Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Apr. 14, 2016 | Jun. 30, 2015 | |
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, 2015 | ||
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? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 27,204,684 | ||
Entity Common Stock, Shares Outstanding | 58,162,786 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current Assets | ||
Cash and cash equivalents | $ 13,563 | $ 14,035 |
Prepaid expenses | 93,029 | 95,748 |
Deposit on Highlon acquisition | 150,000 | 150,000 |
Total Current Assets | 256,592 | 259,783 |
Deposits | 4,664 | 11,478 |
Property and Equipment, net | 4,708 | 10,288 |
Total Assets | 265,964 | 281,549 |
Current Liabilities | ||
Accounts payable | 626,883 | 499,586 |
Accrued liabilities ($267,598 and $255,830 related parties, respectively) | 615,324 | $ 656,482 |
Advances from Highlon | 26,000 | |
Convertible debentures, net of discounts of $500,000 and $773,700, respectively | 52,333 | $ 259,633 |
Derivative liabilities | 16,886,192 | 46,065,517 |
Loans payable ($220,000 and $268,000 related parties, respectively) | 367,000 | 391,500 |
Total Current Liabilities | $ 18,573,732 | 47,872,718 |
Long-term loans payable ($nil and $607,000 related parties, respectively) | 607,000 | |
Total Liabilities | $ 18,573,732 | $ 48,479,718 |
Stockholder's Deficit | ||
Undesignated Preferred stock, 40,000 shares authorized, par value $0.01; no shares issued and outstanding | ||
Series A Preferred stock, 3,500,000 shares authorized, par value $0.01; 3,381,520 shares issued and outstanding (2014 - no shares) | $ 33,815 | |
Series B Preferred stock, 10,000 shares authorized, par value $0.01; 5,000 shares issued and outstanding (2014 - no shares) | 50 | |
Common stock, 500,000,000 shares authorized, $0.01 par value; 58,162,669 shares and 77,727,669 shares issued and outstanding at December 31, 2015 and 2014, respectively | 581,627 | $ 777,277 |
Common stock reserved for future issuance; 316,500 and 244,000 shares at December 31, 2015 and 2014, respectively | 197,865 | 152,236 |
Treasury stock, at cost - 58,333 shares | (773,500) | (773,500) |
Additional Paid-in capital | 69,697,929 | 54,757,844 |
Accumulated deficit | (88,045,554) | (103,112,026) |
Total Stockholder's Deficit | (18,307,768) | (48,198,169) |
Total Liabilities and Stockholder's Deficit | $ 265,964 | $ 281,549 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Current Liabilities | ||
Accrued liabilities - related parties | $ 267,598 | $ 255,830 |
Convertible debentures - related parties | 500,000 | 773,700 |
Loans payable - related parties current | 220,000 | 268,000 |
Loans payable - related parties | $ 0 | $ 607,000 |
Stockholders' Deficiency | ||
Undesignated Preferred Stock, shares authorized | 40,000 | 40,000 |
Undesignated Preferred Stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Undesignated Preferred Stock, shares issued | 0 | 0 |
Undesignated Preferred Stock, shares outstanding | 0 | 0 |
Preferred Stock A, shares authorized | 3,500,000 | 3,500,000 |
Preferred Stock A, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Preferred Stock A, shares issued | 3,381,520 | 0 |
Preferred Stock A, shares outstanding | 3,381,520 | 0 |
Preferred Stock B, shares authorized | 10,000 | 10,000 |
Preferred Stock B, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
Preferred Stock B, shares issued | 5,000 | 0 |
Preferred Stock B, shares outstanding | 5,000 | 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 | 58,162,669 | 77,727,669 |
Common Stock, shares outstanding | 58,162,669 | 77,727,669 |
Common stock reserved for future issuance | 316,500 | 244,000 |
Treasury Stock - shares | 58,333 | 58,333 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Consolidated Statements Of Operations | ||
Revenue | $ 10,930 | |
Write-down of inventory | 125,616 | |
Gross Margin (Deficit) | (114,686) | |
Operating Expenses | ||
Depreciation | $ 5,580 | 9,410 |
General and administrative | 297,352 | 756,902 |
Professional fees | 210,835 | 371,170 |
Total Operating Expenses | 513,767 | 1,137,482 |
Operating Loss | (513,767) | (1,252,168) |
Other Income (Expense) | ||
Interest expense | (1,011,790) | (1,666,381) |
Change in fair value of derivatives liabilities | 14,603,888 | (16,442,992) |
Gain on settlement of debt | 1,988,114 | 1,451,919 |
Other income | 27 | 1,565 |
Total Other Income (Expense) | 15,580,239 | (16,655,889) |
Net Income (Loss) | $ 15,066,472 | $ (17,908,057) |
Net Earnings (Loss) Per Common Share - Basic | $ 0.20 | $ (0.23) |
Net Earnings (Loss) Per Common Share - Diluted | $ 0.08 | $ (0.23) |
Basic weighted average common shares outstanding | 75,581,000 | 77,728,000 |
Diluted weighted average common shares outstanding | 180,382,000 | 77,728,000 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholder's Deficit - USD ($) | Preferred Stock | Series A Preferred Stock | Series B Preferred Stock | Common Stock | Common Stock Reserved For Future Issuance | Additional Paid-in Capital | Treasury Stock | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $ 777,277 | $ 129,881 | $ 54,757,844 | $ (773,500) | $ (85,203,969) | $ (30,312,467) | |||
Beginning Balance, Shares at Dec. 31, 2013 | 77,727,669 | ||||||||
Shares issuable for accrued interest | $ 22,355 | 22,355 | |||||||
Net loss/ income | $ (17,908,057) | (17,908,057) | |||||||
Ending Balance, Amount at Dec. 31, 2014 | $ 777,277 | $ 152,236 | $ 54,757,845 | $ (773,500) | $ (103,112,026) | (48,198,169) | |||
Ending Balance, Shares at Dec. 31, 2014 | 77,727,669 | ||||||||
Shares issuable for accrued interest | $ 45,629 | 45,629 | |||||||
Shares issued for exercise of warrants, Amount | $ 4,350 | $ (4,133) | $ 217 | ||||||
Shares issued for exercise of warrants, Shares | 435,000 | 435,000 | |||||||
Cancellation of shares pursuant to a Share Exchange Agreement, Amount | $ 50 | $ (200,000) | $ 199,950 | ||||||
Cancellation of shares pursuant to a Share Exchange Agreement, Shares | 5,000 | (20,000,000) | |||||||
Series A Preferred shares issued for settlement of debt, Amount | $ 33,815 | $ 12,815,961 | $ 12,849,776 | ||||||
Series A Preferred shares issued for settlement of debt, Shares | 3,381,520 | ||||||||
Gain on settlement of related party debts | $ 1,928,307 | 1,928,307 | |||||||
Net loss/ income | $ 15,066,472 | 15,066,472 | |||||||
Ending Balance, Amount at Dec. 31, 2015 | $ 33,815 | $ 50 | $ 581,627 | $ 197,865 | $ 69,697,929 | $ (773,500) | $ (88,045,554) | $ (18,307,768) | |
Ending Balance, Shares at Dec. 31, 2015 | 3,381,520 | 5,000 | 58,162,669 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Operating Activities | ||
Net income (loss) | $ 15,066,472 | $ (17,908,057) |
