Document_And_Entity_Informatio
Document And Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Aug. 08, 2014 | |
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 | 30-Jun-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q2 | ' |
Trading Symbol | 'WSGI | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 739,126,430 |
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 $) | Jun. 30, 2014 | Dec. 31, 2013 |
CURRENT ASSETS | ' | ' |
Cash | $124,057 | $8,907 |
Accounts receivable | 78,307 | 59,651 |
Accounts receivable from related party | 46,102 | 59,833 |
Inventory | 82,510 | 0 |
Prepaid expenses | 38,940 | 38,940 |
Current assets – discontinued operations | 0 | 194,407 |
TOTAL CURRENT ASSETS | 369,916 | 361,738 |
PROPERTY AND EQUIPMENT | ' | ' |
Property and equipment, net of accumulated depreciation of $584,170 and $492,670, at June 30, 2014 and December 31, 2013, respectively. | 2,178,466 | 2,269,966 |
OTHER NONCURRENT ASSETS | ' | ' |
Available-for-sale securities (Under15-month contractual lock-up provision; leak-out provisions effective months 13 thru 15) | 9,000,000 | 0 |
Deferred financing costs | 12,060 | 22,398 |
Other assets – discontinued operations | 0 | 809,822 |
TOTAL NONCURRENT ASSETS | 9,012,060 | 832,220 |
TOTAL ASSETS | 11,560,442 | 3,463,924 |
CURRENT LIABILITIES | ' | ' |
Accounts payable | 4,405,956 | 4,520,662 |
Notes payable | 9,659,193 | 9,501,083 |
Other accrued liabilities | 2,960,248 | 2,795,027 |
Current liabilities – discontinued operations | 0 | 143,252 |
TOTAL CURRENT LIABILITIES | 17,025,397 | 16,960,024 |
DEFICIT EQUITY | ' | ' |
Common stock, $0.00001 par value, 1,000,000,000 shares authorized; 751,126,430 shares and 681,127,043 shares issued; and 739,126,430 shares and 669,127,043 shares outstanding at June 30, 2014 and December 31, 2013, respectively. | 7,391 | 6,691 |
Additional paid-in capital | 140,024,845 | 138,909,766 |
Accumulated other comprehensive income | 8,921,000 | 0 |
Accumulated deficit | -154,418,191 | -152,412,557 |
TOTAL STOCKHOLDERS' DEFICIT | -5,464,955 | -13,496,100 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $11,560,442 | $3,463,924 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Property and equipment, accumulated depreciation | $584,170 | $492,670 |
Common stock, par value | $0.00 | $0.00 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares issued | 751,126,430 | 681,127,043 |
Common stock, shares outstanding | 751,126,430 | 669,127,043 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
REVENUES | ' | ' | ' | ' |
Net sales | $498,252 | $301,605 | $829,405 | $763,482 |
Cost of sales | 325,381 | 169,930 | 627,930 | 499,599 |
Gross profit | 172,871 | 131,675 | 201,475 | 263,883 |
COSTS AND EXPENSES: | ' | ' | ' | ' |
General and administrative | 301,319 | 444,675 | 1,166,831 | 825,491 |
Professional fees | 142,387 | 151,006 | 266,557 | 227,790 |
Depreciation and amortization | 45,750 | 45,750 | 91,500 | 91,500 |
Research and development | 0 | 164 | 0 | 300 |
TOTAL EXPENSES | 489,456 | 641,595 | 1,524,888 | 1,145,081 |
LOSS FROM OPERATIONS | -316,585 | -509,920 | -1,323,413 | -881,198 |
OTHER INCOME (EXPENSE) | ' | ' | ' | ' |
Loss from conversion agreement true-up | 0 | -211,785 | 0 | -233,382 |
Change in fair value of derivative liabilities | 0 | 63 | 0 | 363 |
Interest expense, net | -118,145 | -118,450 | -232,207 | -268,516 |
NET OTHER INCOME (EXPENSE) | -118,145 | -330,172 | -232,207 | -501,535 |
NET LOSS FROM CONTINUING OPERATIONS | -434,730 | -840,092 | -1,555,620 | -1,382,733 |
Net income (loss) from discontinued operations | -2,674 | -280 | -6,831 | 25,280 |
Loss on sale of discontinued operations | -443,183 | 0 | -443,183 | 0 |
NET LOSS | -880,587 | -840,372 | -2,005,634 | -1,357,453 |
Other comprehensive income | 8,921,000 | 0 | 8,921,000 | 0 |
TOTAL COMPREHENSIVE INCOME (LOSS) | $8,040,413 | ($840,372) | $6,915,366 | ($1,357,453) |
NET LOSS PER SHARE: | ' | ' | ' | ' |
Basic and Diluted from continuing operations | $0 | $0 | $0 | $0 |
Basic and Diluted from discontinued operations | $0 | $0 | $0 | $0 |
WEIGHTED AVERAGE SHARES: | ' | ' | ' | ' |
Basic and Diluted | 606,649,882 | 494,620,984 | 704,090,708 | 584,918,220 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (USD $) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Other Comprehensive Incomet [Member] | Accumulated Deficit [Member] | Total |
Beginning Balance at Dec. 31, 2013 | $6,691 | $138,909,766 | ' | ($152,412,557) | ($13,496,100) |
Beginning Balance (in shares) at Dec. 31, 2013 | 669,127,043 | ' | ' | ' | 669,127,043 |
Shares issued for cash (in shares) | 27,928,571 | ' | ' | ' | 27,928,571 |
Shares issued for cash | 280 | 214,720 | ' | ' | 215,000 |
Shares issued for legal settlement (in shares) | 23,137,584 | ' | ' | ' | 23,137,584 |
Shares issued for legal settlement | 232 | 213,542 | ' | ' | 213,774 |
Shares issued to services (in shares) | 18,933,232 | ' | ' | ' | 18,933,232 |
Shares issued to services | 188 | 159,051 | ' | ' | 159,239 |
Fair value of vested restricted shares issued for compensation | ' | 95,200 | ' | ' | 95,200 |
Fair value of vested options issued as share-based compensation and director’s fees | ' | 376,567 | ' | ' | 376,567 |
Vested restricted shares previously issued as performance-based compensation | ' | 33,993 | ' | ' | 33,993 |
Fair value of options issued for services | ' | 22,006 | ' | ' | 22,006 |
Net loss | ' | 0 | ' | -2,005,634 | -2,005,634 |
Other Comprehensive Income | ' | ' | 8,921,000 | ' | 8,921,000 |
Ending Balance at Jun. 30, 2014 | $7,391 | $140,024,845 | $8,921,000 | ($154,418,191) | ($5,464,955) |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
OPERATING ACTIVITIES IN CONTINUING OPERATIONS: | ' | ' |
Net loss | ($2,005,634) | ($1,357,453) |
Adjustments to reconcile net loss to net cash used in operating activities in continuing operations: | ' | ' |
Depreciation expense | 91,500 | 91,500 |
Share-based compensation | 505,760 | 43,231 |
Loss on conversion of debt | 0 | 233,382 |
