Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended |
Mar. 31, 2014 | |
Document and Entity Information | ' |
Entity Registrant Name | 'Heatwurx, Inc. |
Document Type | '10-Q |
Document Period End Date | 31-Mar-14 |
Amendment Flag | 'false |
Entity Central Index Key | '0001533743 |
Current Fiscal Year End Date | '--12-31 |
Entity Common Stock, Shares Outstanding | 8,271,398 |
Entity Filer Category | 'Smaller Reporting Company |
Entity Current Reporting Status | 'Yes |
Entity Voluntary Filers | 'No |
Entity Well-known Seasoned Issuer | 'No |
Document Fiscal Year Focus | '2014 |
Document Fiscal Period Focus | 'Q1 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current assets: | ' | ' |
Cash and cash equivalents | $82,248 | $186,864 |
Accounts receivable | 20,345 | 19,200 |
Prepaid expenses and other current assets | 111,934 | 80,386 |
Inventory | 263,780 | 228,256 |
Total current assets | 478,307 | 514,706 |
Other assets: | ' | ' |
Equipment, net of depreciation | 465,026 | 369,775 |
Intangible assets, net of amortization | 1,964,287 | 2,053,572 |
Total other assets | 2,429,313 | 2,423,347 |
Total assets | 2,907,620 | 2,938,053 |
Current liabilities: | ' | ' |
Accounts payable | 82,688 | 77,028 |
Accrued liabilities | 160,242 | 258,006 |
Advance payment | ' | 155,497 |
Loan payable, current | 41,572 | 41,186 |
Current portion of notes payable | 500,000 | 590,000 |
Total current liabilities | 784,502 | 1,121,717 |
Long-term liabilities: | ' | ' |
Loan payable | 134,615 | 145,458 |
Revolving line of credit | 229,980 | ' |
Unsecured notes payable | 728,908 | ' |
Total long-term liabilities | 1,093,503 | 145,458 |
Total liabilities | 1,878,005 | 1,267,175 |
Commitments and contingencies | ' | ' |
Stockholders' equity: | ' | ' |
Preferred stock value | 93 | 101 |
Common stock value | 827 | 808 |
Additional paid-in capital | 9,247,645 | 8,483,727 |
Accumulated deficit during development stage | 8,218,950 | 6,813,758 |
Total stockholders' equity | 1,029,615 | 1,670,878 |
Total liabilities and stockholders' equity | $2,907,620 | $2,938,053 |
BALANCE_SHEETS_Parenthetical
BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 4,500,000 | 4,500,000 |
Preferred Stock, Issued | 927,915 | 1,005,648 |
Common Stock, Par Value | $0.00 | $0.00 |
Common Stock, Shares Authorized | 20,000,000 | 20,000,000 |
Common Stock, Issued | 8,271,398 | 8,082,000 |
Preferred Series A | ' | ' |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 600,000 | 600,000 |
Preferred Stock, Issued | 0 | 0 |
Liquidation preference | $0 | $0 |
Preferred Series B | ' | ' |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 1,500,000 | 1,500,000 |
Preferred Stock, Issued | 101,935 | 177,000 |
Liquidation preference | 243,729 | 416,227 |
Preferred Series C | ' | ' |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 760,000 | 760,000 |
Preferred Stock, Issued | 45,000 | 101,000 |
Liquidation preference | 101,875 | 224,668 |
Preferred Series D | ' | ' |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Shares Authorized | 1,500,000 | 1,500,000 |
Preferred Stock, Issued | 780,980 | 727,648 |
Liquidation preference | $2,578,681 | $2,403,691 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 36 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Income Statement | ' | ' | ' |
Equipment sales | $7,445 | $19,200 | $451,053 |
Service revenue | 12,900 | ' | 37,900 |
Other revenue | ' | ' | 51,551 |
Total revenue | 20,345 | 19,200 | 540,504 |
Costs of goods sold | 9,140 | 12,125 | 330,397 |
Gross profit | 11,205 | 7,075 | 210,107 |
Expenses: | ' | ' | ' |
Selling, general and administrative | 805,004 | 736,566 | 6,119,306 |
Impairment of goodwill | 390,659 | ' | 390,659 |
Research and development | 99,769 | 71,626 | 988,639 |
Total expenses | 1,295,432 | 808,192 | 7,498,604 |
Loss from operations | -1,284,227 | -801,117 | -7,288,497 |
Other Income and Expense: | ' | ' | ' |
Interest income | 72 | 641 | 7,297 |
Interest expense | -60,096 | -15,889 | -513,056 |
Total other income and expense | -60,024 | -15,248 | -505,759 |
Loss before income taxes | -1,344,251 | -816,365 | -7,794,256 |
Income taxes | -25 | ' | -356 |
Net loss | -1,344,276 | -816,365 | -7,794,612 |
Preferred stock cumulative dividend | 38,548 | 98,942 | 464,197 |
Net loss available to common stockholders | ($1,382,824) | ($915,307) | ($8,258,809) |
Net loss per common share basic and diluted | ($0.17) | ($0.48) | ($2.26) |
Weighted average shares outstanding basic and diluted | 8,264,992 | 1,900,000 | 3,657,424 |
CONSOLIDATED_STATEMENT_OF_CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | 3 Months Ended | 36 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' | ' |
Net loss | ($1,344,276) | ($816,365) | ($7,794,612) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' | ' |
Depreciation expense | 21,775 | 13,034 | 99,245 |
Amortization of intangible asset | 89,285 | 89,285 | 535,713 |
Amortization of discount on notes payable | 21,086 | ' | 21,086 |
Impairment of goodwill | 390,659 | ' | 390,659 |
Bad debt expense | ' | ' | 3,500 |
Stock-based compensation and other non-cash expense | 129,408 | 19,322 | 1,016,297 |
Changes in operating assets and liabilities | ' | ' | ' |
Decrease (increase) in receivables | -1,145 | 11,251 | -23,345 |
Increase in prepaid and other current assets | -7,056 | -48 | -87,942 |
Increase in inventory | -119,236 | -13,891 | -265,354 |
(Decrease) increase in accounts payable | -23,080 | 87,819 | 53,948 |
(Decrease) increase in accrued liabilities | -145,158 | 16,620 | -73,845 |
Cash used in operating activities | -987,738 | -592,973 | -6,124,650 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' | ' |
Purchases of property and equipment | 13,772 | 6,276 | 379,204 |
Cash from acquisition of subsidiary | 3,355 | ' | 3,355 |
Acquisition of business | ' | ' | 2,500,000 |
Cash used in investing activities | -10,417 | -6,276 | -2,875,849 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' | ' |
Proceeds from advance payment | ' | ' | 73,359 |
Proceeds from issuance of unsecured notes payable | 1,000,000 | ' | 1,090,000 |
Proceeds from issuance of senior secured notes payable | ' | ' | 2,500,000 |
Repayment of senior secured notes payable | ' | ' | 1,750,018 |
Proceeds from issuance of senior subordinated note payable | ' | ' | 1,000,000 |
Repayment of senior subordinated notes payable | 250,000 | ' | 750,000 |
Proceeds from issuance of common shares | ' | ' | 4,000 |
Proceeds from exercise of options | ' | ' | 300,000 |
Proceeds from issuance of preferred shares, net | 153,996 | ' | 6,522,726 |
Proceeds from loan payable | ' | ' | 142,290 |
Repayment of loan payable | 10,457 | 6,737 | 49,610 |
Cash provided by (used in) financing activities | 893,539 | -6,737 | 9,082,747 |
Net change in cash and cash equivalents | -104,616 | -605,986 | 82,248 |
Cash and cash equivalents, beginning of period | 186,864 | 1,027,475 | ' |
Cash and cash equivalents, end of period | $82,248 | $421,489 | $82,248 |
Principal_Business_Activities
Principal Business Activities | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Principal Business Activities | ' |
1. PRINCIPAL BUSINESS ACTIVITIES: | |
Organization and Business - Heatwurx, Inc., a Delaware corporation (“Heatwurx,” or the “Company”), is a development stage, asphalt repair equipment and technology company. Heatwurx was incorporated on March 29, 2011 as Heatwurxaq, Inc. and subsequently changed its name to Heatwurx, Inc. on April 15, 2011. On January 1, 2014 Heatwurx acquired Dr. Pave, LLC a service company offering asphalt repair and restoration. (Note 5) | |
Development Stage - From the date of incorporation, the Company has been in the development stage and therefore is classified as a development stage company. |
Basis_of_Presentation_and_Summ
Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Basis of Presentation and Summary of Significant Accounting Policies: | ' |
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: | |