Adjustments to reconcile net income (loss) to cash used in operating activities: | ||
Depreciation | 5,580 | 9,410 |
Accretion expense | 773,700 | 1,500,923 |
Change in fair value of derivatives | $ (14,603,888) | 16,442,992 |
Gain on sale of equipment | (1,063) | |
Gain on settlement of debt | $ (1,988,114) | (1,451,919) |
Write-down of inventory | 125,616 | |
Shares issuable for accrued interest | $ 45,629 | 22,355 |
Changes in operating assets and liabilities: | ||
Inventory | (25,790) | |
Prepaid expenses and deposits | $ 9,533 | (37,228) |
Accounts payable & accrued liabilities | 131,620 | 442,662 |
Accrued liabilities - related parties | 158,279 | 115,171 |
Net Cash Used in Operating Activities | $ (401,189) | (764,929) |
Investing Activities | ||
Payment on deposit in Highlon acquisition | (150,000) | |
Proceeds from sale property and equipment | 5,920 | |
Net Cash Used in Investing Activities | $ (144,080) | |
Financing Activities | ||
Advances from Highlon | $ 26,000 | |
Proceeds from exercise of warrants | 217 | |
Proceeds from loans payable | 216,000 | $ 50,000 |
Proceeds from loans payable - related parties | 180,200 | 867,300 |
Repayment of loans | (8,500) | (18,000) |
Repayment of loans - related parties | (13,200) | (19,300) |
Net Cash Provided by Financing Activities | 400,717 | 880,000 |
Decrease In Cash | (472) | (29,009) |
Cash - Beginning of Year | 14,035 | 43,044 |
Cash - End of Year | $ 13,563 | $ 14,035 |
Supplemental Cash Flows Information: | ||
Cash paid for income taxes | ||
Cash paid for interest | $ 4,580 | $ 182 |
Non-cash Investing and Financing Activities | ||
Warrants issued to settle debt | $ 53,606 | |
Series A Preferred shares issued for settlement of debt | $ 12,849,776 | |
Series B Preferred shares issued for cancellation of common shares | 200,000 | |
Gain on settlement of related party debts | $ 1,928,307 |
Summary of Business and Basis o
Summary of Business and Basis of Presentation | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
1. Summary of Business and Basis of Presentation | Organization and Business 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. On September 23, 2015, the Company incorporated two wholly-owned subsidiaries, USH Distribution Corp., a Nevada corporation, and Powersports Brand Alliance, Inc., a Nevada corporation. The subsidiaries were formed to provide sales, marketing and distribution services of their power sport products and accessories. On September 25, 2015, the Company entered into a Joint Venture Agreement with M&M Sourcing Sdn. Bhd., a Malaysian entity ("M&M") and jointly formed Lahva, Inc., a Nevada corporation ("Lahva"). The Company's and M&M's equity stake in Lahva is 40% and 60%, respectively. As at December 31, 2015, there were no activities in Lahva. 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 operations, and as of December 31, 2015, current liabilities exceed current assets by $18,317,140, and the Company has an accumulated deficit of $88,045,554. 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. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
2. 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 subsidiaries, US Highlands Electric Inc., USH Distribution Corp., and Powersports Brand Alliance, 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 financialstatement 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, loan receivable, 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, 2015 or 2014. 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 7 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, 2015, or 2014. i) Revenue Recognition For revenue from product sales, the Company recognizes revenue using the four basic criteria that 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 $11,000 and $6 for 2015, and 2014, respectively. k) Research and Development Research and development costs are expensed as incurred. l) Basic and Diluted Net Loss Per Common Share Basic earnings (loss) per common 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, 2015, and 2014, approximately 50,986,000 and 91,852,000 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, 2015. 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. |
Deposit on Highlon Distribution
Deposit on Highlon Distribution Inc. Acquisition | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
3. 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 2014, the Company transferred $150,000 to Highlon as a deposit. Highlon is a distribution management business focusing on marketing existing product in logistics area. Currently, the parties are negotiating final terms of the share exchange. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
4. Property and Equipment | Property and equipment is recorded at cost and is comprised of: Useful Life December 31, 2015 December 31, 2014 Computers and office equipment 3 years $ 15,930 $ 15,930 Manufacturing equipment 5 - 10 years 19,513 19,513 Subtotal 35,443 35,443 Accumulated depreciation (30,735 ) (25,155 ) Property and equipment, net $ 4,708 $ 10,288 Depreciation expense amounted to $5,580 and $9,410 for the years ended December 31, 2015 and 2014, respectively. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
5. Related Party Transactions | a) During the year ended December 31, 2015, the Company incurred salary and wages of $88,598 (2014 $97,376) and $69,409 (2014 $72,567) to the former President of the Company and the interim Chief Financial Officer ("CFO") of the Company, respectively. At December 31, 2015, the Company owes the former President of the Company and the interim CFO $5,885 (2014 $2,700) and $12,000 (2014 $nil), respectively, which has been included in accounts payable. b) At December 31, 2015, the Company owed a significant shareholder of the Company an aggregate of $190,000 (2014 $842,000) pursuant to unsecured, non-guaranteed loan agreements and $500,000 (2014 $773,700) pursuant to convertible debenture agreements. In addition, the Company owed the significant shareholder of the Company a total of $266,816 (2014 $255,382) in accrued interest. During the year ended December 31, 2015, the Company issued 2,484,422 shares of Series A Preferred stock to a significant shareholder of the Company to settle $822,000 of loans payable, a $273,700 convertible note and $146,511 of accrued interest. Refer to Notes 6(e), 8(g) and 8(h). c) At December 31, 2015, the Company owed a director of the Company $27,000 (2014 $27,000) pursuant to unsecured, non-guaranteed loan agreements. In addition, the Company owes the director of the Company accrued interest of $658 (2014 $385), which has been included in accrued liabilities. Refer to Note 8(d). d) At December 31, 2015, the Company owed the President of the Company $3,000 (2014 $6,000) pursuant to unsecured, non-guaranteed loan agreements. In addition, the Company owes the President of the Company accrued interest of $122 (2014 $62), which has been included in accrued liabilities. Refer to Note 8(e). e) On December 30, 2014, the Company entered into a share exchange agreement with a company whose Chief Executive Officer ("CEO") is the former President of the Company. Refer to Note 3. |