Change in fair value of derivative liabilities | 0 | -363 |
Loan interest capitalized to debt | 208,110 | 230,429 |
Amortization of deferred financing costs | 10,338 | 10,338 |
Shares issued as inducement to loan | ' | 34,400 |
Net loss from discontinued operations | 6,831 | 0 |
Loss on sale of discontinued operations | 443,183 | 0 |
Change in operating assets and liabilities: | ' | ' |
Accounts receivable | -18,657 | -31,538 |
Accounts receivable from related party | 13,731 | 0 |
Inventories | -82,510 | 0 |
Prepaid expenses | 0 | 7,194 |
Current assets of discontinued operations | 0 | 26,021 |
Deposits | 0 | 50,000 |
Accounts payable | 73,503 | -330,985 |
Other accrued liabilities | 378,995 | 743,084 |
Deferred revenues | 0 | -7,500 |
Current liabilities of discontinued operations | 0 | 148,699 |
NET CASH USED BY OPERATING ACTIVITIES IN CONTINUING OPERATIONS | -374,850 | -109,561 |
INVESTING ACTIVITIES: | ' | ' |
Proceeds from sale of LTAS, net of professional fees | 325,000 | 0 |
NET CASH PROVIDED BY INVESTING ACTIVITIES IN CONTINUING OPERATIONS | 325,000 | 0 |
FINANCING ACTIVITIES: | ' | ' |
Payment on LTAS acquisition payable | 0 | -110,000 |
Proceeds from notes payable | 0 | 150,000 |
Payoff of notes payable | -50,000 | 0 |
Proceeds from sale of common stock | 215,000 | 100,000 |
NET CASH PROVIDED BY FINANCING ACTIVITIES IN CONTINUING OPERATIONS | 165,000 | 140,000 |
NET CASH PROVIDED BY CONTINUING OPERATIONS | 115,150 | 30,439 |
CASH BALANCE, BEGINNING OF PERIOD | 8,907 | 49,343 |
CASH BALANCE, END OF PERIOD | 124,057 | 79,782 |
SUPPLEMENTAL INFORMATION: | ' | ' |
Interest paid | 0 | 3,668 |
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ' | ' |
Reclassification of long-term convertible notes payable to current notes payable | 0 | 267,000 |
Common stock issued for services | 159,239 | 130,250 |
Common stock issued for settlements | 213,774 | 130,250 |
Fair value of options issued for services | 22,006 | 0 |
Proceeds from sale of LTAS - available-for-sale securities | 79,000 | 0 |
Common stock issued for convertible debt conversions | 0 | 76,339 |
Common stock issued for acquisition | 0 | 672,500 |
LTAS acquisition payable | $0 | $140,000 |
1_SUMMARY_OF_SIGNIFICANT_ACCOU
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES | 6 Months Ended | ||||||||||||||||
Jun. 30, 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) unmanned aerial systems (UAS) designed to carry 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 UAS that are designed to provide situational awareness and other communications capabilities via the integration of wireless capabilities and customer payloads. The Company’s 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 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. | |||||||||||||||||
On May 5, 2014, the Company exchanged 100% of the outstanding stock of its wholly-owned subsidiary Lighter Than Air Systems Corp. (LTAS) for a cash payment of $335,000 and 10,000,000 shares of common stock of Drone Aviation Corp. (DAC), a privately-held company. For purposes of this Form 10-Q, the Company’s financial statements reflect the accounts and operations of LTAS as discontinued operations. | |||||||||||||||||
On June 3, 2014, 100% of the outstanding capital stock of Drone Aviation Corp. was exchanged for capital stock of Drone Aviation Holding Corp., a publicly-held entity, and the 10,000,000 common shares of DAC held by the Company were exchanged for 10,000,000 shares of Series D Convertible Preferred Shares of Drone Aviation Holding Corp. | |||||||||||||||||
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 continuing operations of $434,730 for the six months ended June 30, 2014. The Company also had a working capital deficit of $16,655,481 and total stockholders’ deficit of $5,464,955, as well as an accumulated deficit for $154,418,191 at June 30, 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 subsidiary’s business. 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 at least 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 subsidiary’s 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 subsidiary’s 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 | |||||||||||||||||
WSGI recognizes revenue when all 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 as deferred revenues and their associated costs of sales as prepaid expenses. Deferred revenues from contracts and their related costs are recognized upon completion and fulfillment of the contractual obligation using the completed contract method. | |||||||||||||||||
GTC recognizes revenue when all 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 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. | |||||||||||||||||
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 six months ended June 30, 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 receivable, accounts payable and notes payable. The carrying values for the current financial assets and liabilities approximate fair value due to their short maturity. The Company accounts for the 10,000,000 shares of Drone Aviation Corp. stock received as proceeds from the sale of LTAS, which was converted into 10,000,000 shares of Series D Convertible Preferred Stock of Drone Aviation Holding Corp. (“DAHC”) on June 3, 2014, as available-for-sale securities. These shares are convertible on a one-for-one basis into shares of common stock of DAHC, but are subject to a contractual lock-up provision for 15 months beginning on June 3, 2014, although the Company will be able to sell a certain volume of shares in months 13 through 15. The Company uses fair value accounting to value these securities. The level 2 securities are not publicly traded, but rather they are convertible on a one-for-one basis into the publicly traded common stock. These securities were valued using observable inputs for the common stock based upon the closing quoted market price. The Company records changes in fair value of the available-for-sales securities as Other Comprehensive Income (Loss). | |||||||||||||||||