Basis of Presentation - These unaudited interim consolidated financial statements and related notes are presented in accordance with the accounting principles generally accepted in the United States (“U.S. GAAP”). Accordingly, they do not include all disclosures required in the annual financial statements by U.S. GAAP. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments considered necessary to present fairly in all material respects the financial position as of March 31, 2014. | |
These financial statements should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2013, and have been prepared on a consistent basis with the accounting policies described in Note 2 - Summary of Significant Accounting Policies of the Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. Our accounting policies did not change in the first three months of 2014. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any future period. | |
The Company’s unaudited interim consolidated financial statements include Dr. Pave, LLC a wholly-owned subsidiary. All intercompany investments, accounts and transactions have been eliminated. | |
The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. | |
The Company also faces certain risks and uncertainties which are present in many emerging companies regarding product development, future profitability, ability to obtain future capital, protection of patents and property rights, competition, rapid technological change, government regulations, recruiting and retaining key personnel, and third party manufacturing organizations. | |
To date we have relied exclusively on private placements with a small group of investors to finance our business and operations. We have had little revenue since our inception. For the three months ended March 31, 2014, the Company incurred a net loss of approximately $1,344,000 and utilized approximately $988,000 in cash flows from operating activities. The Company had cash on hand of approximately $82,000 as of March 31, 2014. Successful completion of the Company’s development program and its transition to profitable operations is dependent upon obtaining additional financing adequate to fulfill its development and commercialization activities, and achieve a level of revenues adequate to support the Company’s cost structure. Many of the Company’s objectives to establish profitable business operations rely upon the occurrence of events outside its control; there is no assurance that the Company will be successful in accomplishing these objectives. We cannot assure that additional debt, equity or other funding will be available to us on acceptable terms, if at all. If we fail to obtain additional funding when needed, we would be forced to scale back, or terminate our operations, or seek to merge with or be acquired by another company. | |
Management anticipates that the Company will require additional funds to continue operations. As of March 31, 2014, we had approximately $82,000 cash on hand and were spending approximately $250,000 per month, of which only a very small amount was satisfied by revenues. The amount of cash on hand is not adequate to meet our operating expenses over the next twelve months. The Company raised $570,000 in April 2014 in relation to a $3,000,000 private debt offering commenced in March 2014. | |
The issues described above raise substantial doubt about the Company’s ability to continue as a going concern. Although we have commenced a new $3,000,000 debt offering and we have a total of approximately $2,157,000 remaining to be raised under our Series D preferred stock offering, which closes May 31, 2014, we cannot guarantee we will be able to raise the entire offering amounts, if any. We are solely reliant on raising additional capital in order to maintain our current operations. To date we have been able to raise debt and equity financing through the assistance of a small number of our investors who have been substantial participants in our debt and equity offerings since our formation. If these investors choose not to assist us with our capital raising initiatives in the future, we do not expect that we would be able to obtain any alternative forms of financing at this time and we would not be able to continue to satisfy our current or long term obligations. Based upon our current monthly spend we anticipate the need to raise at least $3,000,000 to meet our cash flow requirements for the next twelve months. If we successfully raise $3,000,000 in the private debt offering, we believe the proceeds we will receive and anticipated revenues from equipment sales and restoration services will be sufficient to fund our operations, including our expected capital expenditures, through the next twelve months. Without these additional funds, we will be required to reduce operations, curtail any future growth opportunities, cease operations all together, or seek to merge with or be acquired by another company. | |
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be different should the Company be unable to continue as a going concern. | |
Recent Accounting Pronouncements - From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to be material to our financial statements upon adoption. |
Property_and_Equipment_Note
Property and Equipment, Note | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Notes | ' | |||||
Property and Equipment, Note | ' | |||||
3. PROPERTY AND EQUIPMENT: | ||||||
A summary of the cost of property and equipment, by component, and the related accumulated depreciation is as follows: | ||||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
(unaudited) | ||||||
Office furniture and equipment | $ | 27,205 | $ | 20,562 | ||
Demo and service equipment | 541,228 | 426,336 | ||||
568,433 | 446,898 | |||||
Accumulated depreciation | -103,407 | -77,123 | ||||
$ | 465,026 | $ | 369,775 | |||
Depreciation expense was $21,775 and $13,034 for the three months ended March 31, 2014 and March 31, 2013, respectively. |
Asset_Purchase_Agreement_Note
Asset Purchase Agreement, Note | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Asset Purchase Agreement, Note | ' |
4. ASSET PURCHASE AGREEMENT: | |
On April 15, 2011, the Company entered into an Asset Purchase Agreement with an individual who is a founder and a current stockholder. Pursuant to the agreement, the Company purchased the related business and activities of the design, manufacture and distribution of asphalt repair machinery under the Heatwurx brand. The total purchase price was $2,500,000. The purchase price was paid in a $1,500,000 cash payment and the issuance of a senior subordinated note to the seller in the amount of $1,000,000. (Note 6) | |
The business essentially consisted of the investment in research and development of the technology, the patents applied for as a result of the research and development activities and certain distribution relationships that were in process, but not finalized as of the acquisition date. Collectively, these investments constitute the in-process research and development we refer to as the “asphalt preservation and repair solution.” The Company capitalized $2,500,000 of in-process research and development related to this asphalt preservation and repair solution. As of October 1, 2012, in-process research and development is now classified as developed technology and amortized over its estimated useful life of seven years. The initial estimated fair value of the in-process research and development was determined using the income approach. Under the income approach, the expected future cash flows from the asset are estimated and discounted to its net present value at an appropriate risk-adjusted rate of return. The Company performed its annual impairment analysis in October of 2013. The Company used the Relief-from-Royalty method. The Company believes that is the most appropriate method for valuing the developed technology as it is a revenue generating technology. As of March 31, 2014, our developed technology intangible asset had a value of $1,964,287, net of accumulated amortization of $535,713. Amortization expense for the three months ended March 31, 2014 and 2013 was $89,285. | |