Convertible Debentures
Convertible Debentures | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
6. 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 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, during the year ended December 31, 2014, the Company repaid an additional $3,000 and during the year ended December 31, 2015, the Company repaid $1,000. At December 31, 2015 and 2014, the carrying value of the note was $52,333 and $53,333, respectively. The note is in default at December 31, 2015. 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 per share. 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 On September 30, 2015, the Company issued 190,054 shares of Series A preferred stock with a fair value of $722,205 upon the settlement of the principal amount of $75,000 and accrued interest of $20,027. At September 30, 2015, the fair value of the derivative liability was $773,811. The Company recognized a gain of $146,633 on settlement of debt. The difference between the value of the debt and the derivative liability and the fair value of the Series A preferred shares was recorded as a gain or loss on settlement of debt. At December 31, 2015 and 2014, the carrying value of the note was $nil and $75,000, respectively. c) Effective July 25, 2013, the Company issued a convertible note 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 per share. 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. On September 30, 2015, the Company issued 113,176 shares of Series A preferred stock with a fair value of $430,069 upon the settlement of the principal amount of $45,000 and accrued interest of $11,588. At September 30, 2015, the fair value of the derivative liability was $464,286. The Company recognized a gain of $90,805 on settlement of debt. The difference between the value of the debt and the derivative liability and the fair value of the Series A preferred shares was recorded as a gain or loss on settlement of debt. At December 31, 2015, and 2014, the carrying value of the note was $nil and $45,000, respectively. 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 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. On December 31, 2015, the Company and the note holder agreed to extend the maturity date to December 31, 2016. 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 gain on extinguishment of debt of $492,585. The Company also recognized the fair value of the embedded conversion feature of $16,507,415 as a derivative liability and reduced the value of the convertible loan to $nil. During the year ended December 31, 2015, the Company recorded total accretion of $500,000. At December 31, 2015, and 2014, the carrying value of the note was $nil and $nil with unamortized discount of $500,000 and $500,000, respectively. 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 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, 2015, the Company recorded total accretion of $273,700. On September 30, 2015, the Company issued 673,010 shares of Series A preferred stock with a fair value of $2,557,438 upon the settlement of the principal amount of $273,700 and accrued interest of $62,805. At September 30, 2015, the fair value of the derivative liability was $10,126,900. The Company recorded an adjustment to additional paid-in capital of $7,905,967 on settlement of debt. The difference between the value of the debt and the derivative liability and the fair value of the Series A preferred shares was recorded as an adjustment to additional paid-in capital as the note holder is a significant shareholder of the Company. At December, 2015, and 2014, the carrying value of the note was $nil and $nil with unamortized discount of $nil and $273,700, respectively. 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 On September 30, 2015, the Company issued 46,478 shares of Series A preferred stock at a fair value of $176,616 upon the settlement of the principal amount of $20,000 and accrued interest of $3,239. At September 30, 2015, the fair value of the derivative liability was $745,788. The Company recognized a gain of $592,411 on settlement of debt. The difference between the value of the debt and the derivative liability and the fair value of the Series A preferred shares was recorded as a gain or loss on settlement of debt. At December 31, 2015, and 2014, the carrying value of the note was $nil and $20,000, respectively. 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 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. On September 30, 2015, the Company issued 61,306 shares of Series A preferred stock with a fair value of $232,963 upon the settlement of the principal amount of $25,000 and accrued interest of $5,653. At September 30, 2015, the fair value of the derivative liability was $932,152. The Company recognized a gain of $729,842 on settlement of debt. The difference between the value of the debt and the derivative liability and the fair value of the Series A preferred shares was recorded as a gain or loss on settlement of debt. At December 31, 2015, and 2014, the carrying value of the note was $nil and $25,000, respectively. 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. On September 30, 2015, the Company issued 102,082 shares of Series A preferred stock at a fair value of $387,912 upon the settlement of the principal amount of $41,300 and accrued interest of $9,741. At September 30, 2015, the fair value of the derivative liability was $1,539,915. The Company recognized a gain of $1,203,044 on settlement of debt. The difference between the value of the debt and the derivative liability and the fair value of the Series A preferred shares was recorded as a gain or loss on settlement of debt. At December 31, 2015, and 2014, the carrying value of the note was $nil and $41,300, respectively. |
Derivative Liabilities
Derivative Liabilities | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