Fair Value Measurements at June 30, 2014 Using: | |||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Available-for-sale securities | $ | — | $ | — | $ | 9,000,000 | $ | — | |||||||||
Totals | $ | — | $ | — | $ | 9,000,000 | $ | — | |||||||||
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. Other Comprehensive Income represents sources of income (loss) outside the control or operations of the Company. | |||||||||||||||||
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 June 30, 2014, the shares outstanding would be 907,693,691. | |||||||||||||||||
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 | ||||||||||||||||
MARKETABLE SECURITIES | |||||||||||||||||
The Company carries its investments in marketable equity securities at fair value, based on quoted market prices. Security transactions are recorded on a trade date basis. Unrealized gains and losses are reported as a component of accumulated other comprehensive income. | |||||||||||||||||
Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determination at each balance sheet date. Marketable debt securities bought and held for short-term trading are classified as “trading securities.” Marketable debt securities for which the Company does not have both the intent and ability to hold to maturity are classified as “available-for-sale,” and those that are intended to be held to maturity are classified as “held-to-maturity.” At June 30, 2014, the Company had no trading securities, or investments that it plans to hold to maturity. | |||||||||||||||||
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 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 six-months ended June 30, 2014 and 2013 was $505,760 and $43,231 respectively. | |||||||||||||||||
2_ACQUISITIONS
2. ACQUISITIONS | 6 Months Ended | ||||||||||||
Jun. 30, 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 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 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 six-months ended June 30, 2014 and 2013 was $505,760 and $43,231 respectively. | |||||||||||||
On December 31, 2013, the Company entered into a First Amendment to the 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 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 | - | (350,000 | ) | (350,000 | ) | ||||||||
Current liabilities assumed | (261,662 | ) | 12,010 | (249,652 | ) | ||||||||
Total Purchase Price | $ | 922,500 | $ | - | $ | 922,500 |
3_DISCONTINUED_OPERATIONS
3. DISCONTINUED OPERATIONS | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Discontinued Operations and Disposal Groups [Abstract] | ' | ||||||||
3. DISCONTINUED OPERATIONS | ' | ||||||||
On May 5, 2014 (the “Closing Date”), 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”), a privately-held company, 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”). The Shares were converted into 10,000,000 shares of Series D Convertible Stock (the “Preferred Shares”) of Drone Aviation Holding Corp. (DAHC), a publicly-held company, and are convertible on a one-to-one basis into shares of common stock of DAHC. The Preferred Shares were valued at $9,000,000 based upon the closing price of the DAHC stock on June 30, 2014. The Company signed a Lock-Up Agreement that includes restrictions on the sale of the Shares by the Company for a fifteen-month period following the Closing Date, although the Company 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 developed by the Ohio Lighter Than Air UAS Consortium created by the Company and several other companies in August 2013 and growing the business of Global Telesat Corp. (“GTC”). | |||||||||
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. | |||||||||
The net assets of the LTAS discontinued operations sold on May 5th and at December 31, 2013, carried at fair value were as follows: | |||||||||
May 5, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | (Audited) | ||||||||
Cash | $ | 30,719 | $ | 109,825 | |||||
Accounts receivable | 135,050 | 8,085 | |||||||
Inventories | 72,974 | 75,311 | |||||||
Prepaid expenses | 1,382 | 1,186 | |||||||
Current assets of discontinued operations | $ | 240,125 | $ | 194,407 | |||||
Property and equipment, net | 1,638 | 1,998 | |||||||
Goodwill | 807,824 | 807,824 | |||||||
Other assets of discontinued operations | $ | 809,462 | $ | 809,822 | |||||
Accounts payable | 117,746 | 72,985 | |||||||
Accounts payable due related party | 24,824 | 50,691 | |||||||
Accrued liabilities | 55,676 | 17,926 | |||||||
Deferred revenues | - | 1,650 | |||||||
Current liabilities of discontinued operations | $ | 198,246 | $ | 143,252 | |||||
Net assets of discontinued operations | $ | 851,341 | $ | 860,977 | |||||
The operating results of LTAS since the acquisition date of March 28, 2013 are also reflected in the Company’s Condensed Consolidated Statements of Comprehensive Income as discontinued operations through May 5, 2014. | |||||||||
June 30, | June 30, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | (Unaudited) | ||||||||
Net sales | $ | 250,000 | 412,996 | ||||||
Cost of sales | 152,513 | 289,214 | |||||||
General and administrative | 90,984 | 96,086 | |||||||
Research and development | 6,449 | - | |||||||
Professional fees | 5,589 | 2,136 | |||||||
Depreciation | 360 | 280 | |||||||
Interest expense | 936 | - | |||||||
Net income (loss) from discontinued operations | $ | (6,831 | ) | 25,280 |
4_RELATED_PARTY_TRANSACTIONS
4. RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2014 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
The accounts receivable from related party at June 30, 2014 reflects trade receivables from Global Telesat Communications, Ltd. (“GTCL”) of $46,102. GTCL is a related party based in the United Kingdom and controlled by a current officer of GTC. Total sales to GTCL for the six-months ended June 30, 2014 were $231,143, and account for 27.8% of GTC’s total sales during the period. |
5_PROPERTY_AND_EQUIPMENT
5. PROPERTY AND EQUIPMENT | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