In conjunction with the Asset Purchase Agreement, the Company granted 200,000 performance stock options to a founder of the Company with an exercise price of $0.40 per share and a term of seven years. Following the effectiveness of the 7 for 1 stock split that was completed in October 2011, the 200,000 performance stock options were exchanged for 1,400,000 performance stock options with an exercise price of $0.057 per share. As of March 31, 2014 there is no expectation that these performance stock options will vest. |
Acquisition_Note
Acquisition, Note | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Acquisition, Note | ' |
5. ACQUISITION | |
On January 7, 2014, the Company entered into an Agreement and Plan of Reorganization (the “Acquisition Agreement”) dated January 8, 2014 with Dr. Pave, LLC, a California limited liability company (“Dr. Pave”). Dr. Pave was controlled by David Dworsky, the Chief Executive Officer of the Company. The acquisition of Dr. Pave gives the Company the immediate ability to provide service work to municipalities and other end purchasers of the Heatwurx equipment. By performing the service work, management of the Company believes that it will assist the Company in generating purchase interest for the Heatwurx equipment as well as possibly open other revenue opportunities such as franchising the service business. The Company acquired all of the outstanding membership interests in Dr. Pave for 58,333 shares of common stock of the Company at a value of $3.00 per share for consideration in the amount of $175,000. The consideration included the issuance of 41,668 shares to Dworsky Partners, LLC, an entity in which David Dworsky owned 80% of the ownership interest, and 3,333 shares to Reginald Greenslade, one of the Company’s directors. As a result of the acquisition, which closed on January 8, 2014, Dr. Pave became a wholly owned subsidiary of the Company. Dr. Pave is managed by David Dworsky and Justin Yorke, a shareholder of the Company. The parties to the Acquisition Agreement established the effective date of the closing of the transaction for tax and accounting purposes as 8:00 a.m. on January 1, 2014. | |
The securities offered and sold in the above transactions have not been and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. | |
As of January 1, 2014, Dr. Pave had net liabilities of $215,659 assumed by the Company; in addition to the consideration of 58,333 shares of common stock valued at $175,000. The total consideration paid in the acquisition of Dr. Pave resulted in goodwill in the amount of $390,659. The Company determined that the goodwill was immediately impaired as of the acquisition date based on the lack of service revenue for the prior year. An impairment of goodwill from the acquisition in the amount of $390,659, was recorded as an operating expense in the income statement for the quarter ended March 31, 2014. |
Notes_Payable_Note
Notes Payable, Note | 3 Months Ended | |
Mar. 31, 2014 | ||
Notes | ' | |
Notes Payable, Note | ' | |
6. NOTES PAYABLE: | ||
Unsecured Notes Payable - The Company issued senior unsecured notes payable totaling $90,000 on December 11, 2013. The notes bear interest at a rate of 12% per annum. Interest is payable monthly on the first day of each month. The principal amount and all then-accrued and unpaid interest is payable on June 11, 2014. | ||
On January 6, 2014, the Company commenced a non-public offering of notes and warrants of up to $1,000,000. The promissory notes will bear interest at 12% per annum payable monthly, with principal and unpaid interest due and payable on January 6, 2016. As additional consideration for a lender to enter into the Loan Agreement, the Company has agreed to issue to each lender one common stock purchase warrant for each $3.00 loaned to the Company. The Warrants expire three years following the date of issuance and may not be offered for sale, sold, transferred or assigned without the consent of the Company. The three-year warrants will be exercisable immediately at $3.00 per share. | ||
On February 28, 2014, the Company closed its $1,000,000 debt financing. The total notes issued were in the aggregate principal amount of $850,000 and were issued with an aggregate of 283,329 warrants to the investors. The warrants are detachable and exercisable immediately. The Company allocated the fair value of the warrants in the amount of $248,129 as a discount on notes payable which will be amortized over the term of the notes to interest expense in the income statement. The Company recognized amortization of discount on notes payable in interest expense of $20,348 during the first quarter of 2014. | ||
On March 1, 2014, the Company commenced a similar non-public offering of notes and warrants up to $3,000,000 which is intended to remain open until December 31, 2014, unless terminated sooner at the option of the Company before all of the notes are sold. The promissory notes will bear interest at 12% per annum payable monthly, with principal and unpaid interest due and payable on January 6, 2016. Persons holding promissory notes issued by the Company in prior offerings may convert these notes into the notes and warrants being offered in this new offering. Each lender in the offering will receive one warrant for each $3.00 loaned. The three-year warrants will be exercisable immediately at $3.00 per share. As of March 31, 2014, the Company issued notes in the aggregate principal amount of $150,000 and were issued with an aggregate of 50,000 warrants to the investors. The warrants are detachable and exercisable immediately. The Company allocated the fair value of the warrants in the amount of $44,049 as a discount on notes payable which will be amortized over the term of the notes to interest expense in the income statement. The Company recognized amortization of discount on notes payable in interest expense of $738 during the first quarter of 2014. | ||
Revolving line of credit | ||
The Company assumed a revolving line of credit entered into by Dr. Pave at its inception in July 2013 in the amount of $229,980. The balance on the line of credit bears interest at a rate of 12% per annum. Interest is payable monthly on the first day of each month. The principal amount and all then-accrued and unpaid interest is payable on August 15, 2015. Interest on the line of credit totaling $2,344 was outstanding at March 31, 2014. | ||
Secured Notes Payable - The Company assumed secured notes payable issued by Dr. Pave on December 11, 2013 totaling $160,000. The notes bear interest at a rate of 12% per annum. Interest is payable monthly on the first day of each month. The principal amount and all then-accrued and unpaid interest is payable on June 11, 2014. | ||
Interest on the secured notes payable totaling $1,631 was outstanding at March 31, 2014. | ||
Senior Subordinated Note Payable - The Company issued a senior subordinated note payable in the amount of $1,000,000 on April 15, 2011 to Richard Giles, a founder, stockholder and former director of the Company. The note bears interest at a rate of 6% per annum and matures on April 15, 2014. The holder of the senior subordinated note agreed to subordinate to the lenders of the senior secured notes his security interest in our assets granted under the Subordinated Security Agreement dated April 15, 2011. Mandatory principal payments of $500,000 were made in 2013. As of March 31, 2014, the note was subject to a mandatory principal payment of $250,000 on April 15, 2014. The required principal payment of $250,000 was made on April 15, 2014. | ||
Interest on the senior subordinated note payable totaling $625 was outstanding at March 31, 2014. See Note 12 for further discussion of the Senior Subordinated Note Payable. | ||
Loan Payable - In September 2012, the Company financed the purchase of equipment used for transport and demonstration of our equipment. The note, in the original amount of $142,290, bears interest at a rate of 2.6% per annum and matures on September 4, 2017. In August 2013, the Company financed the purchase of a truck to transport our equipment used in demonstrations. The loan, in the amount of $83,507, bears interest at a rate of 6.1% per annum and matures on December 1, 2018. | ||