7. Derivative Liabilities | The embedded conversion options of the Company's convertible debentures described in Note 6 contain conversion features that qualify for embedded derivative classification. The warrants described in Notes 6 and 11 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: Year Ended December 31, 2015 Year Ended December 31, 2014 Balance at the beginning of the year $ 46,065,517 $ 29,430,719 Addition of new derivative liabilities (warrants) 53,606 Change in fair value of warrants (763,397 ) (5,184,569 ) Change in fair value of embedded conversion option (13,840,491 ) 21,627,561 Modification of embedded conversion options 7,415 138,200 Derecognize of derivative liabilities upon settlement of convertible notes (14,582,852 ) Balance at the end of the year $ 16,886,192 $ 46,065,517 The following table summarizes the change in fair value of derivatives for the years ended: December 31, 2015 December 31, 2014 Change in fair value of derivative liabilities during the period $ (14,603,888 ) $ (16,442,992 ) Change in fair value of derivatives $ (14,603,888 ) $ (16,442,992 ) 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) At December 31, 2014 167% - 369% 0.04% - 0.67% 0 % 0.25-2.50 At December 31, 2015 134% - 216% 0.20% - 1.03% 0 % 0.25-2.50 |
Loans Payable
Loans Payable | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
8. Loans Payable | December 31, December 31, 2015 2014 Loans payable consist of the following: a) Loans payable that are unsecured, non-guaranteed, past due and are non-interest bearing. $ 25,000 $ 25,000 b) Note payable which is unsecured, non-guaranteed, past due and bears interest at 10% per annum. 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, 2015, and 2014, the Company recognized the fair value of $135,365 and $125,736, respectively, of the 180,000 and 164,000 common shares issuable for interest expense as shares reserved for future issuance. The Company has not yet issued these common shares. As at December 31, 2015, the Company has also accrued interest expense of $33,320 (2014 - $26,600). 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, 2015, and 2014, the Company recognized the fair value of $62,500 and $26,500, respectively, of the 140,000 and 80,000 common shares issuable for interest expense as shares reserved for future issuance. The Company has not yet issued these common shares. As at December 31, 2015, the Company has also accrued interest expense of $658 (2014 - $385). 27,000 27,000 e) On February 27, 2014, and March 19, 2015, the Company received advances from a director of $6,000, and $10,200, respectively. During the year ended December 31, 2015, the Company repaid $13,200. The advances are unsecured, due on demand and bears interest at 1% per annum compounded and calculated monthly. 3,000 6,000 f) On September 18, 2014, February 18, 2015, March 9, 2015, March 31, 2015, May 8, 2015, May 29, 2015 , July 3, 2015, and December 2, 2015, the Company entered into unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $35,000, $20,000, $50,000, $50,000, $65,000, $4,000, $5,000 and $22,000, respectively. The loans bear interest at 8% per annum compounded annually and is due 1 year after the date of issuance. On September 30, 2015, the Company issued 384,002 shares of Series A preferred stock for settlement of $185,000 of notes payable and $7,001 of accrued interest. The Series A preferred shares had a fair value of $1,459,208, and the Company recorded a loss on settlement of debt of $1,267,206. 66,000 35,000 g) On August 26, 2014, December 4, 2014, December 18, 2014, January 29, 2015, August 12, 2015, August 21, 2015, September 1, 2015, September 15, 2015, November 13, 2015 and December 23, 2015, the Company issued unsecured notes payable of $15,000, $20,000, $200,000, $20,000, $20,000, $25,000, $40,000, $25,000, $30,000 and $10,000, 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. On September 30, 2015, the Company issued 457,734 shares of Series A preferred stock for settlement of $215,000 of notes payable and accrued interest of $13,867. The Series A preferred shares had a fair value of $1,739,389. The settlement of debt resulted an adjustment to additional paid-in capital of $1,510,522. 190,000 235,000 h) On January 17, 2014, January 29, 2014, February 19, 2014, March 3, 2014, March 19, 2014, April 25, 2014, May 19, 2014, June 2, 2014, June 12, 2014, July 1, 2014, July 16, 2014, October 7, 2014, October 31, 2014, and November 3, 2014, the Company issued unsecured notes payable of $50,000, $50,000, $25,000, $50,000, $150,000, $25,000, $25,000, $18,000, $32,000, $25,000, $75,000, $30,000, $20,000 and $32,000, respectively to a significant shareholder. 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. On September 30, 2015, the Company issued 1,353,678 shares of preferred stock for the settlement of all of the following $607,000 of notes payable and $69,839 of accrued interest. The preferred shares had a fair value of $5,143,976. The settlement of debt resulted an adjustment to additional paid-in capital of $4,467,138 . 607,000 Total $ 367,000 $ 998,500 Less Short Term Portion (367,000 ) (391,500 Long-Term Loans Payable $ $ 607,000 |
Preferred Stock
Preferred Stock | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
9. Preferred Stock | a) On September 30, 2015, the Company designated 3,500,000 shares of the Company's 3,550,000 authorized "blank check" preferred stock as Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock shall, with respect to dividend rights, rights on liquidation, winding up and dissolution, rank senior to (i) all classes of common stock of the Company and (ii) any class or series of capital stock of the Company hereafter created (unless, with the consent of the holders of Series A Convertible Preferred Stock). The holders of the Series A Preferred Stock shall not entitled to receive any dividends and shall have the voting equivalency of 10 shares of common stock. Each holder of Series A Preferred Stock shall have the right at any time or from time to time from and after the day immediately following the date the Series A Preferred Stock is first issued, to convert each share of Series A Preferred Stock into 10 fully-paid and non-assessable share of common stock, par value $0.01 per share, of the Company. In connection with any conversion hereunder, each holder of Series A Convertible Preferred Stock if such conversion would cause such holder or any of its assignees to beneficially own more than 4.99% of the common stock of the Company. b) On September 30, 2015, the Company issued an aggregate of 3,381,520 shares of Series A Convertible Preferred Stock at a fair value of $12,849,776 to settle convertible and promissory notes in the amount of $1,487,000 and accrued interest of $203,760. The Company recorded a gain on settlement of debt of $1,495,529. c) On November 20, 2015, the Company designated 10,000 