PROPERTY AND EQUIPMENT | ' | ||||||||
Property and equipment consisted of the following: | |||||||||
June 30, | 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 | (584,170 | ) | (492,670 | ) | |||||
$ | 2,178,466 | $ | 2,269,966 |
6_OTHER_ACCRUED_LIABILITIES
6. OTHER ACCRUED LIABILITIES | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Unsecured short term promissory notes | ' | ||||||||
OTHER ACCRUED LIABILITIES | ' | ||||||||
Accrued liabilities consisted of the following: | |||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Payroll liabilities | $ | 2,258,274 | $ | 1,890,245 | |||||
Professional fees | 10,000 | 10,000 | |||||||
Accrued legal claims payable | 198,434 | 354,684 | |||||||
Accrued cash true-up from conversion | 353,873 | 353,873 | |||||||
Accrued interest on debenture | 37,422 | 31,133 | |||||||
GTC acquisition payable | 75,000 | 75,000 | |||||||
Other | 27,245 | 80,092 | |||||||
OTHER ACCRUED LIABILITIES | $ | 2,960,248 | $ | 2,795,027 | |||||
7_NOTES_PAYABLE
7. NOTES PAYABLE | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Notes Payable [Abstract] | ' | ||||||||
NOTES PAYABLE | ' | ||||||||
Notes payable consisted of the following: | |||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Unsecured promissory notes | $ | 5,997,030 | $ | 5,997,030 | |||||
Unsecured short-term promissory notes | 100,000 | 150,000 | |||||||
Convertible notes payable | 267,000 | 267,000 | |||||||
Accrued interest on the unsecured promissory notes | 3,295,163 | 3,087,053 | |||||||
NOTES PAYABLE | $ | 9,659,193 | $ | 9,501,083 | |||||
At June 30, 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. At June 30, 2014, the Company is in default on the $100,000 note and has repaid the $50,000 note with accrued interest thereon. | |||||||||
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 Convertible Debenture was converted by the Investor into shares of common stock beginning on May 3, 2012. | |||||||||
The Convertible 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 the Investor 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 Investor has made counterclaims against the Company and is defending against the complaint. 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 | 6 Months Ended |
Jun. 30, 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. |
9_WARRANTS
9. WARRANTS | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Warrants | ' | ||||||||
WARRANTS | ' | ||||||||
The Company had 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 | (2,583,334 | ) | 0.21 | ||||||
Outstanding at June 30, 2014 | 16,044,901 | $ | 0.21 | ||||||
The warrants and purchase rights outstanding and exercisable at June 30, 2014 and December 31, 2013 had no intrinsic value. All warrants and purchase rights were fully exercisable. | |||||||||
10_LITIGATION_AND_CONTINGENCIE
10. LITIGATION AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 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: | |
The DeCarlo Group | |
A lawsuit was filed by the DeCarlo Group on November 24, 2010 in Miami-Dade County Courthouse claiming damages in excess of $1.1 million, including $400,000 claimed in connection with CFO and accounting services rendered to the Company. It is our position that we were overcharged in connection with the services rendered and that no amounts are due. On July 2, 2014, without either party admitting liability, we and the DeCarlo Group entered into a confidential settlement agreement in the amount of $85,000 to be paid during the next twenty-four months. The Court will retain jurisdiction in the matter until the full amount of the settlement is paid in full. However, in the event we default on any payment or provision of the settlement agreement, the DeCarlo Group may, pursuant to the settlement agreement, pursue its litigation. | |
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. Through stipulation during litigation, the parties agreed to refrain from enforcing, or attempting to enforce, any part or terms of the finance documents pending final resolution. We are seeking 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. | |
11_SHAREBASED_COMPENSATION
11. SHARE-BASED COMPENSATION | 6 Months Ended | ||||||||||||||
Jun. 30, 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 six-months ended June 30, 2014, there were no share-based compensation awards of common stock. During the six-months ended June 30, 2013, the Company awarded 300,000 shares for $5,550 for quarterly directors’ fees. | |||||||||||||||
Restricted Stock | |||||||||||||||
Awards of restricted stock 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. Compensation expense for restricted stock that vested during the six-months ended June 30, 2014 totaled $95,200. There is approximately $24,000 in unrecognized compensation relating to unvested restricted stock at June 30, 2014. Compensation expense for performance-based restricted stock that vested during the six-months ended June 30, 2013 totaled $9,312. During the first quarter of 2013, the Company awarded 16 million shares to certain officers and employees as retention bonuses, which cliff vested on February 6, 2014. There is approximately $369,215 in unrecognized compensation relating to unvested restricted stock at June 30, 2013. | |||||||||||||||
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 six-months ended June 30, 2014, the Company awarded fully-vested options totaling $370,000 as retention bonuses; $6,567 as directors’ fees; and $142,006 as consulting fees. The fair value of options issued in a previous period that vested during the six-month period totaled $33,993. At June 30, 2014, there is approximately $45,000 in unrecognized compensation expense relating to unvested stock options. During the six-months ended June 30, 2013, the Company awarded 2 million options that cliff vested on February 6, 2014 in retention bonuses and issued 500,000 fully-vested options totaling $7,913 as directors’ fees. Vested options during the six-month period totaled $20,457. At June 30, 2013, there is approximately $92,315 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 June 30, 2014: | |||||||||||||||
