Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2014 | Jul. 09, 2015 | Jun. 30, 2014 | |
Document And Entity Information | |||
Entity Registrant Name | US Highland, Inc. | ||
Entity Central Index Key | 1,381,871 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2014 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | No | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 27,204,684 | ||
Entity Common Stock, Shares Outstanding | 77,727,669 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,014 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Current Assets | ||
Cash and cash equivalents | $ 14,035 | $ 43,044 |
Inventory | 99,826 | |
Prepaid expenses | $ 95,748 | $ 58,520 |
Deposit in Highlon acquisition | 150,000 | |
Total Current Assets | 259,783 | $ 201,390 |
Deposits | 11,478 | 11,491 |
Property and Equipment, net | 10,288 | 24,555 |
Total Assets | 281,549 | 237,436 |
Current Liabilities | ||
Accounts payable | 499,586 | 393,617 |
Accrued liabilities ($255,830 and $66,184 related parties, respectively) | 656,482 | 258,238 |
Convertible debentures ($nil and $144,362 related parties, respectively), net of discounts of $773,700 and $684,504, respectively | 259,633 | 351,829 |
Derivative liabilities | 46,065,517 | 29,430,719 |
Loans payable ($268,000 and $27,000 related parties, respectively) | 391,500 | 115,500 |
Total Current Liabilities | 47,872,718 | $ 30,549,903 |
Loans payable ($607,000 and $0 related parties, respectively) | 607,000 | |
Total Liabilities | $ 48,479,718 | $ 30,549,903 |
Stockholder's Deficit | ||
Preferred stock, 3,550,000 shares authorized, par value $0.01; no shares issued and outstanding at December 31, 2014 and 2013 | ||
Common stock, 500,000,000 shares authorized, $0.01 par value; 77,727,669 shares issued and outstanding | $ 777,276 | $ 777,276 |
Common stock reserved for future issuance; 244,000 and 168,000 shares at December 31, 2014 and 2013, respectively | 152,236 | 129,881 |
Treasury stock, at cost - 58,333 shares | (773,500) | (773,500) |
Additional Paid-in Capital | 54,757,845 | 54,757,845 |
Accumulated Deficit | (103,112,026) | (85,203,969) |
Total Stockholder's Deficit | (48,198,169) | (30,312,467) |
Total Liabilities and Stockholder's Deficit | $ 281,549 | $ 237,436 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Current Liabilities | ||
Accrued liabilities - related parties | $ 255,830 | $ 66,184 |
Convertible debentures - related parties | 144,362 | |
Net of discounts | 773,700 | 684,504 |
Loans payable - related parties current | 268,000 | 27,000 |
Loans payable - related parties | $ 607,000 | $ 0 |
Stockholders' Deficiency | ||
Preferred Stock, shares authorized | 3,550,000 | 3,550,000 |
Preferred Stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Common Stock, shares authorized | 500,000,000 | 500,000,000 |
Common Stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares issued | 77,727,669 | 77,727,669 |
Common Stock, shares outstanding | 77,727,669 | 77,727,669 |
Common stock reserved for future issuance | 244,000 | 168,000 |
Treasury Stock - shares | 58,333 | 58,333 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Consolidated Statements Of Operations | ||
Revenue | $ 10,930 | |
Cost of goods sold | ||
Write-down of inventory | $ 125,616 | |
Gross Margin | $ (114,686) | |
Operating Expenses | ||
Consulting | $ 2,943,106 | |
Depreciation | $ 9,410 | 10,649 |
General and administrative | 756,902 | 645,186 |
Professional fees | 371,170 | 545,975 |
Total Operating Expenses | 1,137,482 | 4,144,916 |
Operating Loss | (1,252,168) | (4,144,916) |
Other Income (Expense) | ||
Interest expense | (1,666,381) | (346,660) |
Change in fair value of derivatives | (16,442,992) | (27,685,283) |
Other income | 1,565 | 2,985 |
Gain on settlement of debt | 1,451,919 | 66,734 |
Total Other Income (Expense) | (16,655,889) | (27,962,224) |
Net Loss | $ (17,908,057) | $ (32,107,140) |
Net Loss Per Common Share - Basic and Diluted | $ (0.23) | $ (0.42) |
Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 77,728,000 | 75,729,000 |
Consolidated Statement Changes
Consolidated Statement Changes in Stockholder's Deficit - USD ($) | Common Stock | Additional Paid-in Capital | Commom Stock Reserved For Future Issuance | Stock Subscription Receivable | Accumulated Deficit | Treasury Stock | Total |
Beginning Balance, Amount at Dec. 31, 2012 | $ 672,743 | $ 51,337,434 | $ 114,303 | $ (1,000) | $ (53,096,829) | $ (773,500) | $ (1,746,849) |
Beginning Balance, Shares at Dec. 31, 2012 | 67,757,669 | ||||||
Shares issued upon conversion of warrants, Shares | 5,000,000 | ||||||
Shares issued upon conversion of warrants, Amount | $ 50,000 | $ 3,202,278 | 3,252,278 | ||||
Stock subscriptions received | $ 1,000 | $ 1,000 | |||||
Cancellation of shares issued in error, Shares | (483,333) | ||||||
Cancellation of shares issued in error, Amount | |||||||
Shares issued to settle debt, Shares | 953,333 | ||||||
Shares issued to settle debt, Amount | $ 9,533 | $ 38,133 | $ 47,666 | ||||
Shares issued for cash, Shares | 4,500,000 | ||||||
Shares issued for cash, Amount | $ 45,000 | $ 180,000 | 225,000 | ||||
Shares issuable in payment of accrued interest | $ 15,578 | 15,578 | |||||
Net (loss) | $ (32,107,140) | (32,107,140) | |||||
Ending Balance, Amount at Dec. 31, 2013 | $ 777,276 | $ 54,757,845 | 129,881 | $ (85,203,969) | $ (773,500) | (30,312,467) | |
Ending Balance, Shares at Dec. 31, 2013 | 77,727,669 | ||||||
Shares issuable in payment of accrued interest | 22,355 | 22,355 | |||||
Net (loss) | $ (17,908,057) | (17,908,057) | |||||
Ending Balance, Amount at Dec. 31, 2014 | $ 777,276 | $ 54,757,845 | $ 152,236 | $ (103,112,026) | $ (773,500) | $ (48,198,169) | |
Ending Balance, Shares at Dec. 31, 2014 | 77,727,669 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Operating Activities | ||
Net loss | $ (17,908,057) | $ (32,107,140) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Depreciation | 9,410 | 10,649 |
Amortization expense | 1,500,923 | 295,496 |
Change in fair value of derivative | 16,442,992 | 27,685,283 |
Gain on settlement of debt | $ (1,451,919) | (66,734) |
Warrants issued for consulting services | $ 2,629,456 | |
Write-down of inventory | $ 125,616 | |
Shares reserved for payment of accrued interest | 22,355 | $ 15,578 |
Gain on sale of equipment | (1,063) | |
Changes in operating assets and liabilities: | ||
Inventory | (25,790) | $ (99,826) |
Prepaid expenses and deposits | (37,228) | (51,136) |
Accounts payable & accrued liabilities | 442,662 | 611,774 |
Accrued liabilities - related parties | 115,171 | |
Net Cash Used in Operating Activities | (764,929) | $ (1,076,600) |
Investing Activities | ||
Payment on deposit in Highlon acquisition | (150,000) | |
Proceeds from sale property and equipment | $ 5,920 | |
Investment in property and equipment | $ (4,354) | |
Net Cash Used in Investing Activities | $ (144,080) | (4,354) |
Financing Activities | ||
Proceeds from convertible debt | $ 860,000 | |
Proceeds from loan payable | $ 50,000 | |
Proceeds from loans payable - related parties | 867,300 | $ 27,000 |
Repayment of loans | $ (18,000) | (2,000) |
Proceeds from issuance of common stock | 228,500 | |
Net Cash Provided by Financing Activities | $ 880,000 | 1,113,500 |
(Decrease) Increase In Cash | (29,009) | 32,546 |
Cash - Beginning of Period | 43,044 | 43,044 |
Cash - End of Period | $ 14,035 | $ 43,044 |
Supplemental Cash Flows Information: | ||
Cash paid for income taxes | ||
Cash paid for interest | $ 182 | |
Non-cash Investing and Financing Activities | ||
Warrants issued to settle debt | $ 53,606 | $ 444,294 |
Common stock issued to settle debt | 47,666 | |
Common stock issued for services and compensation | $ 15,578 |
1. Nature of Operations
1. Nature of Operations | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Nature of Operations | US Highland, Inc. was originally formed as a limited liability company on February 5, 1999 under the name The Powerhouse, L.L.C. pursuant to the laws of the State of Oklahoma. On November 9, 2006, Powerhouse Productions, L.L.C. filed Articles of Conversion changing the entity from a limited liability company to a corporation under the name Harcom Productions, Inc. On January 25, 2010, Articles of Merger were filed with the State of Oklahoma merging U.S. Highland, Inc., an Oklahoma corporation into Harcom Productions, Inc. and the name of the corporation was changed to US Highland, Inc. US Highland, Inc. (the "Company") is a recreational power sports Original Equipment Manufacturer ("OEM"), developing motorcycles, quads, single cylinder engines, and v-twin engines under its own brand and for other OEMs. Going concern The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going-concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company has incurred recurring losses from its operations, and as of December 31, 2014, current liabilities exceed current assets by $47,612,935, and the Company has an accumulated deficit of $103,112,026. The Company's ability to continue as a going concern depends upon its ability to obtain adequate funding to support its operations through continuing investments of debt and/or equity by qualified investors/creditors, internally generated working capital and monetization of intellectual property assets. These factors raise substantial doubt about the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Management is currently pursuing a business strategy which includes raising the necessary funds to finance the Company's development, marketing and manufacturing efforts. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Summary of Significant Accounting Policies | a) Basis of Presentation and Principles of Consolidation The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, US Highlands Electric Inc. All significant intercompany transactions and balances have been eliminated. b) Use of Estimates The preparation of these consolidated financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to useful life and recoverability of long-lived assets, stock-based compensation, derivative liabilities, deferred income tax asset valuations, fair values of financial instruments and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. c) Reclassifications Certain amounts in the prior period presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net loss. d) Cash and Cash Equivalents The Company considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents. e) Inventory Inventory is stated at the lower of cost or market, utilizing the specific lot identification method. Inventory consists of goods and parts for resale. f) Property and Equipment Property and equipment are stated at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets acquired as follows: Computers and office equipment 3 years Manufacturing equipment 5 - 10 years g) Fair Value Measurements The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows: Level 1 -- quoted prices for identical instruments in active markets. Level 2 -- quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and. Level 3 -- fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Financial instruments consist principally of cash and cash equivalents, accounts payable, loans payable and convertible debentures. Derivative liabilities are determined based on "Level 3" inputs, which are significant and unobservable and have the lowest priority. There were no transfers into or out of "Level 3" during the years ended December 31, 2014 or 2013. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 8 for additional information. h) Income Taxes The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely that not that all or a portion of a deferred tax asset will not be realized. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the period presented. The Company had no accruals for interest and penalties at December 31, 2014 or 2013. i) Revenue Recognition For revenue from product sales, four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. j) Advertising The Company expenses advertising costs as incurred. Such costs totaled approximately $6 and $28,500 for 2014 and 2013, respectively. k) Research and Development Research and development costs are expensed as incurred. l) Basic and Diluted Net Loss Per Share Basic earnings (loss) per share is calculated by dividing net profit attributable to common stockholders by the weighted average number of outstanding common shares during the year. The calculation of basic earnings (loss) per share excludes any dilutive effects of options, warrants and other stock-based compensation, which are included in diluted earnings per share. When a company is in a loss situation, all outstanding dilutive shares are excluded from the calculation of diluted earnings because their inclusion would be antidilutive; and the basic and fully diluted common shares outstanding are stated to be the same. At December 31, 2014 and 2013, approximately 91,852,000 and 113,500,000 shares, respectively, underlying the convertible debentures and warrants were antidilutive. m) Concentration of Business and Credit risk The Company maintains cash balances in several financial institutions which currently are insured by the Federal Deposit Insurance Corporation. Balances in these accounts may, at times, exceed the federally insured limits. The Company provides credit in the normal course of business to customers and performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. There Company had sales of $10,930 to one customer during the year ended December 31, 2014 and no sales during the year ending December 31, 2013. n) Subsequent Events The Company's management reviewed all material events through the issuance date of this report for disclosure purpose. o) Recently Issued Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
3. Deposit on Highlon Distribut
3. Deposit on Highlon Distribution Inc. Acquisition | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Deposit on Highlon Distribution Inc. Acquisition | On December 30, 2014, the Company entered into a share exchange agreement with Highlon Distribution, Inc. (Highlon). Per the agreement, the Company will exchange 100 shares of the Company's common stock for 100% of the Highlon shares. In addition, the Company will transfer $150,000 to Highlon within five days from the execution of the agreement. Highlon is in the distribution management business, focusing on marketing existing product in logistics area. |
4. Property and Equipment
4. Property and Equipment | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Property and Equipment | Property and equipment is recorded at cost and is comprised of: Useful Life December 31, 2014 December 31, 2013 Computers and office equipment 3 years $ 15,930 $ 15,930 Manufacturing equipment 5 - 10 years 19,513 28,408 35,443 44,338 Accumulated depreciation (25,155 ) (19,783 ) Property and equipment, net $ 10,288 $ 24,555 Depreciation expense amounted to approximately $9,410 and $10,649 for the year ended December 31, 2014 and 2013, respectively. |
5. Related Party Transactions
5. Related Party Transactions | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Related Party Transactions | a) During the year ended December 31, 2014, the Company entered into unsecured, non-guaranteed loan agreements with a significant shareholder for $842,000. Refer to Note 6 (g) and (h). b) During the year ended December 31, 2014, the Company entered into an unsecured, non-guaranteed loan agreement with a director for $25,300. During the year, repayments of $19,300 were made. Refer to Note 6 (e). c) During the year ended December 31, 2013, the Company issued a convertible note payable to a significant shareholder for cash proceeds of $500,000. Refer to Note 7 (g). d) During the year ended December 31, 2013, the Company issued a convertible note payable to a significant shareholder for cash proceeds of $273,700. Refer to Note 7 (h). e) During the year ended December 31, 2013, the Company entered into an unsecured, non-guaranteed loan agreement with the director for $27,000. Refer to Note 7 (d). f) On March 18, 2013, a director of the Company converted $21,000 of amounts owed to him by the Company into 420,000 shares of common stock. The amount owed had no terms of repayment and was non-interest bearing. g) On March 13, 2013, the Company issued 4,500,000 shares of common stock in consideration for cash at $0.05 per share to a shareholder. This transaction resulted in the shareholder becoming a significant shareholder. h) On December 30, 2014, the Company entered into a share exchange agreement with an entity owned by our President. Refer to Note 3. |
6. Loans Payable
6. Loans Payable | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Loans Payable | Loans payable consist of the following: December 31, 2014 $ December 31, 2013 $ a) Loans payable that are unsecured, non-guaranteed, past due and are non-interest bearing. During the year ended December 31, 2013, the Company settled $13,400 of loans payable through the transfer of inventory previously written off. 25,000 25,000 b) Note payable which is unsecured, non-guaranteed, past due and bears interest at 10% per annum. 7,500 7,500 c) On January 15, 2011, the Company entered into 8 unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $56,000. If the loans were not repaid within 90 days they then bear interest at 1% per month. In addition, if the loan was not repaid within 90 days, the Company is required to issue 167 common shares every month until the loan is repaid in full. As at December 31, 2014 and 2013, the Company recognized the fair value of 164,000 and 148,000 common shares issuable for interest expense of $125,736 and $120,281, respectively, as shares reserved for future issuance. The Company has not yet issued these common shares. As at December 31, 2014, the Company has also accrued interest expense of $26,600 (2013 - $19,880). 56,000 56,000 d) On May 30, 2013 and August 12, 2013, the Company received advances from a director for $2,000 and $25,000, respectively. On August 12, 2013, the Company entered into an unsecured, non-guaranteed, demand loan agreement with the director for $27,000. The loan bears interest at 1% per annum compounded monthly. In addition, the Company is required to issue 5,000 common shares every month until the loan is repaid in full. As at December 31, 2014 and 2013, the Company recognized the fair value of 80,000 and 20,000 common shares issuable for interest expense of $20,950 and $9,600, respectively, as shares reserved for future issuance. The Company has not yet issued these common shares. As at December 31, 2014, the Company has also accrued interest expense of $385 (2013 - $125). 27,000 27,000 e) On February 27, 2014, May 9, 2014, July 11, 2014, and October 7, 2014, the Company received advances from a director of $6,000, $3,300, $9,000, and $7,000, respectively. The Company repaid $3,300 on June 12, 2014, $9,000 on July 28, 2014 and $7,000 on October 8, 2014. The outstanding amount is unsecured, due on demand and bears interest at 1% per annum compounded and calculated monthly. 