As of March 31, 2014, the loans are subject to mandatory principal payments as follows: | ||
Year ending December 31, | Payments | |
2014 | $530,729 | |
2015 | 273,981 | |
2016 | 1,045,725 | |
2017 | 37,361 | |
2018 | 18,371 | |
Total principal payments | $1,906,167 | |
Stockholders_Equity_Note
Stockholders' Equity, Note | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Notes | ' | |||
Stockholders' Equity, Note | ' | |||
7. STOCKHOLDERS’ EQUITY | ||||
Common Stock - The Company has authorized 20,000,000 common shares with a $0.0001 par value. There were 8,271,398 and 8,082,000 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively. | ||||
Preferred Stock - The Company has authorized 4,500,000 shares of Preferred Stock with a $0.0001 par value. As holders of any series of preferred stock convert into common shares the preferred shares are no longer outstanding and become available for reissuance. As of March 31, 2014 and December 31, 2013, there were 927,915 and 1,005,648 preferred shares outstanding, respectively. | ||||
Series B Preferred Stock - As of March 31, 2014 there were 101,935 shares of Series B Preferred Stock outstanding. | ||||
During the three months ended March 31, 2014; 75,065 Series B preferred shares were converted to common shares. The Series B Preferred Stock ranks senior in liquidation and dividend preferences to the Company’s common stock. Holders of Series B Preferred Stock accrue dividends at the rate per annum of $0.16 per share. The conversion of Series B preferred shares to common shares resulted in a release of $26,488 in accumulated dividends during the three months ended March 31, 2014. At March 31, 2014, Series B Preferred Stock had dividends accumulated of $39,859. No dividends have been declared, therefore there are no amounts accrued on the balance sheet. | ||||
The holders of the Series B Preferred Stock have conversion rights equivalent to such number of fully paid and non-assessable shares of common stock as is determined by dividing the Series B original issue price of $2.00 by the then applicable conversion price. The conversion ratio is subject to customary anti-dilution adjustments, including in the event that the Company issues equity securities at a price equivalent to or less than the conversion price in effect immediately prior to such issue. | ||||
The holders of Series B Preferred Stock have a liquidation preference over the holders of the Company’s common stock equivalent to the purchase price per share of the Series B Preferred Stock plus any accrued and unpaid dividends, whether or not declared, on the Series B Preferred Stock. A liquidation would be deemed to occur upon the happening of customary events, including transfer of all or substantially all of the Company’s common stock or assets or a merger, or consolidation. The Company believes that such liquidation events are within its control and therefore the Company has classified the Series B Preferred Stock in stockholders’ equity. | ||||
The holders of Series B Preferred Stock vote together as a single class with the holders of the Company’s common stock on all action to be taken by the Company’s stockholders. Each share of Series B Preferred Stock entitles the holder to the number of votes equal to the number of shares of common stock into which the shares of the Series B Preferred Stock are convertible as of the record date for determining stockholders entitled to vote on such matter. | ||||
Series C Preferred Stock - As of March 31, 2014 there were 45,000 shares of Series C Preferred Stock outstanding. | ||||
During the three months ended March 31, 2014; 56,000 Series C preferred shares were converted to common shares. The Series C Preferred Stock ranks senior in liquidation and dividend preferences to the Company’s common stock. Holders of Series C Preferred Stock accrue dividends at the rate per annum of $0.16 per share. Dividends of $6,999 were paid upon the conversion of Series C preferred shares to common shares. At March 31, 2014, Series C Preferred Stock had dividends accumulated of $17,574. As dividends are accrued and payable quarterly on the Series C Preferred Stock, the Company has dividends payable of $17,574 included in current liabilities as of March 31, 2014. | ||||
The holders of the Series C Preferred Stock have conversion rights equivalent to such number of fully paid and non-assessable shares of common stock as is determined by dividing the Series C original issue price of $2.00 by the then applicable conversion price. The conversion ratio is subject to customary anti-dilution adjustments, including in the event that the Company issues equity securities at a price equivalent to or less than the conversion price in effect immediately prior to such issue. | ||||
The holders of Series C Preferred Stock have a liquidation preference over the holders of the Company’s common stock equivalent to the purchase price per share of the Series C Preferred Stock plus any accrued and unpaid dividends, whether or not declared, on the Series C Preferred Stock. A liquidation would be deemed to occur upon the happening of customary events, including transfer of all or substantially all of the Company’s common stock or assets or a merger, or consolidation. The Company believes that such liquidation events are within its control and therefore the Company has classified the Series C Preferred Stock in stockholders’ equity. | ||||
The holders of Series C Preferred Stock vote together as a single class with the holders of the Company’s common stock on all action to be taken by the Company’s stockholders. Each share of Series C Preferred Stock entitles the holder to the number of votes equal to the number of shares of common stock into which the shares of the Series C Preferred Stock are convertible as of the record date for determining stockholders entitled to vote on such matter. | ||||
Series D Preferred Stock - As of March 31, 2014 there were 780,980 shares of Series D Preferred Stock outstanding. | ||||
In October 2013, the Company initiated a follow-on Series D Preferred stock offering to sell the remaining 772,352 units at $3.00 per unit for up to $2,317,056 gross proceeds. The offering includes an over-allotment of 1,000,000 units for an additional $3,000,000 in potential gross proceeds. The offering term was extended and ends May 30, 2014. The terms of the follow-on Series D preferred stock offering are the same as the original Series D preferred stock offering. | ||||
In January 2014, the Company issued 53,332 units sold at $3.00 per unit for gross proceeds of $159,996. The Company paid share issuance costs in the amount of $6,000. Each unit in this offering consists of one share of the Company’s Series D Preferred Stock and one-half warrant, with each whole warrant exercisable at $3.00 per share. The Company issued warrants to purchase 26,666 shares of common stock outstanding. The warrants will be exercisable by the holders at any time on or after the issuance date of the warrants through and including one year from their respective issuance dates. | ||||
Holders of Series D Preferred Stock accrue dividends at the rate per annum of $0.24 per share, payable on a quarterly basis. As dividends are accrued and payable quarterly on the Series D Preferred Stock, the Company paid dividends of $44,018 during the period ended March 31, 2014. As of March 31, 2013 the Company had dividends payable in accrued expenses of $45,665. | ||||
The holders of the Series D Preferred Stock have conversion rights equivalent to such number of fully paid and non-assessable shares of common stock as is determined by dividing the Series D original issue price of $3.00 by the then applicable conversion price. Each Series D Share will convert into one share of our common stock at any time at the option of the holder of the Series D Shares or will be converted at the option of the Company at any time the trading price of our common stock is at least $4.50 per share for ten consecutive trading days. The conversion ratio is subject to anti-dilution adjustments, including in the event that the Company issues equity securities at a price equivalent to or less than the conversion price in effect immediately prior to such issue. We have determined that there is a beneficial conversion feature (“BCF”). The calculated value as of the commitment date of the BCF was $13,347, which represents the difference between the effective conversion price and the stated conversion price multiplied by the total number of shares which may be converted. We have recorded this amount as a deemed dividend as of the date of issuance, as the Series D Preferred Stock is immediately convertible. This amount was recorded as a charge against our accumulated deficit in our accompanying balance sheet. | ||||