Options Outstanding and Exercisable | |||||||||||||||
Exercise prices | Number | Weighted average | Weighted | ||||||||||||
outstanding | remaining | Average | |||||||||||||
contractual | Exercise | ||||||||||||||
terms | price | ||||||||||||||
(years) | |||||||||||||||
$ | 0.0083 | 3,400,000 | 2.75 | $ | 0.0083 | ||||||||||
0.0096 | 12,000,000 | 6.51 | 0.0096 | ||||||||||||
0.01 | 37,400,000 | 6.66 | 0.01 | ||||||||||||
0.011 | 400,000 | 2.37 | 0.011 | ||||||||||||
0.013 | 40,355,693 | 6.24 | 0.013 | ||||||||||||
0.015 | 11,000,000 | 5.26 | 0.015 | ||||||||||||
0.016 | 250,000 | 1.68 | 0.016 | ||||||||||||
0.017 | 2,000,000 | 5.61 | 0.017 | ||||||||||||
0.021 | 250,000 | 1.87 | 0.021 | ||||||||||||
0.023 | 22,316,667 | 5.37 | 0.023 | ||||||||||||
0.024 | 12,000,000 | 6.08 | 0.024 | ||||||||||||
0.028 | 400,000 | 2.08 | 0.028 | ||||||||||||
0.075 | 7,750,000 | 3.75 | 0.075 | ||||||||||||
149,522,360 | 5.87 | $ | 0.018 | ||||||||||||
No options were in-the-money on June 30, 2014. | |||||||||||||||
12_INCOME_TAXES
12. INCOME TAXES | 6 Months Ended |
Jun. 30, 2014 | |
Income Tax Disclosure [Abstract] | ' |
INCOME TAXES | ' |
The Company has federal and state net operating loss (NOL) carry-forwards, 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 carry-forwards and the related valuation allowances. The resulting deferred tax assets and liabilities consist of the tax effects (computed at 15%) of the temporary differences. | |
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 carry-forwards 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 9, the Company remains subject to examination in all of those tax jurisdictions until the applicable statute of limitations expire. At June 30, 2014, tax years subsequent to 2007 remain subject to examination by the Internal Revenue Service (“IRS”) and in the Company’s major state tax jurisdictions. |
13_PER_SHARE_INFORMATION
13. PER SHARE INFORMATION: | 6 Months Ended | ||||||||
Jun. 30, 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 Comprehensive Income. There were no dilutive common stock equivalents. | |||||||||
Six-Months Ended June 30, | |||||||||
2014 | 2013 | ||||||||
Numerator: | |||||||||
Net loss from continuing operations | $ | (1,555,620 | ) | $ | (1,382,733 | ) | |||
Net income (loss) from discontinued operations | $ | (6,831 | ) | $ | 25,280 | ||||
Denominator: | |||||||||
Weighted-average common shares outstanding | 704,090,708 | 584,918,220 | |||||||
Dilutive effect of stock warrants and stock options | 0 | 0 | |||||||
Weighted-average common shares outstanding, assuming dilution | 704,090,708 | 584,918,220 | |||||||
Net loss per share: | |||||||||
Basic and diluted from continuing operations | $ | (0.00 | ) | $ | (0.00 | ) | |||
Basic and diluted from discontinued operations | $ | (0.00 | ) | $ | (0.00 | ) | |||
14_SUBSEQUENT_EVENTS
14. SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2014 | |
Subsequent Events [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
There were no subsequent events from the balance sheet date requiring disclosure. |
1_SUMMARY_OF_SIGNIFICANT_ACCOU1
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Policies) | 6 Months Ended | ||||||||||||||||
Jun. 30, 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) unmanned aerial systems (UAS) designed to carry 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 UAS that are designed to provide situational awareness and other communications capabilities via the integration of wireless capabilities and customer payloads. The Company’s 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 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. | |||||||||||||||||
On May 5, 2014, the Company exchanged 100% of the outstanding stock of its wholly-owned subsidiary Lighter Than Air Systems Corp. (LTAS) for a cash payment of $335,000 and 10,000,000 shares of common stock of Drone Aviation Corp. For purposes of this Form 10-Q, the Company’s financial statements reflect the accounts and operations of LTAS as discontinued operations. | |||||||||||||||||
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 continuing operations of $434,730 for the six months ended June 30, 2014. The Company also had a working capital deficit of $16,655,481 and total stockholders’ deficit of $5,464,955, as well as an accumulated deficit for $154,418,191 at June 30, 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 subsidiary’s business. 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 at least 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 subsidiary’s 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 subsidiary’s 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 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 six months ended June 30, 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 receivable, accounts payable and notes payable. The carrying values for the current financial assets and liabilities approximate fair value due to their short maturity. The Company accounts for the 10,000,000 shares of Drone Aviation Corp. stock received as proceeds from the sale of LTAS, which was converted into 10,000,000 shares of Series D Convertible Preferred Stock of Drone Aviation Holding Corp. (“DAHC”) on June 3, 2014, as available-for-sale securities. These shares are convertible on a one-for-one basis into shares of common stock of DAHC, but are subject to a contractual lock-up provision for 15 months beginning on June 3, 2014, although the Company will be able to sell a certain volume of shares in months 13 through 15. The Company uses fair value accounting Level 2 inputs to value these securities by marking-to-market the securities based upon the closing market price for the securities at the end of each reporting period. The Company records changes in fair value of the available-for-sales securities as Other Comprehensive Income (Loss). | |||||||||||||||||