6,000 -- f) On September 18, 2014, the Company entered into an unsecured, non-guaranteed, loan agreement pursuant to which the Company received proceeds of $35,000. The loan bears interest at 8% per annum compounded annually and is due 1 year after the date of issuance. 35,000 -- g) On August 26, 2014, December 4, 2014 and December 18, 2014, the Company issued unsecured notes payable of $15,000, $20,000 and $200,000, respectively to a significant shareholder. The notes bear interest at an annual rate of 8% per annum, are uncollateralized, and due 1 year after the date of issuance. 235,000 -- h) The Company issued the following unsecured notes payable to a significant shareholder. The notes bear interest at an annual rate of 8% per annum, are uncollateralized, and are due 2 years after the date of issuance: 1. On January 17, 2014, the Company issued a $50,000 note payable. 50,000 -- 2. On January 29, 2014, the Company issued a $50,000 note payable. 50,000 -- 3. On February 19, 2014, the Company issued a $25,000 note payable. 25,000 -- 4. On March 3, 2014, the Company issued a $50,000 note payable. 50,000 -- 5. On March 19, 2014, the Company issued a $150,000 note payable. 150,000 -- 6. On April 25, 2014, the Company issued a $25,000 note payable. 25,000 -- 7. On May 19, 2014, the Company issued a $25,000 note payable. 25,000 -- 8. On June 2, 2014, the Company issued an $18,000 note payable. 18,000 -- 9. On June 12, 2014, the Company issued a $32,000 note payable. 32,000 -- 10. On July 1, 2014, the Company issued a $25,000 note payable. 25,000 -- 11. On July 16, 2014, the Company issued a $75,000 note payable to a related party. On July 23, the note holder assigned the note to a related party. 75,000 -- 12. On October 7, 2014, the Company issued a $30,000 note payable. 30,000 -- 13. On October 31, 2014, the Company issued a $20,000 note payable. 20,000 -- 14. On November 4, 2014, the Company issued a $32,000 note payable. 32,000 -- Total $ 998,500 $ 115,500 Less Current (391,500 ) (115,500 ) Long Term $ 607,000 $ -- |
7. Convertible Debentures
7. Convertible Debentures | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Convertible Debentures | a) Effective January 25, 2010, the Company issued a convertible note for $225,000. Pursuant to the terms of the agreement, the loan was unsecured, non-interest bearing, and was due on December 21, 2010. The note was convertible into shares of the Company's common stock at any time at a variable conversion price equal to 65% of the average of the closing bid prices of the common stock during the 28 trading days prior to the date of the conversion notice and was subject to adjustment upon the issuance of certain dilutive instruments. Due to these provisions, the embedded conversion option qualified for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the derivative liability of $538,249 resulted in a full discount to the note payable of $225,000 and the recognition of a loss on derivatives of $313,249. On June 2, 2010, the Company issued 6,386 restricted shares of common stock upon the conversion of the principal amount of $166,667. The fair value of the derivative liability at June 2, 2010, was $266,425 and $197,352 was reclassified to additional paid-in capital upon conversion. During the year ended December 31, 2013, the Company repaid $2,000 of the note and during the year ended December 31, 2014, the Company repaid an additional $3,000. At December 31, 2014, the carrying value of the note is $53,333 (2013 - $56,333). The note is in default at December 31, 2014. b) Effective July 25, 2013, the Company issued a convertible note to secure a demand loan of $75,000. Pursuant to the terms of the agreement, the loan is unsecured and due on July 31, 2014. The note is convertible into shares of the Company's common stock at any time at a price of $0.035. The note bears interest at 8% per annum compounded monthly, and is due on demand. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $577,797 resulted in a discount to the note payable of $75,000 and the recognition of a loss on derivatives of $502,797. As the note is due on demand the entire discount was recorded as interest expense on July 25, 2013. At December 31, 2014, the carrying value of the note is $75,000 (2013 - $75,000). c) Effective July 25, 2013, the Company issued a convertible note to secure a demand loan of $45,000. Pursuant to the terms of the agreement, the loan is unsecured and due on July 31, 2014. The note is convertible into shares of the Company's common stock at any time at a price of $0.035. The note bears interest at 8% per annum compounded monthly, and is due on demand. The embedded conversion option qualifies for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $346,678 resulted in a discount to the note payable of $45,000 and the recognition of a loss on derivatives of $301,678. As the note is due on demand the entire discount was recorded as interest expense on July 25, 2013. At December 31, 2014, the carrying value of the note is $45,000 (2013 - $45,000). d) On July 25, 2013, the Company issued a convertible note for up to $500,000 and warrants to purchase 12,500,000 underlying shares of the Company's common stock. The warrants are exercisable into 10,000,000 common shares of the Company at $0.05 per share and 2,500,000 shares at an exercise price of $0.10 per share until July 31, 2014. During the year ended December 31, 2013, the Company received proceeds of $500,000 under the note. The note bears interest at 8% per annum compounded monthly, and principal and interest are due on July 31, 2014. In addition, so long as any amounts are due hereunder, the Company is obligated to remit to the lender 100% of all revenues, payments and receivables from the sale of the first 50 engines sold by the Company. The note is secured against substantially all of the assets of the Company. The note may be prepaid by the Company without penalty with 30 days prior notice. The note is convertible into shares of the Company's common stock at any time at a conversion price equal to $0.02 per share and is subject to adjustment upon the issuance of certain dilutive instruments and other events. The conversion price was subsequently reduced to $0.01 per share upon the failure to file various reports with the SEC within 120 days of the issuance of the note. Due to the potential adjustments to the conversion feature and the inability to conclude that the Company has enough unissued-authorized common shares to settle the warrants, the embedded conversion option and the warrants qualify for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $6,714,279 and warrants of $3,169,531 resulted in a discount to the note payable of $500,000 and the recognition of a loss on derivatives of $9,383,810. On July 24, 2014, the Company and the note holder agreed to extend the maturity date to December 31, 2014 and increase the interest rate to 12% starting on August 1, 2014. The Company accounted for the modification in accordance with ASC 405-20 and ASC 470-50-40. As the present value of the future cash flows was more than 10% different than the cash flows of the original debt, it was determined that the original and new debt instruments are substantially different and the Company treated the original convertible note extinguished and exchanged for a new convertible note. The Company recorded a loss on extinguishment of debt of $474,668. The Company also recognized the fair value of the embedded conversion feature of $24,501,757 as a derivative liability and reduced the value of the convertible loan to $nil. On December 31, 2014, the Company and the note holder agreed to extend the maturity date to December 31, 2015. Interest shall accrue at 12% per annum but may be reduced to 8% for any period of time in which the interest is paid in cash and not accrued. The Company accounted for the modification in accordance with ASC 405-20 and ASC 470-50-40. As the present value of the future cash flows was more than 10% different than the cash flows of the original debt, it was determined that the original and new debt instruments are substantially different and the Company treated the original convertible note extinguished and exchanged for a new convertible note. The Company recorded a loss on extinguishment of debt of $411,820. The Company also recognized the fair value of the embedded conversion feature of $25,088,180 as a derivative liability and reduced the value of the convertible loan to $nil. During the year ended December 31, 2014, the Company recorded total accretion of $884,065 and at December 31, 2014, the carrying value of the note was $500,000 (2013 - $500,000) with unamortized discount of $500,000 (2013 -- $407,646). e) On July 25, 2013, the Company issued a convertible note for up to $500,000 and warrants to purchase 10,197,916 underlying shares of the Company's common stock. The warrants are exercisable into 8,158,333 common shares of the Company at $0.05 per share and 2,039,583 shares at an exercise price of $0.10 per share until July 31, 2014. During the year ended December 31, 2013, the Company received proceeds of $273,700 under the note. At November 30, 2013, the Company had determined that no additional funding would be received pursuant to the convertible note. The note bears interest at 8% per annum compounded monthly, and principal and interest are