The holders of Series D Preferred Stock have a liquidation preference over the holders of the Company’s common stock equivalent to the purchase price per share of the Series D Preferred Stock plus any accrued and unpaid dividends, whether or not declared, on the Series D Preferred Stock. A liquidation would be deemed to occur upon the happening of customary events, including transfer of all or substantially all of the Company’s common stock or assets or a merger, or consolidation. The Company believes that such liquidation events are within its control and therefore the Company has classified the Series D Preferred Stock in stockholders’ equity. | ||||
The holders of Series D Preferred Stock vote together as a single class with the holders of the Company’s common stock on all action to be taken by the Company’s stockholders. Each share of Series D Preferred Stock entitles the holder to the number of votes equal to the number of shares of common stock into which the shares of the Series D Preferred Stock are convertible as of the record date for determining stockholders entitled to vote on such matter. | ||||
Each unit includes one-half warrant. Each full warrant grants the right to purchase a share of the Company’s common stock and, as of March 31, 2014, there were warrants to purchase 390,490 shares of common stock outstanding. The warrants issued with the original Series D offering will be exercisable by the holders at any time on or after the issuance date of the warrants through and including October 1, 2014. The warrants issued with the follow-on Series D offering will be exercisable by the holders at any time on or after the issuance date of the warrants through and including one year from their respective issuance dates. | ||||
In addition, the Company agreed to use its best efforts to register the shares underlying the warrants issued in the follow-on Series D preferred stock offering and the original Series D preferred stock offering. The Company intends to file the registration statement not later than 90 days following the completion of the offering and will use its best efforts to maintain the effectiveness of the registration statement for the investors in this and the prior offering through December 31, 2015. | ||||
Treasury Stock Transaction | ||||
Effective January 26, 2012, two of our founders, including our former Chief Executive Officer, Mr. Larry Griffin, severed their ties with the Company upon execution of a settlement agreement with us. At the time of their departure from the Company, each of them returned 525,000 shares (10,050,000 total) of common stock to the Company for cancellation to assist the Company and provide for a better capitalization to all the investors, and sold their remaining shares to other private individuals with no proceeds going to the Company. The settlement agreement did not provide for payment by us or the founders. | ||||
Stock Options | ||||
Number of | Weighted | Weighted | ||
Options | Average | Average | ||
Exercise | Remaining | |||
Price | Life (Years) | |||
Balance, December 31, 2012 | 1,022,000 | $2.00 | ||
Granted | 410,000 | $2.76 | ||
Exercised | - | $ - | ||
Cancelled | -112,000 | $2.00 | ||
Balance, December 31, 2013 | 1,320,000 | $2.23 | 3.44 | |
Granted | 184,000 | $3.00 | ||
Exercised | - | $ - | ||
Cancelled | -100,000 | $2.00 | ||
Balance, March 31, 2014 | 1,404,000 | $2.35 | 3.62 | |
Exercisable, December 31, 2013 | 845,000 | $2.04 | ||
Exercisable, March 31, 2014 | 816,333 | $2.13 | ||
On January 13, 2014, the Board of Directors approved the grant of 94,000 options to employees of the Company, in accordance with the terms of the 2011 Equity Incentive Plan, as amended. One-third of the options vest immediately, with the remaining vesting over a 2 year period. The options have an exercise price of $3.00 per share, with an expiration date of five years from the grant date. | ||||
On January 16, 2014, the Board of Directors approved the grant of 40,000 options to the Company’s Directors for their 2013 service, in accordance with the terms of the 2011 Equity Incentive Plan, as amended. The options vest immediately and have an exercise price of $3.00 per share, with an expiration date of five years from the grant date. | ||||
On February 1, 2014, the Board of Directors approved the grant of 50,000 options to an employee of the Company, in accordance with the terms of the 2011 Equity Incentive Plan, as amended. The options vest ratably over a four year period. The options have an exercise price of $3.00 per share, with an expiration date of five years from the grant date. | ||||
The fair value of each stock option granted was estimated on the date of grant using the Black Scholes option pricing model with the following assumptions: | ||||
31-Mar-14 | ||||
Risk-free interest rate range | 1.49% - 1.66% | |||
Expected life | 5.0 years | |||
Vesting Period | 0 - 4 Years | |||
Expected volatility | 42% | |||
Expected dividend | - | |||
Fair value range of options at grant date | $1.156- $1.164 | |||
The Company recorded stock-based compensation expense of $129,408 and $19,322 during the three months ended March 31, 2014 and 2013, respectively. | ||||
As of March 31, 2014 there was $492,371 of unrecognized compensation expense related to the issuance of the stock options. | ||||
Performance Stock Options | ||||
There were no performance stock options granted during the three months ended March 31, 2014. | ||||
Number of | Weighted | |||
Options | Average | |||
Exercise | ||||
Price | ||||
Balance, December 31, 2012 | 1,440,000 | $0.11 | ||
Granted | - | $ - | ||
Exercised | - | $ - | ||
Cancelled | - | $ - | ||
Balance, March 31, 2014 and December 31, 2013 | 1,440,000 | $0.11 | ||
Exercisable, March 31, 2014 and December 31, 2013 | 40,000 | $2.00 | ||
See Note 4 for further discussion of the performance options. | ||||
Warrants | ||||
The Company issued 26,666 warrants in connection with the follow-on Series D unit offering discussed above. Each unit consisted of one share of Series D Preferred Stock and one-half warrant, with each whole warrant exercisable at $3.00 per share and grants the right to purchase a share of the Company’s common stock. | ||||
The Company issued 283,329 warrants in connection with the non-public offering of notes and warrants up to $1,000,000. The warrants expire three years from the date of issuance and are exercisable immediately at $3.00 per share. | ||||
The Company issued 50,000 warrants in connection with the non-public offering of notes and warrants up to $3,000,000. The warrants expire three years from the date of issuance and are exercisable immediately at $3.00 per share. | ||||
Number of | Weighted | Weighted | ||
Warrants | Average | Average | ||
Exercise | Remaining | |||
Price | Life (Years) | |||
Balance, December 31, 2013 | 363,824 | $3.00 | ||
Granted | 359,995 | $3.00 | ||
Exercised | - | $ - | ||
Cancelled | - | $ - | ||
Balance, March 31, 2014 | 723,819 | $3.00 | 1.6 | |
Net_Loss_Per_Common_Share_Note
Net Loss Per Common Share, Note | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Notes | ' | |||
Net Loss Per Common Share, Note | ' | |||
8. NET LOSS PER COMMON SHARE: | ||||
The Company computes loss per share of common stock using the two-class method required for participating securities. Our participating securities include all series of our convertible preferred stock. Undistributed earnings allocated to these participating securities are added to net loss in determining net loss attributable to common stockholders. Basic and Diluted loss per share are computed by dividing net loss attributable to common stockholder by the weighted-average number of shares of common stock outstanding. | ||||