Fair Value Measurements at June 30, 2014 Using: | |||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Available-for-sale securities | $ | — | $ | — | $ | 9,000,000 | $ | — | |||||||||
Totals | $ | — | $ | — | $ | 9,000,000 | $ | — | |||||||||
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. Other Comprehensive Income represents sources of income (loss) outside the control or operations of the Company. | |||||||||||||||||
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 June 30, 2014, the shares outstanding would be 907,693,691. | |||||||||||||||||
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. | |||||||||||||||||
MARKETABLE SECURITIES | ' | ||||||||||||||||
The Company carries its investments in marketable equity securities at fair value, based on quoted market prices. Security transactions are recorded on a trade date basis. Unrealized gains and losses are reported as a component of accumulated other comprehensive income. | |||||||||||||||||
Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determination at each balance sheet date. Marketable debt securities bought and held for short-term trading are classified as “trading securities.” Marketable debt securities for which the Company does not have both the intent and ability to hold to maturity are classified as “available-for-sale,” and those that are intended to be held to maturity are classified as “held-to-maturity.” At June 30, 2014, the Company had no trading securities, or investments that it plans to hold to maturity. | |||||||||||||||||
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 six-months ended June 30, 2014 and 2013 was $505,760 and $43,231 respectively. |
1_SUMMARY_OF_SIGNIFICANT_ACCOU2
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Summary Of Significant Accounting Principles | ' | ||||||||||||||||
Schedule of fair value of financial instruments | ' | ||||||||||||||||
Fair Value Measurements at June 30, 2014 Using: | |||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Available-for-sale securities | $ | — | $ | — | $ | 9,000,000 | $ | — | |||||||||
Totals | $ | — | $ | — | $ | 9,000,000 | $ | — | |||||||||
Estimated Useful Lives of Property and Equipment | ' | ||||||||||||||||
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 |
2_ACQUISITIONS_Tables
2. ACQUISITIONS (Tables) | 6 Months Ended | ||||||||||||
Jun. 30, 2014 | |||||||||||||
Business Combination, Description [Abstract] | ' | ||||||||||||
Summary of Original and Revised Allocation Acquisition Purchase Price | ' | ||||||||||||
The following table summarizes the 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 | - | (350,000 | ) | (350,000 | ) | ||||||||
Current liabilities assumed | (261,662 | ) | 12,010 | (249,652 | ) | ||||||||
Total Purchase Price | $ | 922,500 | $ | - | $ | 922,500 | |||||||
3_DISCONTINUED_OPERATIONS_tabl
3. DISCONTINUED OPERATIONS (tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Discontinued Operations Tables | ' | ||||||||
Discontinued Operations | ' | ||||||||
The net assets of the LTAS discontinued operations sold on May 5th and at December 31, 2013, carried at fair value were as follows: | |||||||||
May 5, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | (Audited) | ||||||||
Cash | $ | 30,719 | $ | 109,825 | |||||
Accounts receivable | 135,050 | 8,085 | |||||||
Inventories | 72,974 | 75,311 | |||||||
Prepaid expenses | 1,382 | 1,186 | |||||||
Current assets of discontinued operations | $ | 240,125 | $ | 194,407 | |||||
Property and equipment, net | 1,638 | 1,998 | |||||||
Goodwill | 807,824 | 807,824 | |||||||
Other assets of discontinued operations | $ | 809,462 | $ | 809,822 | |||||
Accounts payable | 117,746 | 72,985 | |||||||
Accounts payable due related party | 24,824 | 50,691 | |||||||
Accrued liabilities | 55,676 | 17,926 | |||||||
Deferred revenues | - | 1,650 | |||||||
Current liabilities of discontinued operations | $ | 198,246 | $ | 143,252 | |||||
Net assets of discontinued operations | $ | 851,341 | $ | 860,977 | |||||
The operating results of LTAS since the acquisition date of March 28, 2013 are also reflected in the Company’s Condensed Consolidated Statements of Comprehensive Income as discontinued operations through May 5, 2014. | |||||||||
June 30, | June 30, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | (Unaudited) | ||||||||
Net sales | $ | 250,000 | 412,996 | ||||||
Cost of sales | 152,513 | 289,214 | |||||||
General and administrative | 90,984 | 96,086 | |||||||
Research and development | 6,449 | - | |||||||
Professional fees | 5,589 | 2,136 | |||||||
Depreciation | 360 | 280 | |||||||
Interest expense | 936 | - | |||||||
Net income (loss) from discontinued operations | $ | (6,831 | ) | 25,280 |
5_PROPERTY_AND_EQUIPMENT_Table
5. PROPERTY AND EQUIPMENT (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property and Equipment | ' | ||||||||
Property and equipment consisted of the following: | |||||||||
June 30, | 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 | (584,170 | ) | (492,670 | ) | |||||
$ | 2,178,466 | $ | 2,269,966 | ||||||
6_OTHER_ACCRUED_LIABILITIES_Ta
6. OTHER ACCRUED LIABILITIES (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Unsecured short term promissory notes | ' | ||||||||
Accrued Liabilities | ' | ||||||||
Accrued liabilities consisted of the following: | |||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Payroll liabilities | $ | 2,258,274 | $ | 1,890,245 | |||||
Professional fees | 10,000 | 10,000 | |||||||
Accrued legal claims payable | 198,434 | 354,684 | |||||||
Accrued cash true-up from conversion | 353,873 | 353,873 | |||||||
Accrued interest on debenture | 37,422 | 31,133 | |||||||
GTC acquisition payable | 75,000 | 75,000 | |||||||
Other | 27,245 | 80,092 | |||||||
OTHER ACCRUED LIABILITIES | $ | 2,960,248 | $ | 2,795,027 | |||||
7_NOTES_PAYABLE_Tables
7. NOTES PAYABLE (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Notes Payable [Abstract] | ' | ||||||||