due on July 31, 2014. The note may be prepaid by the Company without penalty with 30 days prior notice. The note is convertible into shares of the Company's common stock at any time at a conversion price equal to $0.02 per share and is subject to adjustment upon the issuance of certain dilutive instruments and other events. The conversion price was subsequently reduced to $0.01 per share upon the failure to file various reports with the SEC within 120 days of the issuance of the note. Due to the potential adjustments to the conversion rate of the conversion feature and the inability to conclude that the Company has enough unissued-authorized common shares to settle the warrants, the embedded conversion option and the warrants qualify for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $5,278,978 and warrants of $2,450,519 resulted in a discount to the note payable of $273,700 and the recognition of a loss on derivatives of $7,455,797. The note was not repaid on July 31, 2014. On August 4, 2014, the Company and the note holder agreed to extend the maturity date to December 31, 2014 and increase the interest rate to 12% starting on August 1, 2014. The Company accounted for the modification in accordance with ASC 405-20 and ASC 470-50-40. As the present value of the future cash flows was more than 10% different than the cash flows of the original debt, it was determined that the original and new debt instruments are substantially different and the Company treated the original convertible note extinguished and exchanged for a new convertible note. The Company recorded a loss on extinguishment of debt of $273,700. The Company also recognized the fair value of the embedded conversion feature of $13,685,849 as a derivative liability and reduced the value of the convertible loan to $nil. On December 31, 2014, the Company and the note holder agreed to extend the maturity date to December 31, 2015. Interest shall accrue at 12% per annum but may be reduced to 8% for any period of time in which the interest is paid in cash and not accrued. The Company accounted for the modification in accordance with ASC 405-20 and ASC 470-50-40. As the present value of the future cash flows was more than 10% different than the cash flows of the original debt, it was determined that the original and new debt instruments are substantially different and the Company treated the original convertible note extinguished and exchanged for a new convertible note. The Company recorded a loss on extinguishment of debt of $225,431. The Company also recognized the fair value of the embedded conversion feature of $13,733,269 as a derivative liability and reduced the value of the convertible loan to $nil. During the year ended December 31, 2014, the Company recorded total accretion of $495,392 and at December 31, 2014, the carrying value of the note was $273,700 (2013 - $273,700) with unamortized discount of $273,700 (2013 -- $221,692). f) Effective November 12, 2013, the Company issued a convertible note for up to $500,000 and warrants to purchase 694,445 underlying shares of the Company's common stock. The warrants are exercisable into 555,556 common shares of the Company at $0.05 per share and 138,889 shares at an exercise price of $0.10 per share until July 31, 2014. During the year ended December 31, 2013, the Company received proceeds of $20,000 under the note. At November 30, 2013, the Company had determined that no additional funding would be received pursuant to the convertible note. The note bears interest at 8% per annum compounded monthly, and principal and interest are due on July 31, 2014. The note may be prepaid by the Company without penalty with 30 days prior notice. The note is convertible into shares of the Company's common stock at any time at a conversion price equal to $0.02 per share and is subject to adjustment upon the issuance of certain dilutive instruments and other events. The conversion price was subsequently reduced to $0.01 per share upon the failure to file various reports with the SEC within 120 days of the issuance of the note. Due to the potential adjustments to the conversion feature and the inability to conclude that the Company has enough unissued-authorized common shares to settle the warrants, the embedded conversion option and the warrants qualify for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $250,021 and warrants of $145,943, resulted in a discount to the note payable of $20,000 and the recognition of a loss on derivatives of $375,964. During the year ended December 31, 2014, the Company recorded accretion of $13,479 increasing the carrying value of the note to $20,000. The note is in default at December 31, 2014. g) Effective October 7, 2013, the Company issued a convertible note for up to $500,000 and warrants to purchase 868,055 underlying shares of the Company's common stock. The warrants are exercisable into 694,444 common shares of the Company at $0.05 per share and 173,611 shares at an exercise price of $0.10 per share until July 31, 2014. During the year ended December 31, 2013, the Company received proceeds of $25,000 under the note. At November 30, 2013, the Company had determined that no additional funding would be received pursuant to the convertible note. The note bears interest at 8% per annum compounded monthly, and principal and interest are due on July 31, 2014. The note may be prepaid by the Company without penalty with 30 days prior notice. The note is convertible into shares of the Company's common stock at any time at a conversion price equal to $0.02 per share and is subject to adjustment upon the issuance of certain dilutive instruments and other events. The conversion price was subsequently reduced to $0.01 per share upon the failure to file various reports with the SEC within 120 days of the issuance of the note. Due to the potential adjustments to the conversion feature and the inability to conclude that the Company has enough unissued-authorized common shares to settle the warrants, the embedded conversion option and the warrants qualify for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $312,522 and warrants of $182,522 resulted in a discount to the note payable of $25,000 and the recognition of a loss on derivatives of $470,045. On July 24, 2014, the Company and the note holder agreed to extend the maturity date to December 31, 2014 and increase the interest rate to 12% starting on August 1, 2014. The Company accounted for the modification in accordance with ASC 405-20 and ASC 470-50-40. As the present value of the future cash flows was more than 10% different than the cash flows of the original debt, it was determined that the original and new debt instruments are substantially different and the Company treated the original convertible note extinguished and exchanged for a new convertible note. The Company recorded a loss on extinguishment of debt of $25,000. The Company also recognized the fair value of the embedded conversion feature of $1,250,082 as a derivative liability and reduced the value of the convertible loan to $nil. During the year ended December 31, 2014, the Company recorded total accretion of $42,032 and at December 31, 2014 the carrying value of the note was $25,000. The note is in default at December 31, 2014. h) On July 25, 2013, the Company issued a convertible note for up to $500,000 and warrants to purchase 739,584 underlying shares of the Company's common stock. The warrants are exercisable into 591,667 common shares of the Company at $0.05 per share and 147,917 shares at an exercise price of $0.10 per share until July 31, 2014. During the year ended December 31, 2013, the Company received proceeds of $41,300 under the note. At November 30, 2013, the Company had determined that no additional funding would be received pursuant to the convertible note. The note bears interest at 8% per annum compounded monthly, and principal and interest are due on July 31, 2014. The note may be prepaid by the Company without penalty with 30 days prior notice. The note is convertible into shares of the Company's common stock at any time at a conversion price equal to $0.02 per share and is subject to adjustment upon the issuance of certain dilutive instruments and other events. The conversion price was subsequently reduced to $0.01 per share upon the failure to file various reports with the SEC within 120 days of the issuance of the note. Due to the potential adjustments to the conversion feature and the inability to conclude that the Company has enough unissued-authorized common shares to settle the warrants, the embedded conversion option and the warrants qualify for derivative accounting and bifurcation under ASC 815-15 Derivatives and Hedging. The initial fair value of the conversion feature of $547,736 and warrants of $187,531, resulted in a discount to the note payable of $41,300 and the recognition of a loss on derivatives of $693,967. On August 4, 2014, the Company and the note holder agreed to extend the maturity date to December 31, 2014 and increase the interest rate to 12% starting on August 1, 2014. The Company accounted for the modification in accordance with ASC 405-20 and ASC 470-50-40. As the present value of the future cash flows was more than 10% different than the cash flows of the original debt, it was determined that the original and new debt instruments are substantially different and the Company treated the original convertible note extinguished and exchanged for a new convertible note. The Company recorded a loss on extinguishment of debt of $41,300. The Company also recognized the fair value of the embedded conversion feature of $2,065,135 as a derivative liability and reduced the value of the convertible loan to $nil. During the year ended December 31, 2014, the Company recorded total accretion of $65,955 and at December 31, 2014, the carrying value of the note was $41,300. The note is in default at December 31, 2014. |