Outstanding options were not included in the computation of diluted loss per share because the options' exercise price was greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive. | ||||
The calculation of the numerator and denominator for basic and diluted net loss per common share is as follows: | ||||
For the three months ended | For the period | |||
from March 29, | ||||
2011 (date of | ||||
inception) | ||||
through | ||||
March 31, | March 31, | |||
2014 | 2013 | 2014 | ||
Net Loss | ($1,344,276) | $ (816,365) | ($7,794,612) | |
Basic and diluted: | ||||
Preferred stock cumulative dividend - Series A | - | 9,863 | - | |
Preferred stock cumulative dividend - Series B (1) | -22,368 | 59,178 | 39,859 | |
Preferred stock cumulative dividend - Series C | 1,904 | 29,901 | 120,172 | |
Preferred stock cumulative dividend - Series D | 59,012 | - | 304,166 | |
Income applicable to preferred stockholders | 38,548 | 98,942 | 464,197 | |
Net loss applicable to common stockholders | ($1,382,824) | ($915,307) | ($8,258,809) | |
(1) Upon conversion of the Series B preferred stock into common stock, the holders of the Series B preferred stock were no longer entitled to the dividends recorded in the adjustment to net loss applicable to common shareholders in prior periods. As a result, current year reported dividends were adjusted downward to reflect this release of accumulated dividends. |
Commitments_and_Contingencies_
Commitments and Contingencies Note | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Commitments and Contingencies Note | ' |
9. COMMITMENTS AND CONTINGENCIES: | |
Lease Commitments - On July 18, 2012, the Company entered into a thirteen month lease for office space for our corporate headquarters located in Greenwood Village, Colorado. Under the terms of the lease agreement, the Company leased approximately 2,244 square feet of general office space. The lease term commenced on July 23, 2012 and continues through June 2014. | |
The Company also has a lease of warehouse and office space for our equipment and operations located in Gardena, CA. The lease term continues through July 2015. | |
Total rent expense for the three months ended March 31, 2014 and 2013 was $19,099 and $8,819, respectively. | |
The Company’s remaining commitment under its current lease terms through July 2015 is approximately $90,000. | |
Purchase Commitments - As of March 31, 2014, the Company’s outsourced manufacturing company has begun fabrication of our equipment resulting in a commitment to purchase the finished equipment totaling approximately $70,000. |
Related_Party_Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Related Party Transactions | ' |
10. RELATED PARTY TRANSACTIONS: | |
The Company has a consulting agreement and a Senior Subordinated note payable with Mr. Richard Giles, a founder, stockholder, and former director of the Company. During the three months ended March 31, 2014 the Company paid consulting fees of $37,400, senior subordinated debt payments of $250,000 in principal and $6,250 in interest. During the three months ended March 31, 2013 the Company paid consulting fees of $47,400 to Mr. Giles. | |
The Company issued 41,668 shares to Dworsky Partners, LLC, and entity in which David Dworsky owned 80% of the ownership interest, and 3,333 shares to Reginald Greenslade, one of the Company’s directors as part of the consideration in the acquisition of Dr. Pave. |
Supplemental_Cash_Flow_Informa
Supplemental Cash Flow Information | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Notes | ' | ||||||
Supplemental Cash Flow Information | ' | ||||||
11. SUPPLEMENTAL CASH FLOW INFORMATION: | |||||||
Three Months ended | For the period | ||||||
March 31, | from March 29, | ||||||
2011 (date of | |||||||
inception) | |||||||
through | |||||||
March 31, | |||||||
2014 | 2013 | 2014 | |||||
Cash paid for interest | $ | 39,116 | $ | 15,889 | $ | 487,345 | |
Cash paid for income taxes | $ | - | $ | - | $ | 200 | |
Series C Dividend payable in current liabilities | $ | 17,574 | $ | 79,073 | $ | 17,574 | |
Series D Dividend payable in current liabilities | $ | 45,665 | $ | - | $ | 45,665 | |
Non-Cash investing and financing transactions | |||||||
Repayment of senior secured notes payable with issuance of Series D preferred shares | $ | - | $ | - | $ | 749,982 | |
Financing the purchase of equipment under a 5 year loan agreement | $ | - | $ | - | $ | 83,507 | |
Beneficial conversion feature on warrants issued in conjunction with Series D preferred shares | $ | 13,347 | $ | - | $ | 190,076 | |
Shares issued in acquisition of Dr. Pave | $ | 175,000 | $ | - | $ | 175,000 | |
Subsequent_Events_Note
Subsequent Events, Note | 3 Months Ended |
Mar. 31, 2014 | |
Notes | ' |
Subsequent Events, Note | ' |
12. SUBSEQUENT EVENTS: | |
Debt Offering | |
In April 2014, the Company received $570,000 under the $3,000,000 debt offering and issued warrants to purchase 189,997 shares of our common stock. | |
Senior subordinate note payment | |
On April 15, 2014, the Company made the final required principal payment of $250,000 on the Senior Subordinated note payable. See Note 6 Notes Payable for further discussion. | |
Preferred stock conversion to common shares | |
As of April 15, 2014, the final payment of the Senior Subordinated note payable was a triggering event to create a mandatory conversion of all remaining Series B and Series C Preferred stock outstanding. As of April 15, 2014; 101,935 Series B preferred shares and 45,000 Series C preferred shares were converted into a total of 146,935 common shares subsequent to March 31, 2014. On April 29, 2014, 4,000 shares of Series D Preferred stock were voluntarily converted to 4,000 shares of common stock. As of May 14, 2014 there were 8,422,333 common shares outstanding. |
Basis_of_Presentation_and_Summ1
Basis of Presentation and Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Basis of Presentation | ' |
Basis of Presentation - These unaudited interim consolidated financial statements and related notes are presented in accordance with the accounting principles generally accepted in the United States (“U.S. GAAP”). Accordingly, they do not include all disclosures required in the annual financial statements by U.S. GAAP. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments considered necessary to present fairly in all material respects the financial position as of March 31, 2014. | |
These financial statements should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2013, and have been prepared on a consistent basis with the accounting policies described in Note 2 - Summary of Significant Accounting Policies of the Notes to Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. Our accounting policies did not change in the first three months of 2014. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any future period. | |
The Company’s unaudited interim consolidated financial statements include Dr. Pave, LLC a wholly-owned subsidiary. All intercompany investments, accounts and transactions have been eliminated. | |
The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. | |
The Company also faces certain risks and uncertainties which are present in many emerging companies regarding product development, future profitability, ability to obtain future capital, protection of patents and property rights, competition, rapid technological change, government regulations, recruiting and retaining key personnel, and third party manufacturing organizations. | |