Notes Payable | ' | ||||||||
Notes payable consisted of the following: | |||||||||
June 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
(Unaudited) | |||||||||
Unsecured promissory notes | $ | 5,997,030 | $ | 5,997,030 | |||||
Unsecured short-term promissory notes | 100,000 | 150,000 | |||||||
Convertible notes payable | 267,000 | 267,000 | |||||||
Accrued interest on the unsecured promissory notes | 3,295,163 | 3,087,053 | |||||||
NOTES PAYABLE | $ | 9,659,193 | $ | 9,501,083 |
8_DERIVATIVE_LIABILITIES_Table
8. DERIVATIVE LIABILITIES (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Derivative Liability [Abstract] | ' | ||||||||
Warrant to Purchase Common Stock | ' | ||||||||
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 | (2,583,334 | ) | 0.21 | ||||||
Outstanding at June 30, 2014 | 16,044,901 | $ | 0.21 |
10_SHAREBASED_COMPENSATION_Tab
10. SHARE-BASED COMPENSATION (Tables) | 6 Months Ended | ||||||||||||||
Jun. 30, 2014 | |||||||||||||||
Share-based Compensation [Abstract] | ' | ||||||||||||||
Stock Options Outstanding and Exercisable | ' | ||||||||||||||
The following table summarizes information about stock options outstanding and exercisable at June 30, 2014: | |||||||||||||||
Options Outstanding and Exercisable | |||||||||||||||
Exercise prices | Number | Weighted average | Weighted | ||||||||||||
outstanding | remaining | Average | |||||||||||||
contractual | Exercise | ||||||||||||||
terms | price | ||||||||||||||
(years) | |||||||||||||||
$ | 0.0083 | 3,400,000 | 2.75 | $ | 0.0083 | ||||||||||
0.0096 | 12,000,000 | 6.51 | 0.0096 | ||||||||||||
0.01 | 37,400,000 | 6.66 | 0.01 | ||||||||||||
0.011 | 400,000 | 2.37 | 0.011 | ||||||||||||
0.013 | 40,355,693 | 6.24 | 0.013 | ||||||||||||
0.015 | 11,000,000 | 5.26 | 0.015 | ||||||||||||
0.016 | 250,000 | 1.68 | 0.016 | ||||||||||||
0.017 | 2,000,000 | 5.61 | 0.017 | ||||||||||||
0.021 | 250,000 | 1.87 | 0.021 | ||||||||||||
0.023 | 22,316,667 | 5.37 | 0.023 | ||||||||||||
0.024 | 12,000,000 | 6.08 | 0.024 | ||||||||||||
0.028 | 400,000 | 2.08 | 0.028 | ||||||||||||
0.075 | 7,750,000 | 3.75 | 0.075 | ||||||||||||
149,522,360 | 5.87 | $ | 0.018 |
12_PER_SHARE_INFORMATION_Table
12. PER SHARE INFORMATION: (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Earnings Per Share [Abstract] | ' | ||||||||
Computation of Earnings Per Share Basic and Diluted | ' | ||||||||
Six-Months Ended June 30, | |||||||||
2014 | 2013 | ||||||||
Numerator: | |||||||||
Net loss from continuing operations | $ | (1,555,620 | ) | $ | (1,382,733 | ) | |||
Net income (loss) from discontinued operations | $ | (6,831 | ) | $ | 25,280 | ||||
Denominator: | |||||||||
Weighted-average common shares outstanding | 704,090,708 | 584,918,220 | |||||||
Dilutive effect of stock warrants and stock options | 0 | 0 | |||||||
Weighted-average common shares outstanding, assuming dilution | 704,090,708 | 584,918,220 | |||||||
Net loss per share: | |||||||||
Basic and diluted from continuing operations | $ | (0.00 | ) | $ | (0.00 | ) | |||
Basic and diluted from discontinued operations | $ | (0.00 | ) | $ | (0.00 | ) |
1_Disclosure_1_SUMMARY_OF_SIGN
1. Disclosure - 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES(Detail) | 6 Months Ended |
Jun. 30, 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 | '1 year |
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 |
1_SUMMARY_OF_SIGNIFICANT_ACCOU3
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Details) (USD $) | Jun. 30, 2014 |
Available-for-sale securities | $0 |
Level 1 | ' |
Available-for-sale securities | 0 |
Level 2 | ' |
Available-for-sale securities | 9,000,000 |
Level 3 | ' |
Available-for-sale securities | $0 |
2_ACQUISITIONS_Detail
2. ACQUISITIONS (Detail) (Lighter Than Air Systems Corp, USD $) | 6 Months Ended |
Jun. 30, 2014 | |
Original 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 | ' |
Revised 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 |
3_DISCONTINUED_OPERATIONS_deta
3. DISCONTINUED OPERATIONS (details) (USD $) | 5-May-14 | Dec. 31, 2013 |
Discontinued Operations Details | ' | ' |
Cash | $30,719 | $109,825 |
Accounts receivable | 135,050 | 8,085 |
Inventories | 72,974 | 75,311 |
Prepaid expenses | 1,382 | 1,186 |
Current assets of discontinued operations | 240,125 | 194,407 |
Property and equipment, net | 1,638 | 1,998 |
Goodwill | 807,824 | 807,824 |
Other assets of discontinued operations | 809,462 | 809,822 |
Accounts payable | 117,746 | 72,985 |
Accounts payable due related party | 24,824 | 50,691 |
Accrued liabilities | 55,676 | 17,926 |
Deferred revenues | 0 | 1,650 |
Current liabilities of discontinued operations | 198,246 | 143,252 |
Net assets of discontinued operations | $851,341 | $860,977 |
3_DISCONTINUED_OPERATIONS_deta1
3. DISCONTINUED OPERATIONS (details 1) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Discontinued Operations Details 1 | ' | ' |
Net sales | $250,000 | $412,996 |
Cost of sales | 152,513 | 289,214 |
General and administrative | 90,984 | 96,086 |
Research and development | 6,449 | 0 |
Professional fees | 5,589 | 2,136 |
Depreciation | 360 | 280 |
Interest expense | 936 | 0 |
Net income (loss) from discontinued operations | ($6,831) | $25,280 |
5_PROPERTY_AND_EQUIPMENT_Detai
5. PROPERTY AND EQUIPMENT (Detail) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | ($2,762,636) | $2,762,636 |
Less: accumulated depreciation | -584,170 | -492,670 |
Property and equipment, net | 2,178,466 | 2,269,966 |
Appliques [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | 2,755,732 | 2,755,732 |
Office Furniture and Equipment [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | $6,904 | $6,904 |
6_OTHER_ACCRUED_LIABILITIES_De
6. OTHER ACCRUED LIABILITIES (Detail) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Earnings Per Share Basic and Diluted Numerator [Abstract] | ' | ' |
Payroll liabilities | $2,258,274 | $1,890,245 |
Professional fees | 10,000 | 10,000 |
Accrued legal claims payable | 198,434 | 354,684 |
Accrued cash true-up from conversion | 353,873 | 353,873 |