8. Derivative Liabilities
8. Derivative Liabilities | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Derivative Liabilities | The embedded conversion options of the Company's convertible debentures described in Note 7 contain conversion features that qualify for embedded derivative classification. The warrants described in Notes 7 and 10 also qualify for derivative classification. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments. The table below sets forth a summary of changes in the fair value of the Company's Level 3 financial liabilities: December 31, 2014 December 31, 2013 Balance at the beginning of year $ 29,430,719 $ 941,464 Addition of new derivative liabilities (embedded conversion options) -- 14,028,014 Addition of new derivative liabilities (warrants) 53,606 9,209,794 Change in fair value of warrants (5,184,569 ) (627,690 ) Change in fair value of embedded conversion option 21,627,561 9,128,915 Conversion of warrants -- (3,249,778 ) Modification of embedded conversion options 138,200 -- Balance at the end of the year $ 46,065,517 $ 29,430,719 The following table summarizes the change in fair value of derivatives: December 31, 2014 December 31, 2013 Fair value of derivative liabilities in excess of note proceeds received $ -- $ (19,184,058 ) Change in fair value of derivative liabilities during year (16,442,992 ) (8,501,225 ) Change in fair value of derivatives $ (16,442,992 ) $ (27,685,283 ) The Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities and embedded conversion option liabilities as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions. The model incorporates the price of a share of the Company's common stock (as quoted on the Over the Counter Bulletin Board), volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations: Expected Volatility Risk-free Interest Rate Expected Dividend Yield Expected Life (in years) 2013 new notes - At issuance 53% - 329 % 0.10% - 1.41 % 0 % 0.69-3.00 At December 31, 2013 29% - 209 % 0.10% - 0.58 % 0 % 0.58-3.00 2014 new notes - At issuance 209 % 0.38 % 0 % 3.00 At December 31, 2014 167% - 369 % 0.04% - 0.67 % 0 % 0.25-2.50 |
9. Income Taxes
9. Income Taxes | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Components of the net deferred tax asset | At December 31, 2014, $9,655,519 of federal and state net operating losses were available to the Company to offset future taxable income, which will expire commencing in 2030. The potential benefit of net operating losses have not been recognized in the consolidated financial statements because the Company cannot be assured that it is more likely than not that it will utilize the net operating losses carried forward in future years. The Company did not incur any income tax expense for the years ended December 31, 2014 and 2013. Given the short history of the Company and the uncertainty as to the likelihood of future taxable income, the Company has recorded a 100% valuation reserve against the anticipated recovery from the use of the net operating losses created at the inception or generated thereafter. The Company will evaluate the appropriateness of the valuation allowance on an annual basis and adjust the allowance as considered necessary. The components of the net deferred tax asset at December 31, 2014 and 2013 and the amount of the valuation allowance are indicated below: December 31, 2014 December 31, 2013 Net loss before taxes $ (17,908,057 ) $ (32,107,140 ) Statutory rate 34 % 34 % Computed expected tax (recovery) $ (6,088,739 ) $ (10,916,428 ) Depreciation 3,199 3,621 Accretion 510,314 100,469 Loss on derivatives 5,590,617 9,412,996 Loss on write-down of inventory 42,709 Gain on settlement of debt (493,652 ) (22,690 ) Gain on sale of equipment (361 ) -- Stock-based compensation -- 899,313 Net operating loss 435,913 522,719 Valuation allowance (435,913 ) (522,719 ) Net deferred taxes $ -- $ -- As of December 31, 2014 and 2013, the Company did not recognize any liability for unrecognized tax benefits. |
10. Common Stock
10. Common Stock | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Common Stock | There were no share transactions during the year ended December 31, 2014. On December 23, 2013, the Board approved an amendment to the Articles of Incorporation to increase the authorized shares of common stock to 500,000,000 shares and authorize 3,550,000 shares of "blank check" preferred stock, par value $0.01. Share transactions for the year ended December 31, 2013: a) On February 15, 2013, the Company issued 5,000,000 shares of common upon the exercise of a warrant at $0.0005 per share described in Note 10(c) for cash proceeds of $2,500. b) On March 13, 2013, the Company issued 4,500,000 shares of common stock in consideration for cash at $0.05 per share. c) On March 18, 2013, a director of the Company converted $21,000 of amounts owed to him by the Company into 420,000 shares of common stock. The amount owed had no terms of repayment and was non-interest bearing. d) On October 25, 2013, the Company issued 533,333 shares to a consultant as part of a settlement agreement to settle $80,000 of amounts owed to the consultant. The fair value of the shares was $26,667 and the Company recorded a gain on the settlement of debt of $53,333. |
11. Stock Purchase Warrants
11. Stock Purchase Warrants | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Stock Purchase Warrants | a) On January 2, 2014, the Company entered into a settlement agreement with a consultant to settle $11,800 of services provided in 2012. Pursuant to the agreement, the Company issued a warrant to purchase 43,750 shares of common stock at $0.0005 per share for three years. The warrants meet the criteria for classification as a derivative liability and the Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions described in note 8. The initial value of these warrants was $41,806. During the year ended December 31, 2014, the Company recorded a loss on the change in fair value of the derivative liability of $37,169. b) On January 3, 2014, the Company entered into a settlement agreement with a consultant to settle $41,806 of services provided in 2012. Pursuant to the agreement, the Company issued a warrant to purchase 155,000 shares of common stock at $0.0005 per share for three years. The warrants meet the criteria for classification as a derivative liability and the Company uses Level 3 inputs for its valuation methodology for the warrant derivative liabilities as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions described in note 8. The initial value of these warrants was $11,800. During the year ended December 31, 2014, the Company recorded a loss on the change in fair value of the derivative liability of $10,491. c) On January 23, 2013, the Company issued a warrant to purchase 5,000,000 common shares at $0.0005 per share exercisable for three years pursuant to the management securities agreement. The Company recorded the fair value of the warrant of $2,599,801 as consulting expense. On February 15, 2013 the Company issued 5,000,000 common shares upon the exercise of the warrant. Upon the exercise of the warrants the Company reclassified the fair value of the warrant of $3,249,778 to additional paid in capital. During the year ended December 31, 2013, the Company recorded a loss on the change in fair value of the derivative liability of $649,977 prior to the exercise of the warrant. d) On April 1, 2013, the Company entered into a settlement agreement with a consultant to settle $149,971 of services provided in 2012. Pursuant to the agreement, the Company will pay $10,000 and issued a warrant to purchase 300,000 shares of common stock at $0.0005 per share for three years. The warrants meet the criteria for classification as a derivative liability and during the year ended December 31, 2013, the Company recorded a gain on the change in fair value of the derivative liability of $69,085. e) On April 8, 2013, the Company entered into a settlement agreement with a consultant to settle $149,971 of services provided in 2012. Pursuant to the agreement, the Company will pay $10,000 and issued a warrant to purchase 300,000 shares of common stock at $0.0005 per share for three years. The warrants meet the criteria for classification as a derivative liability and during the year ended December 31, 2013, the Company recorded a loss on the change in fair value of the derivative liability of $69,084. f) On September 4, 2013, the Company issued a consultant 100,000 warrants for $29,655 of services. The warrant meets the criteria for classification as a derivative liability and during the year ended December 31, 2013, the Company recorded a gain on the change in fair value of the derivative liability of $3,138. g) On December 23, 2013, the Company entered into a settlement agreement with a consultant to settle $88,445 of services provided in 2012. Pursuant to the agreement, the Company will pay $7,500 and issued a warrant to purchase 300,000 shares of common stock at $0.0005 per share for three years. The warrant meets the criteria