11. INCOME TAXES (Tables) | 3 Months Ended | ||||||||||||
Mar. 31, 2014 | |||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||
Schedule of Deferred Tax Assets and Liabilities | ' | ||||||||||||
March 31, 2014 | 2014 | 31-Dec-13 | |||||||||||
Changes | |||||||||||||
Deferred tax assets: | |||||||||||||
Net operating loss carry-forwards | $ | 18,414,667 | $ | 168,757 | $ | 18,245,910 | |||||||
Valuation allowance | (18,414,667 | ) | (168,757 | ) | (18,245,910 | ) | |||||||
Net deferred tax asset | $ | — | $ | — | $ | — | |||||||
Schedule of Effective Income Tax Rate Reconciliation | ' | ||||||||||||
31-Mar-14 | March 31,2013 | ||||||||||||
Income tax benefit computed at federal statutory rate | $ | (168,757 | ) | $ | (77,562 | ) | |||||||
Deferred income taxes | 168,757 | 77,562 | |||||||||||
$ | — | $ | — |
12_PER_SHARE_INFORMATION_Table
12. PER SHARE INFORMATION: (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Earnings Per Share [Abstract] | ' | ||||||||
Computation of Earnings Per Share Basic and Diluted | ' | ||||||||
Three-Months Ended March 31, | |||||||||
2014 | 2013 | ||||||||
Numerator: | |||||||||
Net loss from continuing operations | $ | (1,120,890 | ) | $ | (549,640 | ) | |||
Net income (loss) from discontinued operations | $ | (4,157 | ) | $ | 25,560 | ||||
Denominator: | |||||||||
Weighted-average common shares outstanding | 579,797,908 | 489,871,669 | |||||||
Dilutive effect of stock warrants and stock options | 0 | 0 | |||||||
Weighted-average common shares outstanding, assuming dilution | 579,797,908 | 489,871,669 | |||||||
Net loss per share: | |||||||||
Basic and diluted for continuing operations | $ | (0.00 | ) | $ | (0.00 | ) | |||
Basic and diluted for discontinued operations | $ | (0.00 | ) | $ | (0.00 | ) |
1_Disclosure_1_SUMMARY_OF_SIGN
1. Disclosure - 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES(Detail) | 15 Months Ended |
Mar. 31, 2014 | |
Appliques [Member] | Minimum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property and equipment, estimated useful life | '15 years |
Appliques [Member] | Maximum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property and equipment, estimated useful life | '25 years |
Machinery and Equipment [Member] | Minimum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property and equipment, estimated useful life | '3 years |
Machinery and Equipment [Member] | Maximum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property and equipment, estimated useful life | '12 years |
Furniture and Fixtures [Member] | Minimum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property and equipment, estimated useful life | '3 years |
Furniture and Fixtures [Member] | Maximum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property and equipment, estimated useful life | '10 years |
Equipment Computer Hardware and Software [Member] | Minimum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property and equipment, estimated useful life | '3 years |
Equipment Computer Hardware and Software [Member] | Maximum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property and equipment, estimated useful life | '7 years |
2_ACQUISITIONS_Detail
2. ACQUISITIONS (Detail) (Lighter Than Air Systems Corp, USD $) | 15 Months Ended |
Mar. 31, 2014 | |
Initial Allocation | ' |
Business Acquisition [Line Items] | ' |
Current assets | $703,220 |
Property and equipment | 1,357 |
Goodwill | 479,585 |
Due to selling shareholder | 0 |
Current liabilities assumed | -261,662 |
Total Purchase Price | 922,500 |
Allocation Adjustment | ' |
Business Acquisition [Line Items] | ' |
Current assets | 7,195 |
Property and equipment | 2,556 |
Goodwill | 328,239 |
Due to selling shareholder | -350,000 |
Current liabilities assumed | 12,010 |
Total Purchase Price | 0 |
Amended Allocation | ' |
Business Acquisition [Line Items] | ' |
Current assets | 710,415 |
Property and equipment | 3,913 |
Goodwill | 807,824 |
Due to selling shareholder | -350,000 |
Current liabilities assumed | -249,652 |
Total Purchase Price | $922,500 |
5_PROPERTY_AND_EQUIPMENT_Detai
5. PROPERTY AND EQUIPMENT (Detail) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 |
Property, Plant and Equipment [Line Items] | ' | ' | ' |
Property and equipment, gross | $2,762,636 | ' | $2,762,636 |
Less: accumulated depreciation | -538,420 | -49,267 | -492,670 |
Property and equipment, net | 2,224,216 | 2,269,966 | 2,269,966 |
Appliques [Member] | ' | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' | ' |
Property and equipment, gross | 2,755,732 | ' | 6,904 |
Office Furniture and Equipment [Member] | ' | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' | ' |
Property and equipment, gross | $6,904 | ' | $2,755,732 |
6_OTHER_ACCRUED_LIABILITIES_De