Accrued interest on debenture | 37,422 | 31,133 |
GTC acquisition payable | 75,000 | 75,000 |
Other | 27,245 | 80,092 |
OTHER ACCRUED LIABILITIES | $2,960,248 | $2,795,027 |
7_NOTES_PAYABLE_Detail
7. NOTES PAYABLE (Detail) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Mar. 31, 2013 |
DisclosureNotesPayableAbstract | ' | ' | ' |
Unsecured promissory notes | $5,997,030 | $5,997,030 | $5,997,030 |
Unsecured short-term promissory notes | 100,000 | ' | 150,000 |
Convertible notes payable | 267,000 | ' | 267,000 |
Accrued interest on the unsecured promissory notes | 3,295,163 | ' | 3,087,053 |
NOTES PAYABLE | $9,659,193 | $9,501,083 | $9,501,083 |
7_NOTES_PAYABLE_Detail_Narrati
7. NOTES PAYABLE (Detail Narrative) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Mar. 31, 2013 |
DisclosureNotesPayableAdditionalInformationAbstract | ' | ' | ' |
Unsecured promissory notes included in notes payable total | $5,997,030 | $5,997,030 | $5,997,030 |
8_DERIVATIVE_LIABILITIES_Detai
8. DERIVATIVE LIABILITIES (Details) (USD $) | 6 Months Ended |
Jun. 30, 2014 | |
Class of Warrant or Right Outstanding | ' |
Outstanding at December 31, 2013 | 18,628,235 |
Warrants Granted | 0 |
Warrants Expired | -2,583,334 |
Outstanding at March 31, 2014 | 16,044,901 |
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 $) | 6 Months Ended |
Jun. 30, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options outstanding and exercisable at end of year, Shares | 149,522,360 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '5 years 10 months 13 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.02 |
Exercise Price One [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.01 |
Options outstanding and exercisable at end of year, Shares | 3,400,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '2 years 9 months |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.01 |
Exercise Price Two [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.01 |
Options outstanding and exercisable at end of year, Shares | 12,000,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '6 years 6 months 4 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.01 |
Exercise Price Three [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.01 |
Options outstanding and exercisable at end of year, Shares | 37,400,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '6 years 7 months 28 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.01 |
Exercise Price Four [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.01 |
Options outstanding and exercisable at end of year, Shares | 400,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '2 years 4 months 13 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.01 |
Exercise Price Five [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.01 |
Options outstanding and exercisable at end of year, Shares | 40,355,693 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '6 years 2 months 26 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.01 |
Exercise Price Six [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.02 |
Options outstanding and exercisable at end of year, Shares | 11,000,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '5 years 3 months 7 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.02 |
Exercise Price Seven [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.02 |
Options outstanding and exercisable at end of year, Shares | 250,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '1 year 8 months 5 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.02 |
Exercise Price Eight [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.02 |
Options outstanding and exercisable at end of year, Shares | 2,000,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '5 years 7 months 10 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.02 |
Exercise Price Nine [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.02 |
Options outstanding and exercisable at end of year, Shares | 250,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '1 year 10 months 13 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.02 |
Exercisepriceten [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.02 |
Options outstanding and exercisable at end of year, Shares | 22,316,667 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '5 years 4 months 13 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.02 |
Exercise price eleven [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.02 |
Options outstanding and exercisable at end of year, Shares | 12,000,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '6 years 29 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.02 |
Exercise price twelve [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.03 |
Options outstanding and exercisable at end of year, Shares | 400,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '2 years 29 days |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.03 |
Exercise price thirteen [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Options Outstanding and Exercisable ,Exercise prices | $0.08 |
Options outstanding and exercisable at end of year, Shares | 7,750,000 |
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years) | '3 years 9 months |
Options Outstanding and Exercisable, weighted Average Exercise price | $0.08 |
12_PER_SHARE_INFORMATION_Detai
12. PER SHARE INFORMATION (Detail) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Numerator: | ' | ' |
Net loss from continuing operations | ($1,555,620) | ($1,382,733) |
Net income (loss) from discontinued operations | ($6,831) | $25,280 |
Denominator: | ' | ' |
Weighted-average common shares outstanding | 704,090,708 | 584,918,220 |
Dilutive effect of stock warrants and stock options | 0 | 0 |
Weighted-average common shares outstanding, assuming dilution | 704,090,708 | 584,918,220 |
Net loss per share: | ' | ' |
Basic and diluted for continuing operations | $0 | $0 |
Basic and diluted for discontinued operations | $0 | $0 |