for classification as a derivative liability and during the year ended December 31, 2013, the Company did not recognize a gain or loss on the change in fair value of the derivative liability. h) On December 30, 2013, the Company entered into a settlement agreement with a consultant to settle $36,425 of services provided in 2012. Pursuant to the agreement, the Company issued a warrant to purchase 135,000 shares of common stock at $0.0005 per share for three years. The warrant meets the criteria for classification as a derivative liability and during the year ended December 31, 2013, the Company did not recognize a gain or loss on the change in fair value of the derivative liability. i) On December 30, 2013, the Company entered into a settlement agreement with a consultant to settle $26,982 of services provided in 2012. Pursuant to the agreement, the Company issued a warrant to purchase 100,000 shares of common stock at $0.0005 per share for three years. The warrant meets the criteria for classification as a derivative liability and during the year ended December 31, 2013, the Company did not recognize a gain or loss on the change in fair value of the derivative liability. j) During the year ended December 31, 2013, the Company issued 25,000,000 warrants to purchase 25,000,000 shares of common stock pursuant to the convertible note agreements described in Note 7(d) to (h). A summary of the changes in the Company's common share purchase warrants is presented below: Number Weighted Average Exercise Price Weighted Average Expected Life Balance December 31, 2012 979,166 $ 0.59 2.33 years Issued 31,235,000 0.0481 Exercised (5,000,000 ) 0.0005 Balance December 31, 2013 27,214,166 $ 0.08 0.70 years Issued 198,750 0.0005 Cancelled/Expired (25,166,666 ) 0.08 Balance December 31, 2014 2,246,250 $ 0.08 1.10 years |
12. Commitments
12. Commitments | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Commitments | a) During the year ended December 31, 2012, the Company entered into two leases for the provision of office and warehouse space until April 30, 2015. On April 1, 2013, the Company entered into an amendment to the lease agreements. Pursuant to the amendment, one of the leases was terminated and the other was extended to March 31, 2019. During the year ended December 31, 2013, the Company recognized $61,994 of rent expense. The Company's future minimum lease payments are as follows: Fiscal year ending Amount December 31, 2015 63,989 December 31, 2016 65,982 December 31, 2017 67,975 December 31, 2018 69,968 December 31, 2019 17,866 $ 285,780 b) The Company issued a $500,000 convertible note on July 25, 2013, of which so long as any amounts are due hereunder, the Company is obligated to remit to the lender 100% of all revenues, payments and receivables from the sale of the first 50 engines sold by the Company. c) On May 14, 2014, the Company gave notice to the former CEO and President of the Company that his employment agreement was being terminated pursuant to Section of the agreement. Also on May 14, 2014, the same notice was given to the Director of Manufacturing. d) On June 17, 2014, the Company was informed that a debtor will be instituting legal proceedings against the Company for collection of the sum of $76,712. The Company believes it owes the debtor $9,986 which it has recorded as owing. Accordingly, the Company intends to defend these potential matters vigorously. e) On June 26, 2014, the Company was informed that a debtor will be instituting legal proceedings against the Company for collection of the sum of $17,534. On March 25, 2015, the Company signed a settlement agreement with the debtor and payments totaling $12,000 are to be made. Refer to Note 13(f). f) On December 16, 2013, the Company was informed that a vendor will be instituting legal proceedings against the Company for collection of the sum of $12,455. The Company believes it does not owe the vendor anything. Accordingly, the Company intends to defend these potential matters vigorously. g) On July 8, 2014, the Company filed civil actions against John R. Fitzpatrick, III, it's former Chief Financial Officer, President, Chief Financial Officer, and a former director of the Company, and against Steven ("Posie") Pfaff, the former Director of Manufacturing of the Company regarding an employment dispute. Mr. Fitzpatrick and Mr. Pfaff have answered the Petition and asserted various counterclaims against US Highland, Inc., and third party claims against directors of the Company and one of the Company's attorney. Mr. Fitzpatrick and Mr. Pfaff also filed complaints with the Oklahoma Department of Labor. On March 3, 2015, the Oklahoma Department of Labor entered awards of $72,000 in favor of Mr. Fitzpatrick and $54,000 in favor of Mr. Pfaff. Mr. Fitzpatrick and Mr. Pfaff are all appealing these awards in Tulsa County District Court in the State of Oklahoma. h) On August 8, 2014, the Company entered into an employment agreement with an existing employee. Pursuant to the agreement the employee will act as the Interim CFO and Secretary of the Company for an initial period of six months in consideration for $1,200 per month in addition to the employee's current salary structure of $60,000 per year. |
13. Subsequent Events
13. Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
Subsequent Events | a) On January 29, 2015, the Company entered into a note payable with a related party, pursuant to which the Company received proceeds of $20,000. The note bears interest at an annual rate of 8% per annum and due on January 29, 2016. b) On February 18, 2015, the Company entered into a note payable with a third party, pursuant to which the Company received proceeds of $20,000. The note bears interest at an annual rate of 8% per annum and due on February 18, 2016. c) On March 9, 2015, the Company received additional advances of $10,200 from a director. The amount is unsecured, non-interest bearing and due on demand. d) On March 9, 2015, the Company entered into a note payable with a third party, pursuant to which the Company received proceeds of $50,000. The note bears interest at an annual rate of 8% per annum and due on March 9, 2016. e) On March 25, 2015, the Company signed a settlement agreement with a debtor. Under the terms of the agreement the Company is to pay $6,000 by March 31, 2015 and $6,000 by April 30, 2015. If the settlement payments are not made by the stated payment dates interest and additional costs will accrue to the Company. f) On March 31, 2015, the Company entered into a note payable with a third party, pursuant to which the Company received proceeds of $50,000. The note bears interest at an annual rate of 8% per annum and due on March 31, 2016. g) On May 8, 2015, the Company entered into a note payable with a third party, pursuant to which the Company received proceeds of $65,000. The note bears interest at an annual rate of 8% per annum and due on May 8, 2016. h) On May 29, 2015, the Company entered into a note payable with a third party, pursuant to which the Company received proceeds of $4,000. The note bears interest at an annual rate of 8% per annum and due on May 29, 2016. |
2. Summary of Business and Basi
2. Summary of Business and Basis of Presentation (Policies) | 12 Months Ended |
Dec. 31, 2014 | |
Summary Of Business And Basis Of Presentation Policies | |
Basis of Presentation | The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, US Highlands Electric Inc. All significant intercompany transactions and balances have been eliminated. |
Use of Estimates | The preparation of these consolidated financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to useful life and recoverability of long-lived assets, stock-based compensation, derivative liabilities, deferred income tax asset valuations, fair values of financial instruments and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. |
Reclassifications | Certain amounts in the prior period presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net loss. |
Cash and Cash Equivalents | The Company considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents. |
Inventory | Inventory is stated at the lower of cost or market, utilizing the specific lot identification method. Inventory consists of goods and parts for resale. |
Property and Equipment | Property and equipment are stated at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets acquired as follows: Computers and office equipment 3 years Manufacturing equipment 5 - 10 years |
Fair Value Measurements | The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows: Level 1 -- quoted prices for identical instruments in active markets. Level 2 -- quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and. Level 3 -- fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Financial instruments consist principally of cash and cash equivalents, accounts payable, loans payable and convertible debentures. Derivative liabilities are determined based on "Level 3" inputs, which are significant and unobservable and have the lowest priority. There were no transfers into or out of "Level 3" during the years ended December 31, 2014 or 2013. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. See Note 8 for additional information. |
Income Taxes | The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely that not that all or a portion of a deferred tax asset will not be realized. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the period presented. The Company had no accruals for interest and penalties at December 31, 2014 or 2013. |