To date we have relied exclusively on private placements with a small group of investors to finance our business and operations. We have had little revenue since our inception. For the three months ended March 31, 2014, the Company incurred a net loss of approximately $1,344,000 and utilized approximately $988,000 in cash flows from operating activities. The Company had cash on hand of approximately $82,000 as of March 31, 2014. Successful completion of the Company’s development program and its transition to profitable operations is dependent upon obtaining additional financing adequate to fulfill its development and commercialization activities, and achieve a level of revenues adequate to support the Company’s cost structure. Many of the Company’s objectives to establish profitable business operations rely upon the occurrence of events outside its control; there is no assurance that the Company will be successful in accomplishing these objectives. We cannot assure that additional debt, equity or other funding will be available to us on acceptable terms, if at all. If we fail to obtain additional funding when needed, we would be forced to scale back, or terminate our operations, or seek to merge with or be acquired by another company. | |
Management anticipates that the Company will require additional funds to continue operations. As of March 31, 2014, we had approximately $82,000 cash on hand and were spending approximately $250,000 per month, of which only a very small amount was satisfied by revenues. The amount of cash on hand is not adequate to meet our operating expenses over the next twelve months. The Company raised $570,000 in April 2014 in relation to a $3,000,000 private debt offering commenced in March 2014. | |
The issues described above raise substantial doubt about the Company’s ability to continue as a going concern. Although we have commenced a new $3,000,000 debt offering and we have a total of approximately $2,157,000 remaining to be raised under our Series D preferred stock offering, which closes May 31, 2014, we cannot guarantee we will be able to raise the entire offering amounts, if any. We are solely reliant on raising additional capital in order to maintain our current operations. To date we have been able to raise debt and equity financing through the assistance of a small number of our investors who have been substantial participants in our debt and equity offerings since our formation. If these investors choose not to assist us with our capital raising initiatives in the future, we do not expect that we would be able to obtain any alternative forms of financing at this time and we would not be able to continue to satisfy our current or long term obligations. Based upon our current monthly spend we anticipate the need to raise at least $3,000,000 to meet our cash flow requirements for the next twelve months. If we successfully raise $3,000,000 in the private debt offering, we believe the proceeds we will receive and anticipated revenues from equipment sales and restoration services will be sufficient to fund our operations, including our expected capital expenditures, through the next twelve months. Without these additional funds, we will be required to reduce operations, curtail any future growth opportunities, cease operations all together, or seek to merge with or be acquired by another company. | |
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be different should the Company be unable to continue as a going concern. |
Basis_of_Presentation_and_Summ2
Basis of Presentation and Summary of Significant Accounting Policies: Recent Accounting Pronouncements, Policy (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Policies | ' |
Recent Accounting Pronouncements, Policy | ' |
Recent Accounting Pronouncements - From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to be material to our financial statements upon adoption. |
Property_and_Equipment_Note_Su
Property and Equipment, Note: Summary of the cost of property and equipment (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
Tables/Schedules | ' | |||||
Summary of the cost of property and equipment | ' | |||||
March 31, | December 31, | |||||
2014 | 2013 | |||||
(unaudited) | ||||||
Office furniture and equipment | $ | 27,205 | $ | 20,562 | ||
Demo and service equipment | 541,228 | 426,336 | ||||
568,433 | 446,898 | |||||
Accumulated depreciation | -103,407 | -77,123 | ||||
$ | 465,026 | $ | 369,775 |
Notes_Payable_Note_Schedule_of
Notes Payable, Note: Schedule of Loan Payable (Tables) | 3 Months Ended | |
Mar. 31, 2014 | ||
Tables/Schedules | ' | |
Schedule of Loan Payable | ' | |
Year ending December 31, | Payments | |
2014 | $530,729 | |
2015 | 273,981 | |
2016 | 1,045,725 | |
2017 | 37,361 | |
2018 | 18,371 | |
Total principal payments | $1,906,167 |
Stockholders_Equity_Note_Sched
Stockholders' Equity, Note: Schedule of Stock Option Activity (Tables) | 3 Months Ended | |||
Mar. 31, 2014 | ||||
Tables/Schedules | ' | |||
Schedule of Stock Option Activity | ' | |||
Number of | Weighted | Weighted | ||
Options | Average | Average | ||
Exercise | Remaining | |||
Price | Life (Years) | |||
Balance, December 31, 2012 | 1,022,000 | $2.00 | ||
Granted | 410,000 | $2.76 | ||
Exercised | - | $ - | ||
Cancelled | -112,000 | $2.00 | ||
Balance, December 31, 2013 | 1,320,000 | $2.23 | 3.44 | |
Granted | 184,000 | $3.00 | ||
Exercised | - | $ - | ||
Cancelled | -100,000 | $2.00 | ||
Balance, March 31, 2014 | 1,404,000 | $2.35 | 3.62 | |
Exercisable, December 31, 2013 | 845,000 | $2.04 | ||
Exercisable, March 31, 2014 | 816,333 | $2.13 |
Stockholders_Equity_Note_Sched1
Stockholders' Equity, Note: Schedule of Stock Option Valuation Assumptions (Tables) | 3 Months Ended | ||
Mar. 31, 2014 | |||
Tables/Schedules | ' | ||
Schedule of Stock Option Valuation Assumptions | ' | ||
31-Mar-14 | |||
Risk-free interest rate range | 1.49% - 1.66% | ||
Expected life | 5.0 years | ||
Vesting Period | 0 - 4 Years | ||
Expected volatility | 42% | ||
Expected dividend | - | ||
Fair value range of options at grant date | $1.156- $1.164 |
Supplemental_Cash_Flow_Informa1
Supplemental Cash Flow Information: Schedule of Cash Flow, Supplemental Disclosures (Tables) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Tables/Schedules | ' | ||||||
Schedule of Cash Flow, Supplemental Disclosures | ' | ||||||
Three Months ended | For the period | ||||||
March 31, | from March 29, | ||||||
2011 (date of | |||||||
inception) | |||||||
through | |||||||
March 31, | |||||||
2014 | 2013 | 2014 | |||||
Cash paid for interest | $ | 39,116 | $ | 15,889 | $ | 487,345 | |
Cash paid for income taxes | $ | - | $ | - | $ | 200 | |
Series C Dividend payable in current liabilities | $ | 17,574 | $ | 79,073 | $ | 17,574 | |
Series D Dividend payable in current liabilities | $ | 45,665 | $ | - | $ | 45,665 | |
Non-Cash investing and financing transactions | |||||||
Repayment of senior secured notes payable with issuance of Series D preferred shares | $ | - | $ | - | $ | 749,982 | |
Financing the purchase of equipment under a 5 year loan agreement | $ | - | $ | - | $ | 83,507 | |
Beneficial conversion feature on warrants issued in conjunction with Series D preferred shares | $ | 13,347 | $ | - | $ | 190,076 | |
Shares issued in acquisition of Dr. Pave | $ | 175,000 | $ | - | $ | 175,000 |
Basis_of_Presentation_and_Summ3
Basis of Presentation and Summary of Significant Accounting Policies: Basis of Presentation (Details) (USD $) | 3 Months Ended | 36 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Details | ' | ' | ' |
Net loss during period | $1,344,276 | $816,365 | $7,794,612 |
Cash flows utilized in operating activities | 988,000 | ' | ' |
Cash on hand | $82,000 | ' | $82,000 |
Property_and_Equipment_Note_Su1
Property and Equipment, Note: Summary of the cost of property and equipment (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment, Gross | $568,433 | $446,898 |
Accumulated depreciation | -103,407 | -77,123 |
Equipment, net of depreciation | 465,026 | 369,775 |
Computer Equipment | ' | ' |
Property, Plant and Equipment, Gross | 27,205 | 20,562 |
Demo and service equipment | ' | ' |
Property, Plant and Equipment, Gross | $541,228 | $426,336 |
Property_and_Equipment_Note_De
Property and Equipment, Note (Details) (USD $) | 3 Months Ended | 36 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Details | ' | ' | ' |
Depreciation expense | $21,775 | $13,034 | $99,245 |
Asset_Purchase_Agreement_Note_
Asset Purchase Agreement, Note (Details) (Asset Purchase Agreement, USD $) | 3 Months Ended | |