shares of the Company's 3,550,000 authorized "blank check" preferred stock as Series B Convertible Preferred Stock. The Series B Convertible Preferred Stock shall, with respect to dividend rights, rights on liquidation, winding up and dissolution, rank senior to (i) all classes of common stock of the Company and (ii) any class or series of capital stock of the Company hereafter created (unless, with the consent of the holders of Series B Convertible Preferred Stock). The holders of the Series B Preferred Stock shall not entitled to receive any dividends and shall have the voting equivalency of 4,000 shares of common stock. Each holder of Series B Preferred Stock shall have the right at any time or from time to time from and after the day immediately following the date the Series B Preferred Stock is first issued, to convert each share of Series B Preferred Stock into 4,000 fully-paid and non-assessable share of common stock, par value $0.01 per share, of the Company. In connection with any conversion hereunder, each holder of Series B Convertible Preferred Stock if such conversion occurred would cause such holder or any of its assignees to beneficially own more than 4.99% of the common stock of the Company. |
Common Stock
Common Stock | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
10. Common Stock | a) On October 8, 2015, the Company issued 435,000 shares of common stock for proceeds of $217 upon the exercise of warrants. b) On November 20, 2015, the Company entered into a share exchange agreement with a significant shareholder of the Company, whereby the shareholder exchanged 20,000,000 shares of common stock for 5,000 shares of Series B Convertible Preferred Stock. There were no share transactions during the year ended December 31, 2014. |
Stock Purchase Warrants
Stock Purchase Warrants | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
11. Stock Purchase Warrants | A summary of the changes in the Company's common share purchase warrants is presented below: 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. As of December 31, 2015, these warrants expired without exercised. 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. During the year ended December 31, 2015, the Company recorded a gain on the change in fair value of the derivative liability of $26,352. Number Weighted Average Exercise Price Weighted Average Expected Life Balance December 31, 2013 27,214,166 $ 0.08 0.70 years Issued 198,750 0.0005 Expired (25,166,666 ) 0.08 Balance December 31, 2014 2,246,250 $ 0.08 1.10 years Exercised (435,000 ) 0.0005 Expired (956,250 ) 0.19 Balance December 31, 2015 855,000 $ 0.0005 0.48 years |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
12. Earnings (Loss) Per Share | A reconciliation of the components of basic and diluted net income per common share is presented in the tables below: For the Year Ended December 31, 2015 2014 Net Income Weighted Average Common Shares Outstanding Per Share Net Loss Weighted Average Common Shares Outstanding Per Share Basic: Income (loss) attributable to common stock $ 15,066,472 75,581,000 $ 0.20 $ (17,908,057 ) 77,728,000 $ (0.23 ) Effective of Dilutive Securities: Share purchase warrants 855,000 Convertible notes 71,510 50,131,000 Preferred stock 53,815,000 Diluted: Income (loss) attributable to common stock, including assumed conversions $ 15,137,982 180,382,000 $ 0.08 $ (17,908,057 ) 77,728,000 $ (0.23 ) |
Commitments
Commitments | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
13. Commitments | a) In 2012, the Company entered into two leases for the provision of office and warehouse space until April 30, 2015. In 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 June 30, 2019. During the year ended December 31, 2015, the Company recognized $74,927 (2014 - $61,994) of rent expense. The Company's future minimum lease payments are as follows: Fiscal year ending Amount December 31, 2016 65,970 December 31, 2017 67,963 December 31, 2018 69,956 December 31, 2019 17,863 Total $ 221,752 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 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 is currently defending these potential matters vigorously. d) 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 is currently defending these potential matters vigorously. e) On July 8, 2014, the Company filed civil actions against John R. Fitzpatrick, III, its former Chief Executive Officer, President, Chief Financial Officer, and a former director of the Company and against Mr. Steven ("Posie") Pfaff, the 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 attorneys. 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. Subsequent to the year ended December 31, 2015, the Company entered into a Release of Claims and Settlement Agreement with Mr. Fitzpatrick and Mr. Pfaff, whereby it agreed to pay a total of $200,000. Refer to Note 15(d). f) On September 28, 2015, USH Distribution, Corp., a wholly owned subsidiary of the Company, ("USH Distribution") entered into a consignment agreement whereby USH Distribution will sell workwear apparel manufactured by the consignor in the United States. The agreement shall expire and terminate 18 months from the effective date of the agreement. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
14. Income Taxes | The Company is required to compute tax asset benefits for net operating losses carried forward. 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, 2015, and 2014. At December 31, 2015, $10,378,495 of federal and state net operating losses were available to the Company to offset future taxable income, which will expire commencing in 2030. 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, 2015, and 2014, the statutory tax rate, the effective tax rate, and the amount of the valuation allowance are indicated bel December 31, 2015 December 31, 2014 Net operating loss carryforwards $ 3,528,688 $ 3,290,476 Valuation allowance (3,528,688 ) (3,290,476 ) Net deferred taxes $ $ T he items accounting for the difference between income taxes computed at the statutory rates and the provisions for income taxes are as follows for the years ended December 31, 2015 and 2014: December 31, 2015 December 31, 2014 Net loss before taxes $ 15,066,472 $ (17,908,057 ) Statutory rate 34 % 34 % Computed expected tax (recovery) $ 5,122,600 $ (6,088,739 ) Depreciation 1,897 3,199 Accretion 263,058 510,314 Loss on derivatives (4,965,322 ) 5,590,617 Loss on write-down of inventory 42,709 Gain on settlement of debt (675,959 ) (493,652 ) Gain on sale of equipment (361 ) Shares issuable for interest expense 15,514 7,601 Net operating loss 238,212 428,312 Change in valuation allowance (238,212 ) (428,312 ) Net deferred taxes $ $ The Company follows the provisions of FASB ASC Subtopic 740-10-65-1, Income Taxes. As of December 31, 2015, and 2014, the Company did not recognize any liability for unrecognized tax benefits. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