Revenue Recognition | For revenue from product sales, four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. |
Advertising | The Company expenses advertising costs as incurred. Such costs totaled approximately $6 and $28,500 for 2014 and 2013, respectively. |
Research and Development | Research and development costs are expensed as incurred. |
Concentration of Business and Credit risk | The Company maintains cash balances in several financial institutions which currently are insured by the Federal Deposit Insurance Corporation. Balances in these accounts may, at times, exceed the federally insured limits. The Company provides credit in the normal course of business to customers and performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. There Company had sales of $10,930 to one customer during the year ended December 31, 2014 and no sales during the year ending December 31, 2013. |
Subsequent Events | The Company's management reviewed all material events through the issuance date of this report for disclosure purpose. |
Recently Issued Accounting Pronouncements | The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. |
2. Summary of Business and Ba21
2. Summary of Business and Basis of Presentation (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Summary Of Business And Basis Of Presentation Tables | |
Estimated useful lives of the assets | Computers and office equipment 3 years Manufacturing equipment 5 - 10 years |
4. Property and Equipment (Tabl
4. Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Property And Equipment Tables | |
Property, Plant and Equipment | Property and equipment is recorded at cost and is comprised of: Useful Life December 31, 2014 December 31, 2013 Computers and office equipment 3 years $ 15,930 $ 15,930 Manufacturing equipment 5 - 10 years 19,513 28,408 35,443 44,338 Accumulated depreciation (25,155 ) (19,783 ) Property and equipment, net $ 10,288 $ 24,555 |
6. Loans Payable (Tables)
6. Loans Payable (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Loans Payable Tables | |
Schedule of Debt | Loans payable consist of the following: December 31, 2014 $ December 31, 2013 $ a) Loans payable that are unsecured, non-guaranteed, past due and are non-interest bearing. During the year ended December 31, 2013, the Company settled $13,400 of loans payable through the transfer of inventory previously written off. 25,000 25,000 b) Note payable which is unsecured, non-guaranteed, past due and bears interest at 10% per annum. 7,500 7,500 c) On January 15, 2011, the Company entered into 8 unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $56,000. If the loans were not repaid within 90 days they then bear interest at 1% per month. In addition, if the loan was not repaid within 90 days, the Company is required to issue 167 common shares every month until the loan is repaid in full. As at December 31, 2014 and 2013, the Company recognized the fair value of 164,000 and 148,000 common shares issuable for interest expense of $125,736 and $120,281, respectively, as shares reserved for future issuance. The Company has not yet issued these common shares. As at December 31, 2014, the Company has also accrued interest expense of $26,600 (2013 - $19,880). 56,000 56,000 d) On May 30, 2013 and August 12, 2013, the Company received advances from a director for $2,000 and $25,000, respectively. On August 12, 2013, the Company entered into an unsecured, non-guaranteed, demand loan agreement with the director for $27,000. The loan bears interest at 1% per annum compounded monthly. In addition, the Company is required to issue 5,000 common shares every month until the loan is repaid in full. As at December 31, 2014 and 2013, the Company recognized the fair value of 80,000 and 20,000 common shares issuable for interest expense of $20,950 and $9,600, respectively, as shares reserved for future issuance. The Company has not yet issued these common shares. As at December 31, 2014, the Company has also accrued interest expense of $385 (2013 - $125). 27,000 27,000 e) On February 27, 2014, May 9, 2014, July 11, 2014, and October 7, 2014, the Company received advances from a director of $6,000, $3,300, $9,000, and $7,000, respectively. The Company repaid $3,300 on June 12, 2014, $9,000 on July 28, 2014 and $7,000 on October 8, 2014. The outstanding amount is unsecured, due on demand and bears interest at 1% per annum compounded and calculated monthly. 6,000 -- f) On September 18, 2014, the Company entered into an unsecured, non-guaranteed, loan agreement pursuant to which the Company received proceeds of $35,000. The loan bears interest at 8% per annum compounded annually and is due 1 year after the date of issuance. 35,000 -- g) On August 26, 2014, December 4, 2014 and December 18, 2014, the Company issued unsecured notes payable of $15,000, $20,000 and $200,000, respectively to a significant shareholder. The notes bear interest at an annual rate of 8% per annum, are uncollateralized, and due 1 year after the date of issuance. 235,000 -- h) The Company issued the following unsecured notes payable to a significant shareholder. The notes bear interest at an annual rate of 8% per annum, are uncollateralized, and are due 2 years after the date of issuance: 1. On January 17, 2014, the Company issued a $50,000 note payable. 50,000 -- 2. On January 29, 2014, the Company issued a $50,000 note payable. 50,000 -- 3. On February 19, 2014, the Company issued a $25,000 note payable. 25,000 -- 4. On March 3, 2014, the Company issued a $50,000 note payable. 50,000 -- 5. On March 19, 2014, the Company issued a $150,000 note payable. 150,000 -- 6. On April 25, 2014, the Company issued a $25,000 note payable. 25,000 -- 7. On May 19, 2014, the Company issued a $25,000 note payable. 25,000 -- 8. On June 2, 2014, the Company issued an $18,000 note payable. 18,000 -- 9. On June 12, 2014, the Company issued a $32,000 note payable. 32,000 -- 10. On July 1, 2014, the Company issued a $25,000 note payable. 25,000 -- 11. On July 16, 2014, the Company issued a $75,000 note payable to a related party. On July 23, the note holder assigned the note to a related party. 75,000 -- 12. On October 7, 2014, the Company issued a $30,000 note payable. 30,000 -- 13. On October 31, 2014, the Company issued a $20,000 note payable. 20,000 -- 14. On November 4, 2014, the Company issued a $32,000 note payable. 32,000 -- Total $ 998,500 $ 115,500 Less Current (391,500 ) (115,500 ) Long Term $ 607,000 $ -- |
8. Derivative Liabilities (Tabl
8. Derivative Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Derivative Liabilities Tables | |
Schedule of Derivative Instruments | The table below sets forth a summary of changes in the fair value of the Company's Level 3 financial liabilities: December 31, 2014 December 31, 2013 Balance at the beginning of year $ 29,430,719 $ 941,464 Addition of new derivative liabilities (embedded conversion options) -- 14,028,014 Addition of new derivative liabilities (warrants) 53,606 9,209,794 Change in fair value of warrants (5,184,569 ) (627,690 ) Change in fair value of embedded conversion option 21,627,561 9,128,915 Conversion of warrants -- (3,249,778 ) Modification of embedded conversion options 138,200 -- Balance at the end of the year $ 46,065,517 $ 29,430,719 |
Fair Value, by Balance Sheet Grouping | The following table summarizes the change in fair value of derivatives: December 31, 2014 December 31, 2013 Fair value of derivative liabilities in excess of note proceeds received $ -- $ (19,184,058 ) Change in fair value of derivative liabilities during year (16,442,992 ) (8,501,225 ) Change in fair value of derivatives $ (16,442,992 ) $ (27,685,283 ) |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | Expected Volatility Risk-free Interest Rate Expected Dividend Yield Expected Life (in years) 2013 new notes - At issuance 53% - 329 % 0.10% - 1.41 % 0 % 0.69-3.00 At December 31, 2013 29% - 209 % 0.10% - 0.58 % 0 % 0.58-3.00 2014 new notes - At issuance 209 % 0.38 % 0 % 3.00 At December 31, 2014 167% - 369 % 0.04% - 0.67 % 0 % 0.25-2.50 |
9. Income Taxes (Tables)
9. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Income Taxes Tables | |
Income Taxes | The components of the net deferred tax asset at December 31, 2014 and 2013 and the amount of the valuation allowance are indicated below: December 31, 2014 December 31, 2013 Net loss before taxes $ (17,908,057 ) $ (32,107,140 ) Statutory rate 34 % 34 % Computed expected tax (recovery) $ (6,088,739 ) $ (10,916,428 ) Depreciation 3,199 3,621 Accretion 510,314 100,469 Loss on derivatives 5,590,617 9,412,996 Loss on write-down of inventory 42,709 Gain on settlement of debt (493,652 ) (22,690 ) Gain on sale of equipment (361 ) -- Stock-based compensation -- 899,313 Net operating loss 435,913 522,719 Valuation allowance (435,913 ) (522,719 ) Net deferred taxes $ -- $ -- |
11. Stock Purchase Warrants (Ta
11. Stock Purchase Warrants (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Stock Purchase Warrants Tables | |
Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity | A summary of the changes in the Company's common share purchase warrants is presented below: Number Weighted Average Exercise Price Weighted Average Expected Life Balance December 31, 2012 979,166 $ 0.59 2.33 years Issued 31,235,000 0.0481 Exercised (5,000,000 ) 0.0005 Balance December 31, 2013 27,214,166 $ 0.08 0.70 years Issued 198,750 0.0005 Cancelled/Expired (25,166,666 ) 0.08 Balance December 31, 2014 2,246,250 $ 0.08 1.10 years |