6. OTHER ACCRUED LIABILITIES (Detail) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Earnings Per Share Basic and Diluted Numerator [Abstract] | ' | ' |
Payroll liabilities | $2,133,452 | $1,890,245 |
Professional fees | 10,000 | 10,000 |
Accrued legal claims payable | 260,934 | 354,684 |
Accrued cash true-up from conversion | 353,873 | 353,873 |
Accrued interest on debenture | 34,260 | 31,133 |
GTC acquisition payable | 75,000 | 75,000 |
Other | 52,667 | 80,092 |
OTHER ACCRUED LIABILITIES | $2,920,186 | $2,795,027 |
7_NOTES_PAYABLE_Detail
7. NOTES PAYABLE (Detail) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 |
DisclosureNotesPayableAbstract | ' | ' | ' |
Unsecured promissory notes | $5,997,030 | ' | $5,997,030 |
Unsecured short-term promissory notes | 150,000 | ' | 150,000 |
Convertible debenture | 267,000 | ' | 267,000 |
Accrued interest | 3,194,509 | ' | 3,087,053 |
NOTES PAYABLE | $9,608,539 | $9,501,083 | $9,501,083 |
7_NOTES_PAYABLE_Detail_Narrati
7. NOTES PAYABLE (Detail Narrative) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 |
DisclosureNotesPayableAdditionalInformationAbstract | ' | ' |
Unsecured promissory notes included in notes payable total | $5,997,030 | $5,997,030 |
8_DERIVATIVE_LIABILITIES_Detai
8. DERIVATIVE LIABILITIES (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Class of Warrant or Right Outstanding | ' |
Outstanding at December 31, 2013 | 18,628,235 |
Warrants Granted | 0 |
Warrants Expired | -2,333,334 |
Outstanding at March 31, 2014 | 16,294,901 |
Class of Warrant or Right Outstanding, Weighted Average Exercise Price | ' |
Outstanding at December 31, 2013 | $0.21 |
Warrants Granted | $0 |
Warrants Expired | $0.21 |
Outstanding at March 31, 2014 | $0.21 |
10_SHAREBASED_COMPENSATION_Det
10. SHARE-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | 15 Months Ended | 3 Months Ended | ||||||||||||||
Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | |
Exercise Price One [Member] | Exercise Price Two [Member] | Exercise Price Three [Member] | Exercise Price Four [Member] | Exercise Price Five [Member] | Exercise Price Six [Member] | Exercise Price Seven [Member] | Exercise Price Eight [Member] | Exercise Price Nine [Member] | Exercisepriceten [Member] | Exercise price eleven [Member] | Exercise price twelve [Member] | Exercise price thirteen [Member] | Exercise price fourteen [Member] | Exercise price Fifteen [Member] | Exercise price Sixteen [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options Outstanding and Exercisable ,Exercise prices | ' | $0.01 | $0.01 | $0.01 | $0.01 | $0.01 | $0.02 | $0.02 | $0.02 | $0.02 | $0.02 | $0.02 | $0.03 | $0.05 | $0.08 | $0.08 | $0.09 |
Options outstanding and exercisable at end of year, Shares | 157,983,471 | 3,400,000 | 12,000,000 | 37,000,000 | 400,000 | 40,355,693 | 11,000,000 | 250,000 | 2,000,000 | 250,000 | 22,316,667 | 12,000,000 | 400,000 | 4,444,444 | 7,750,000 | 1,500,000 | 2,916,667 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '5 years 9 months 18 days | '3 years | '6 years 9 months 4 days | '6 years 1028 days | '2 years 7 months 13 days | '4 years 5 months 26 days | '5 years 6 months 4 days | '1 year 11 months 5 days | '5 years 10 months 10 days | '2 years 1 month 13 days | '5 years 7 months 13 days | '6 years 3 months 29 days | '2 years 3 months 29 days | '1 month 6 days | '4 years | '7 days | '7 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.02 | $0.01 | $0.01 | $0.01 | $0.01 | $0.01 | $0.02 | $0.02 | $0.02 | $0.02 | $0.02 | $0.02 | $0.03 | $0.05 | $0.08 | $0.08 | $0.09 |
11_INCOME_TAXES_Detail
11. INCOME TAXES (Detail) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Income Tax Disclosure [Abstract] | ' | ' |
Net operating loss carry-forwards | $18,414,667 | $18,245,910 |
Valuation allowance | -18,414,667 | -18,245,910 |
Net deferred tax asset | ' | ' |
11_INCOME_TAXES_Detail_1
11. INCOME TAXES (Detail 1) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Income Tax Disclosure [Abstract] | ' | ' |
Income tax benefit computed at federal statutory rate | ($168,757) | ($77,562) |
Deferred income taxes | 168,757 | 77,562 |
Income tax expense | ' | ' |
12_PER_SHARE_INFORMATION_Detai
12. PER SHARE INFORMATION (Detail) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Numerator: | ' | ' |
Net loss from continuing operations | ($1,120,890) | ($549,640) |
Net income (loss) from discontinued operations | ($4,157) | $25,560 |
Denominator: | ' | ' |
Weighted-average common shares outstanding | 579,797,908 | 489,871,669 |
Dilutive effect of stock warrants and stock options | 0 | 0 |
Weighted-average common shares outstanding, assuming dilution | 579,797,908 | 489,871,669 |
Net loss per share: | ' | ' |
Basic and diluted for continuing operations | $0 | $0 |
Basic and diluted for discontinued operations | $0 | $0 |