15. Subsequent Events | a) On January 4, 2016, the Company entered into a note payable with a third party, pursuant to which the Company received proceeds of $45,000. The note bears interest at 8% per annum and is due on January 4, 2017. b) On February 11, 2016, the Company entered into a convertible promissory note with a third party, pursuant to which the Company received proceeds of $137,500. The note is convertible at a price equal to 60% of the lowest trading price of the Company's common stock for the 20 prior trading days, bears interest at 8% per annum and is due on February 11, 2017. c) On February 11, 2016, the Company entered into a convertible promissory note with a third party, pursuant to which the Company received proceeds of $137,500. The note is convertible at a price equal to 60% of the lowest trading price of the Company's common stock for the 20 prior trading days, bears interest at 8% per annum and is due on February 11, 2017. d) On February 22, 2016, the Company entered into a Release of Claims and Settlement Agreement with John R. Fitzpatrick, III, Steven Pfaff, and certain of the Company's officers and directors. Pursuant to the settlement agreement, the parties discharged each other from all claims actions, demands, costs, losses, damages, and expenses relating to Mr. Fitzpatrick's and Mr. Pfaff's previous employment with the Company in consideration for an aggregate settlement amount of $200,000 in two installments. The Company and the directors also agreed to execute and deliver a pocket judgement against them which shall not be filed unless the Company fails to make the scheduled payments under the settlement agreement. e) On February 26, 2016, the Company entered into a promissory note with USH Distribution Corp. ("Maker"). The Maker promises to pay the Company a principal sum of $70,000. The note bears interest at 8% per annum and is due on February 26, 2017. f) On March 30, 2016, the Company entered into a promissory note with USH Distribution Corp. The Maker promises to pay the Company a principal sum of $12,500. The note bears interest at 8% per annum and is due on March 30, 2017. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Policies | |
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 subsidiaries, US Highlands Electric Inc., USH Distribution Corp., and Powersports Brand Alliance, 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, loan receivable, 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, 2015 or 2014. 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 7 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, 2015, or 2014. |
Revenue Recognition | For revenue from product sales, the Company recognizes revenue using the four basic criteria that 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 $11,000 and $6 for 2015, and 2014, respectively. |
Research and Development | Research and development costs are expensed as incurred. |
Basic and Diluted Net Loss Per Common Share | Basic earnings (loss) per common 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, 2015, and 2014, approximately 50,986,000 and 91,852,000 shares, respectively, underlying the convertible debentures and warrants were antidilutive. |
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, 2015. |
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. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Summary Of Significant Accounting Policies Tables | |
Estimated useful lives of the assets | 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 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property And Equipment Tables | |
Property, Plant and Equipment | Useful Life December 31, 2015 December 31, 2014 Computers and office equipment 3 years $ 15,930 $ 15,930 Manufacturing equipment 5 - 10 years 19,513 19,513 Subtotal 35,443 35,443 Accumulated depreciation (30,735 ) (25,155 ) Property and equipment, net $ 4,708 $ 10,288 |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
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: Year Ended December 31, 2015 Year Ended December 31, 2014 Balance at the beginning of the year $ 46,065,517 $ 29,430,719 Addition of new derivative liabilities (warrants) 53,606 Change in fair value of warrants (763,397 ) (5,184,569 ) Change in fair value of embedded conversion option (13,840,491 ) 21,627,561 Modification of embedded conversion options 7,415 138,200 Derecognize of derivative liabilities upon settlement of convertible notes (14,582,852 ) Balance at the end of the year $ 16,886,192 $ 46,065,517 |
Fair Value, by Balance Sheet Grouping | The following table summarizes the change in fair value of derivatives for the years ended: December 31, 2015 December 31, 2014 Change in fair value of derivative liabilities during the period $ (14,603,888 ) $ (16,442,992 ) Change in fair value of derivatives $ (14,603,888 ) $ (16,442,992 ) |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The following table shows the assumptions used in the calculations: Expected Volatility Risk-free Interest Rate Expected Dividend Yield Expected Life (in years) At December 31, 2014 167% - 369% 0.04% - 0.67% 0 % 0.25-2.50 At December 31, 2015 134% - 216% 0.20% - 1.03% 0 % 0.25-2.50 |
Loans Payable (Tables)
Loans Payable (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Loans Payable Tables | |
Schedule of Debt | December 31, December 31, 2015 2014 Loans payable consist of the following: a) Loans payable that are unsecured, non-guaranteed, past due and are non-interest bearing. $ 25,000 $ 25,000 b) Note payable which is unsecured, non-guaranteed, past due and bears interest at 10% per annum. 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, 2015, and 2014, the Company recognized the fair value of $135,365 and $125,736, respectively, of the 180,000 and 164,000 common shares issuable for interest expense as shares reserved for future issuance. The Company has not yet issued these common shares. As at December 31, 2015, the Company has also accrued interest expense of $33,320 (2014 - $26,600). 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, 2015, and 2014, the Company recognized the fair value of $62,500 and $26,500, respectively, of the 140,000 and 80,000 common shares issuable for interest expense as shares reserved for future issuance. The Company has not yet issued these common shares. As at December 31, 2015, the Company has also accrued interest expense of $658 (2014 - $385). 