12. Commitments and (Tables)
12. Commitments and (Tables) | 12 Months Ended |
Dec. 31, 2014 | |
Commitments And Tables | |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Fiscal year ending Amount December 31, 2015 63,989 December 31, 2016 65,982 December 31, 2017 67,975 December 31, 2018 69,968 December 31, 2019 17,866 $ 285,780 |
1. Nature of Operations (Detail
1. Nature of Operations (Details Narrative) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Nature Of Operations Details Narrative | ||
Current liabilities exceed current assets | $ 47,612,935 | |
Accumulated deficit | $ 103,112,026 | $ 85,203,969 |
2. Summary of Business and Ba29
2. Summary of Business and Basis of Presentation (Details) | 12 Months Ended |
Dec. 31, 2014 | |
Computers and office equipment | |
Estimated useful lives | 3 years |
Manufacturing equipment [Member] | Minimum [Member] | |
Estimated useful lives | 5 years |
Manufacturing equipment [Member] | Maximum [Member] | |
Estimated useful lives | 10 years |
2. Summary of Significant Acc30
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary Of Significant Accounting Policies Details Narrative | ||
Advertising costs | $ 6 | $ 28,500 |
Antidilutive convertible debentures and warrants | 91,852,000 | 113,500,000 |
Revenue | $ 10,930 |
4. Property and Equipment (Deta
4. Property and Equipment (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Computers and office equipment | $ 15,930 | $ 15,930 |
Manufacturing equipment | 19,513 | 28,408 |
Property and Equipment Gross | 35,443 | 44,338 |
Accumulated depreciation | (25,155) | (19,783) |
Property and equipment, net | $ 10,288 | $ 24,555 |
Computers and office equipment | ||
Property, Plant and Equipment, Useful Life | 3 years | |
Manufacturing equipment [Member] | Minimum [Member] | ||
Property, Plant and Equipment, Useful Life | 5 years | |
Manufacturing equipment [Member] | Maximum [Member] | ||
Property, Plant and Equipment, Useful Life | 10 years |
4. Property and Equipment (De32
4. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property And Equipment Details Narrative | ||
Depreciation, Depletion and Amortization, Nonproduction | $ 9,410 | $ 10,649 |
6. Loans Payable (Details)
6. Loans Payable (Details) - USD ($) | Dec. 31, 2014 | Dec. 31, 2013 |
Loan Payable | $ 998,500 | $ 115,500 |
Less Short Term | (391,500) | $ (115,500) |
Long Term | 607,000 | |
Loan 1 [Member] | ||
Loan Payable | 25,000 | $ 25,000 |
Loan 2 [Member] | ||
Loan Payable | 7,500 | 7,500 |
Loan 3 [Member] | ||
Loan Payable | 56,000 | 56,000 |
Loan 4 [Member] | ||
Loan Payable | 27,000 | $ 27,000 |
Loan 5 [Member] | ||
Loan Payable | 6,000 | |
Loan 6 [Member] | ||
Loan Payable | 35,000 | |
Loan 7 [Member] | ||
Loan Payable | 235,000 | |
Loan 8 [Member] | ||
Loan Payable | 50,000 | |
Loan 9 [Member] | ||
Loan Payable | 50,000 | |
Loan 10 [Member] | ||
Loan Payable | 25,000 | |
Loan 11 [Member] | ||
Loan Payable | 50,000 | |
Loan 12 [Member] | ||
Loan Payable | 150,000 | |
Loan 13 [Member] | ||
Loan Payable | 25,000 | |
Loan 14 [Member] | ||
Loan Payable | 25,000 | |
Loan 15 [Member] | ||
Loan Payable | 18,000 | |
Loan 16 [Member] | ||
Loan Payable | 32,000 | |
Loan 17 [Member] | ||
Loan Payable | 25,000 | |
Loan 18 [Member] | ||
Loan Payable | 75,000 | |
Loan 19 [Member] | ||
Loan Payable | 30,000 | |
Loan 20 [Member] | ||
Loan Payable | 20,000 | |
Loan 21 [Member] | ||
Loan Payable | $ 32,000 |
7. Convertible Debentures (Deta
7. Convertible Debentures (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Conversion option warrants [Member] | ||
Carrying value of the note | $ 53,333 | $ 56,333 |
Conversion option warrants one [Member] | ||
Carrying value of the note | 75,000 | 75,000 |
Conversion option warrants two [Member] | ||
Carrying value of the note | 45,000 | 45,000 |
Conversion option warrants three [Member] | ||
Carrying value of the note | 500,000 | 500,000 |
Unamortized discount | 500,000 | 407,646 |
Conversion option warrants four [Member] | ||
Carrying value of the note | 273,700 | 273,700 |
Unamortized discount | 273,700 | $ 221,692 |
Recorded accretion | 495,392 | |
Conversion option warrants five [Member] | ||
Carrying value of the note | 20,000 | |
Recorded accretion | 13,479 | |
Conversion option warrants six [Member] | ||
Carrying value of the note | 25,000 | |
Recorded accretion | 42,032 | |
Conversion option warrants seven [Member] | ||
Carrying value of the note | 41,300 | |
Recorded accretion | $ 65,955 |
8. Derivative Liabilities (Deta
8. Derivative Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Derivative Liabilities Details | ||
Balance at the beginning of period | $ 29,430,719 | $ 941,464 |
Addition of new derivative liabilities (embedded conversion options) | 14,028,014 | |
Addition of new derivative liabilities (warrants) | $ 53,606 | 9,209,794 |
Change in fair value of warrants | (5,184,569) | (627,690) |
Change in fair value of embedded conversion option | $ 21,627,561 | 9,128,915 |
Conversion of warrants | $ (3,249,778) | |
Modification of embedded conversion options | $ 138,200 | |
Balance at the end of the period | $ 46,065,517 | $ 29,430,719 |
8. Derivative Liabilities (De36
8. Derivative Liabilities (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Derivative Liabilities Details 1 | ||
Fair value of derivative liabilities in excess of note proceeds received | $ (19,184,058) | |
Change in fair value of derivative liabilities during the period | $ (16,442,992) | (8,501,225) |
Change in fair value of derivatives | $ (16,442,992) | $ (27,685,283) |
8. Derivative Liabilities (De37
8. Derivative Liabilities (Details 2) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Expected Dividend Yield | 0.00% | 0.00% |
At Issuance [Member | ||
Expected Volatility | 209.00% | |
Risk-free Interest Rate | 0.38% | |
Expected Dividend Yield | 0.00% | 0.00% |
Expected Life (in years) | 3 years | |
Minimum [Member] | ||
Expected Volatility | 167.00% | 29.00% |
Risk-free Interest Rate | 0.04% | 0.10% |
Expected Life (in years) | 3 months | 6 months 29 days |
Minimum [Member] | At Issuance [Member | ||
Expected Volatility | 53.00% | |
Risk-free Interest Rate | 0.10% | |
Expected Life (in years) | 8 months 9 days | |
Maximum [Member] | ||
Expected Volatility | 369.00% | 209.00% |
Risk-free Interest Rate | 0.67% | 0.58% |
Expected Life (in years) | 2 years 6 months | 3 years |
Maximum [Member] | At Issuance [Member | ||
Expected Volatility | 329.00% | |
Risk-free Interest Rate | 1.41% | |
Expected Life (in years) | 3 years |
9. Income Taxes (Details)
9. Income Taxes (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details | ||
Net loss before taxes | $ (17,908,057) | $ (32,107,140) |
Statutory rate | 34.00% | 34.00% |
Computed expected tax (recovery) | $ (6,088,739) | $ (10,916,428) |
Depreciation | 3,199 | 3,621 |
Accretion | 510,314 | 100,469 |
Loss on derivatives | 5,590,617 | $ 9,412,996 |
Loss on write-down of inventory | 42,709 | |
Gain on settlement of debt | (493,652) | $ (22,690) |
Gain on sale of equipment | $ (361) | |
Stock-based compensation | $ 899,313 | |
Net operating loss | $ 435,913 | 522,719 |
Valuation allowance | $ (435,913) | $ (522,719) |
Net deferred taxes |
9. Income Taxes (Details Narrat
9. Income Taxes (Details Narrative) - Dec. 31, 2014 - USD ($) | Total |
Income Taxes Details Narrative | |
Net operating losses | $ 9,655,519 |
Net operating loss expire | 2,030 |
11. Stock Purchase Warrants (De
11. Stock Purchase Warrants (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Stock Purchase Warrants Details | ||
Number Beginning Balance | 27,214,166 | 979,166 |
Issued | 198,750 | 31,235,000 |
Exercised | (5,000,000) | |
Cancelled/Expired | (25,166,666) | |
Number Ending Balance | 2,246,250 | 27,214,166 |
Weighted Average Exercise Price Beginning Balance | $ 0.08 | $ 0.59 |
Issued | 0.0005 | 0.0481 |
Exercised | 0.0005 | |
Cancelled/Expired | 0.08 | |
Weighted Average Exercise Price Ending Balance | $ 0.08 | $ 0.08 |
Weighted Average Remaining Term Beginning Balance | 8 months 12 days | 2 years 3 months 29 days |
Weighted Average Remaining Term Ending Balance | 1 year 1 month 6 days | 8 months 12 days |
11. Stock Purchase Warrants (41
11. Stock Purchase Warrants (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Warrants issued to purchase common stock | 25,000,000 | |
Common stock purchased | 25,000,000 | |
On January 2, 2014 [Member] | ||
Gain loss on change in fair value of the derivative liability | $ 37,169 | |
On January 3, 2014 [Member] | ||
Gain loss on change in fair value of the derivative liability | $ 10,491 | |
On January 23, 2013 [Member] | ||
Gain loss on change in fair value of the derivative liability | $ 649,977 | |
On April 1, 2013 [Member] | ||
Gain loss on change in fair value of the derivative liability | 69,085 | |
On April 8, 2013 [Member] | ||
Gain loss on change in fair value of the derivative liability | 69,084 | |
On September 4, 2013 [Member] | ||
Gain loss on change in fair value of the derivative liability | $ 3,138 |
12. Commitments (Details)
12. Commitments (Details) | Dec. 31, 2014USD ($) |
Commitments Details | |
December 31, 2015 | $ 63,989 |
December 31, 2016 | 65,982 |
December 31, 2017 | 67,975 |
December 31, 2018 | 69,968 |
December 31, 2019 | 17,866 |
Total | $ 285,780 |
12. Commitments (Details Narrat
12. Commitments (Details Narrative) | 12 Months Ended |
Dec. 31, 2013USD ($) | |
Commitments Details Narrative | |
Rent expense | $ 61,994 |