27,000 27,000 e) On February 27, 2014, and March 19, 2015, the Company received advances from a director of $6,000, and $10,200, respectively. During the year ended December 31, 2015, the Company repaid $13,200. The advances are unsecured, due on demand and bears interest at 1% per annum compounded and calculated monthly. 3,000 6,000 f) On September 18, 2014, February 18, 2015, March 9, 2015, March 31, 2015, May 8, 2015, May 29, 2015 , July 3, 2015, and December 2, 2015, the Company entered into unsecured, non-guaranteed, loan agreements pursuant to which the Company received proceeds of $35,000, $20,000, $50,000, $50,000, $65,000, $4,000, $5,000 and $22,000, respectively. The loans bear interest at 8% per annum compounded annually and is due 1 year after the date of issuance. On September 30, 2015, the Company issued 384,002 shares of Series A preferred stock for settlement of $185,000 of notes payable and $7,001 of accrued interest. The Series A preferred shares had a fair value of $1,459,208, and the Company recorded a loss on settlement of debt of $1,267,206. 66,000 35,000 g) On August 26, 2014, December 4, 2014, December 18, 2014, January 29, 2015, August 12, 2015, August 21, 2015, September 1, 2015, September 15, 2015, November 13, 2015 and December 23, 2015, the Company issued unsecured notes payable of $15,000, $20,000, $200,000, $20,000, $20,000, $25,000, $40,000, $25,000, $30,000 and $10,000, 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. On September 30, 2015, the Company issued 457,734 shares of Series A preferred stock for settlement of $215,000 of notes payable and accrued interest of $13,867. The Series A preferred shares had a fair value of $1,739,389. The settlement of debt resulted an adjustment to additional paid-in capital of $1,510,522. 190,000 235,000 h) On January 17, 2014, January 29, 2014, February 19, 2014, March 3, 2014, March 19, 2014, April 25, 2014, May 19, 2014, June 2, 2014, June 12, 2014, July 1, 2014, July 16, 2014, October 7, 2014, October 31, 2014, and November 3, 2014, the Company issued unsecured notes payable of $50,000, $50,000, $25,000, $50,000, $150,000, $25,000, $25,000, $18,000, $32,000, $25,000, $75,000, $30,000, $20,000 and $32,000, respectively to a significant shareholder. 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. On September 30, 2015, the Company issued 1,353,678 shares of preferred stock for the settlement of all of the following $607,000 of notes payable and $69,839 of accrued interest. The preferred shares had a fair value of $5,143,976. The settlement of debt resulted an adjustment to additional paid-in capital of $4,467,138. 607,000 Total $ 367,000 $ 998,500 Less Short Term Portion (367,000 ) (391,500 ) Long-Term Loans Payable $ $ 607,000 |
Stock Purchase Warrants (Tables
Stock Purchase Warrants (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Stock Purchase Warrants Tables | |
Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity | Number Weighted Average Exercise Price Weighted Average Expected Life Balance December 31, 2013 27,214,166 $ 0.08 0.70 years Issued 198,750 0.0005 Expired (25,166,666 ) 0.08 Balance December 31, 2014 2,246,250 $ 0.08 1.10 years Exercised (435,000 ) 0.0005 Expired (956,250 ) 0.19 Balance December 31, 2015 855,000 $ 0.0005 0.48 years |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Earnings Loss Per Share Tables | |
Earnings (Loss) Per Share | A reconciliation of the components of basic and diluted net income per common share is presented in the tables below: For the Year Ended December 31, 2015 2014 Net Income Weighted Average Common Shares Outstanding Per Share Net Loss Weighted Average Common Shares Outstanding Per Share Basic: Income (loss) attributable to common stock $ 15,066,472 75,581,000 $ 0.20 $ (17,908,057 ) 77,728,000 $ (0.23 ) Effective of Dilutive Securities: Share purchase warrants 855,000 Convertible notes 71,510 50,131,000 Preferred stock 53,815,000 Diluted: Income (loss) attributable to common stock, including assumed conversions $ 15,137,982 180,382,000 $ 0.08 $ (17,908,057 ) 77,728,000 $ (0.23 ) |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Commitments Tables | |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The Company's future minimum lease payments are as follows: Fiscal year ending Amount December 31, 2016 65,970 December 31, 2017 67,963 December 31, 2018 69,956 December 31, 2019 17,863 Total $ 221,752 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes Tables | |
Statutory tax rate | December 31, 2015 December 31, 2014 Net operating loss carryforwards $ 3,528,688 $ 3,290,476 Valuation allowance (3,528,688 ) (3,290,476 ) Net deferred taxes $ $ |
Components of the net deferred tax asset | December 31, 2015 December 31, 2014 Net operating loss carryforwards $ 3,528,688 $ 3,290,476 Valuation allowance (3,528,688 ) (3,290,476 Net deferred taxes $ $ |
Summary of Business and Basis31
Summary of Business and Basis of Presentation (Details Narrative) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Summary Of Business And Basis Of Presentation Details Narrative | ||
Current liabilities exceed current assets | $ 18,317,140 | |
Accumulated deficit | $ (88,045,554) | $ (103,112,026) |
Summary of Significant Accoun32
Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2015 | |
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 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Convertible debentures and warrants | $ 50,986,000 | $ 91,852,000 |
Advertising costs | 11,000 | $ 6 |
Computers and office equipment | ||
Sales | $ 10,930 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Computers and office equipment | $ 15,930 | $ 15,930 |
Manufacturing equipment | 19,513 | 19,513 |
Subtotal | 35,443 | 35,443 |
Accumulated depreciation | (30,735) | (25,155) |
Property and equipment, net | $ 4,708 | $ 10,288 |
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 |
Property and Equipment (Detai35
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Property And Equipment Details Narrative | ||
Depreciation, Depletion and Amortization, Nonproduction | $ 5,580 | $ 9,410 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Accrued interest | $ 146,511 | |
Series A Preferred stock issued | 2,484,422 | |
Loans payable | $ 822,000 | |
Convertible note | 273,700 | |
Shareholder [Member] | ||
Unsecured, non-guaranteed loan agreement | 190,000 | $ 842,000 |
Convertible debenture | 500,000 | 773,700 |
Accrued interest | 266,816 | 255,382 |
Director [Member] | ||
Unsecured, non-guaranteed loan agreement | 27,000 | 27,000 |
Accrued interest | 658 | 385 |
Former President | ||
Salary and wages | 88,598 | 97,376 |
Accounts payable | 5,885 | 2,700 |
Unsecured, non-guaranteed loan agreement | 3,000 | 6,000 |
Accrued interest | 122 | 62 |
Chief Financial Officer | ||
Salary and wages | 69,409 | 72,567 |
Accounts payable | $ 12,000 | $ 0 |
Convertible Debentures (Details
Convertible Debentures (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Recorded accretion | $ 273,700 | |
Conversion option warrants [Member] | ||
Repaid amount | 1,000 | $ 3,000 |
Carrying value of the note | 52,333 | 53,333 |
Conversion option warrants one [Member] | ||
Carrying value of the note | 0 | 75,000 |
Conversion option warrants two [Member] | ||
Carrying value of the note | 0 | 45,000 |
Conversion option warrants three [Member] | ||
Carrying value of the note | 0 | 0 |
Unamortized discount | 500,000 | $ 500,000 |
Recorded accretion | 500,000 | |
Conversion option warrants four [Member] | ||
Carrying value of the note | 0 | $ 0 |
Unamortized discount | 0 | 273,700 |
Recorded accretion | 273,700 | |
Conversion option warrants five [Member] | ||
Carrying value of the note | 0 | 20,000 |
Conversion option warrants six [Member] | ||
Carrying value of the note | 0 | 25,000 |
Conversion option warrants seven [Member] | ||
Carrying value of the note | $ 0 | $ 41,300 |
Derivative Liabilities (Details
Derivative Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Derivative Liabilities Details | ||
Balance at the beginning of period | $ 46,065,517 | $ 29,430,719 |
Addition of new derivative liabilities (warrants) | 53,606 | |
Change in fair value of warrants | $ (763,397) | (5,184,569) |
Change in fair value of embedded conversion option | (13,840,491) | 21,627,561 |
Modification of embedded conversion options | 7,415 | $ 138,200 |
Derecognize of derivative liabilities upon settlement of convertible notes | (14,582,852) | |
Balance at the end of the period | $ 16,886,192 | $ 46,065,517 |
Derivative Liabilities (Detai39
Derivative Liabilities (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Derivative Liabilities Details 1 | ||
Change in fair value of derivative liabilities during the period | $ (14,603,888) | $ (16,442,992) |
Change in fair value of derivatives | $ (14,603,888) | $ (16,442,992) |
Derivative Liabilities (Detai40
Derivative Liabilities (Details 2) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Expected Dividend Yield | 0.00% | 0.00% |
Minimum [Member] | ||
Expected Volatility | 134.00% | 167.00% |
Risk-free Interest Rate | 0.20% | 0.04% |
Expected Life (in years) | 3 months | 3 months |
Maximum [Member] | ||
Expected Volatility | 216.00% | 369.00% |
Risk-free Interest Rate | 1.03% | 0.67% |
Expected Life (in years) | 2 years 6 months | 2 years 6 months |
Loans Payable (Details)
Loans Payable (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Loan Payable | $ 367,000 | $ 998,500 |
Less Short Term | $ (367,000) | (391,500) |
Long Term | 607,000 | |
Loan 1 [Member] | ||
Loan Payable | $ 25,000 | 25,000 |
Loan 2 [Member] | ||
Loan Payable | 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 | 3,000 | 6,000 |
Loan 6 [Member] | ||
Loan Payable | 66,000 | 35,000 |
Loan 7 [Member] | ||
Loan Payable | $ 190,000 | 235,000 |
Loan 8 [Member] | ||
Loan Payable | $ 607,000 |
Stock Purchase Warrants (Detail
Stock Purchase Warrants (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Stock Purchase Warrants Details | ||
Number Beginning Balance | 27,214,166 | 2,246,250 |
Issued | 198,750 | |
Exercised | (435,000) | |
Expired | (956,250) | (25,166,666) |
Number Ending Balance | 855,000 | 27,214,166 |
Weighted Average Exercise Price Beginning Balance | $ 0.08 | $ 0.08 |
Issued | 0.0005 | |
Exercised | 0.0005 | |
Expired | 0.19 | 0.08 |
Weighted Average Exercise Price Ending Balance | $ 0.0005 | $ 0.08 |
Weighted Average Remaining Term Beginning Balance | 1 year 1 month 6 days | 8 months 12 days |
Weighted Average Remaining Term Ending Balance | 5 months 23 days | 1 year 1 month 6 days |
Stock Purchase Warrants (Deta43
Stock Purchase Warrants (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
On January 2, 2014 [Member] | ||
Loss/gain on the change in fair value of the derivative liability | $ (37,169) | |
On January 3, 2014 [Member] | ||
Loss/gain on the change in fair value of the derivative liability | $ 26,352 | $ (10,491) |
Earnings (Loss) Per Share (Deta
Earnings (Loss) Per Share (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Basic: | ||
Income (loss) attributable to common stock | $ 15,066,472 | $ (17,908,057) |
Effective of Dilutive Securities: | ||
Convertible notes | 71,510 | |
Diluted: | ||
Income (loss) attributable to common stock, including assumed conversions | $ 15,137,982 | |
Weighted Average Common Shares Outstanding | ||
Income (loss) attributable to common stock | 75,581,000 | 77,728,000 |
Effective of Dilutive Securities: | ||
Share purchase warrants | 855,000 | |
Convertible notes | 50,131,000 | |
Preferred stock | 53,815,000 | |
Diluted: | ||
Income (loss) attributable to common stock, including assumed conversions | 180,382,000 | 77,728,000 |
Basic: | ||
Income (loss) attributable to common stock | $ 0.20 | $ (0.23) |
Diluted: | ||
Income (loss) attributable to common stock, including assumed conversions | $ 0.08 | $ (0.23) |
Commitments (Details)
Commitments (Details) | Dec. 31, 2015USD ($) |
Commitments Details | |
December 31, 2016 | $ 65,970 |
December 31, 2017 | 67,963 |
December 31, 2018 | 69,956 |
December 31, 2019 | 17,863 |
Total | $ 221,752 |
Commitments (Details Narrative)
Commitments (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Commitments Details Narrative | ||
Rent expense | $ 74,927 | $ 61,994 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Income Taxes Details | ||
Net operating loss carryforwards | $ 3,528,688 | $ 3,290,476 |
Valuation allowance | $ (3,528,688) | $ (3,290,476) |
Net deferred taxes |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes Details | ||
Net loss before taxes | $ 15,066,472 | $ (17,908,057) |
Statutory rate | 34.00% | 34.00% |
Computed expected tax (recovery) | $ 5,122,600 | $ (6,088,739) |
Depreciation | 1,897 | 3,199 |
Accretion | 263,058 | 510,314 |
Loss on derivatives | $ (4,965,322) | 5,590,617 |
Loss on write-down of inventory | 42,709 | |
Gain on settlement of debt | $ (675,959) | (493,652) |
Gain on sale of equipment | (361) | |
Shares issuable for interest expense | $ 15,514 | 7,601 |
Net operating loss | 238,212 | 435,913 |
Valuation allowance | $ (238,212) | $ (435,913) |
Net deferred taxes |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Income Taxes Details Narrative | |
Net operating losses | $ 10,378,495 |
Net operating loss expire | 2,030 |