Mar. 31, 2014 | Apr. 15, 2011 | |
Asset Purchase Agreement | ' | ' |
Total purchase price | ' | $2,500,000 |
Cash payment | ' | 1,500,000 |
Issuance of senior subordinated note (value) | ' | 1,000,000 |
Developed technology intangible asset (value) | 1,964,287 | ' |
Developed technology intangible asset (accumulated amortizaton) | 535,713 | ' |
Developed technology intangible asset (amortization expense) | $89,285 | ' |
Performance stock options granted | ' | 1,400,000 |
Performance stock options, exercise price | ' | $0.06 |
Acquisition_Note_Details
Acquisition, Note (Details) (USD $) | 3 Months Ended | 36 Months Ended | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Jan. 02, 2014 | |
Agreement and Plan of Reorganization | Agreement and Plan of Reorganization | |||
Common stock issued for acquisition | ' | ' | 58,333 | ' |
Consideration for common stock issued for acquisition | ' | ' | $175,000 | ' |
Net liabilities assumed in acquisition | ' | ' | ' | 215,659 |
Total consideration in acquisition resulting in goodwill | ' | ' | ' | 390,659 |
Impairment of goodwill, operating expense | $390,659 | $390,659 | $390,659 | ' |
Notes_Payable_Note_Details
Notes Payable, Note (Details) (USD $) | Mar. 31, 2014 | Aug. 30, 2013 | Sep. 30, 2012 | Dec. 11, 2013 | Mar. 31, 2014 | Feb. 28, 2014 | Jan. 06, 2014 | Mar. 31, 2014 | Mar. 01, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 11, 2013 | Mar. 31, 2014 | Apr. 15, 2011 |
Loan Payable Due | Loan Payable Due | Senior unsecured Notes Payable | Notes and warrants | Notes and warrants | Notes and warrants | Notes and warrants(2) | Notes and warrants(2) | Revolving line of credit | Secured Notes Payable | Secured Notes Payable | Secured Notes Payable | Senior Subordinated Note Payable | Senior Subordinated Note Payable | ||
Total amount of notes outstanding | ' | ' | $142,290 | $90,000 | ' | $850,000 | ' | $150,000 | ' | ' | ' | ' | ' | ' | $1,000,000 |
Note interest rate | ' | ' | 2.60% | 12.00% | ' | ' | 12.00% | ' | 12.00% | ' | ' | ' | 12.00% | ' | 6.00% |
Offering amount of notes and warrants | ' | ' | ' | ' | ' | ' | 1,000,000 | ' | 3,000,000 | ' | ' | ' | ' | ' | ' |
Amortization of discount on notes payable | ' | ' | ' | ' | 20,348 | ' | ' | 738 | ' | ' | ' | ' | ' | ' | ' |
Discount on notes payable | ' | ' | ' | ' | ' | ' | ' | 44,049 | ' | ' | ' | ' | ' | ' | ' |
Lin of credit | 229,980 | ' | ' | ' | ' | ' | ' | ' | ' | 229,980 | ' | ' | ' | ' | ' |
Interest payable | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,344 | ' | 1,631 | ' | 625 | ' |
Notes payable assumed | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 160,000 | ' | ' | ' | ' |
Loan (financed purchase of truck) | ' | $83,507 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Notes_Payable_Note_Schedule_of1
Notes Payable, Note: Schedule of Loan Payable (Details) (Loan Payable Due, USD $) | Mar. 31, 2014 |
Loan Payable Due | ' |
Mandatory principal loan payments (2014) | $530,729 |
Mandatory principal loan payments (2015) | 273,981 |
Mandatory principal loan payments (2016) | 1,045,725 |
Mandatory principal loan payments (2017) | 37,361 |
Mandatory principal loan payments (2018) | 18,371 |
Total principal payments | $1,906,167 |
Stockholders_Equity_Note_Detai
Stockholders' Equity, Note (Details) (USD $) | 3 Months Ended | 12 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 3 Months Ended | ||||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2014 | Mar. 31, 2014 | Jan. 31, 2014 | Mar. 31, 2014 | Oct. 31, 2013 | Jan. 26, 2012 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | |
Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Series D Preferred Stock | Series D Preferred Stock | Treasury Stock Transaction | 2011 Equity Incentive Plan, Employees | 2011 Equity Incentive Plan, Directors | 2011 Equity Incentive Plan, Employee | Series D Unit offering | Non-public offering of notes and warrants | Non-public offering of notes and warrants(2) | |||||
Common stock authorized | 20,000,000 | ' | 20,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common shares issued and outstanding | 8,271,398 | ' | 8,082,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Preferred stock authorized | 4,500,000 | ' | 4,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Preferred stock outstanding | 927,915 | ' | 1,005,648 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares outstanding | ' | ' | ' | ' | 101,935 | 45,000 | ' | 780,980 | ' | ' | ' | ' | ' | ' | ' | ' |
Preferred shares converted to common shares | ' | ' | ' | ' | 75,065 | 56,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Annual dividend rate | ' | ' | ' | ' | $0.16 | $0.16 | ' | $0.24 | ' | ' | ' | ' | ' | ' | ' | ' |
Accumulated dividends released | ' | ' | ' | ' | $26,488 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Dividends accumulated | ' | ' | ' | ' | 39,859 | 17,574 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Original issue price per share | ' | ' | ' | ' | $2 | $2 | ' | $3 | ' | ' | ' | ' | ' | ' | ' | ' |
Dividends paid | ' | ' | ' | ' | ' | 6,999 | ' | 44,018 | ' | ' | ' | ' | ' | ' | ' | ' |
Dividends payable | ' | ' | ' | ' | ' | 17,574 | ' | 45,665 | ' | ' | ' | ' | ' | ' | ' | ' |
Units offered (Common Stock and Warrants) | ' | ' | ' | ' | ' | ' | ' | ' | 772,352 | ' | ' | ' | ' | ' | ' | ' |
Units offered (Common Stock and Warrants), price per unit | ' | ' | ' | ' | ' | ' | ' | ' | $3 | ' | ' | ' | ' | ' | ' | ' |
Units offered (Common Stock and Warrants), potential proceeds | ' | ' | ' | ' | ' | ' | ' | ' | 2,317,056 | ' | ' | ' | ' | ' | ' | ' |
Units offered (Common Stock and Warrants), additional over-allotment | ' | ' | ' | ' | ' | ' | ' | ' | 1,000,000 | ' | ' | ' | ' | ' | ' | ' |
Units offered (Common Stock and Warrants), potential proceeds for additional over-allotment | ' | ' | ' | ' | ' | ' | ' | ' | 3,000,000 | ' | ' | ' | ' | ' | ' | ' |
Units sold during offering | ' | ' | ' | ' | ' | ' | 53,332 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Gross proceeds from units sold in offering | ' | ' | ' | ' | ' | ' | 159,996 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Issuance costs | ' | ' | ' | ' | ' | ' | 6,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Beneficial conversion feature (BCF) | ' | ' | ' | ' | ' | ' | ' | 13,347 | ' | ' | ' | ' | ' | ' | ' | ' |
Common stock returned for cancellation | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10,050,000 | ' | ' | ' | ' | ' | ' |
Number of options granted | 184,000 | ' | 410,000 | ' | ' | ' | ' | ' | ' | ' | 94,000 | 40,000 | 50,000 | ' | ' | ' |
Stock-based compensation expense | 129,408 | 19,322 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrecognized compensation expense | $492,371 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Performance Stock options outstanding | 1,440,000 | ' | ' | 1,440,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average exercise price, performance stock options outstanding | $0.11 | ' | ' | $0.11 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Performance Stock options exercisable | 40,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average exercise price, performance stock options exercisable | $2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of warrants issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 26,666 | 283,329 | 50,000 |
Warrants outstanding | 723,819 | ' | 363,824 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average exercise price, warrants | $3 | ' | $3 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants granted | 359,995 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stockholders_Equity_Note_Sched2
Stockholders' Equity, Note: Schedule of Stock Option Activity (Details) (USD $) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Details | ' | ' | ' |
Number of options outstanding | 1,404,000 | 1,320,000 | 1,022,000 |
Weighted average exercise price, options outstanding | $2.35 | $2.23 | $2 |
Number of options granted | 184,000 | 410,000 | ' |
Weighted average exercise price, options granted | $3 | $2.76 | ' |
Number of options cancelled | -100,000 | -112,000 | ' |
Weighted average exercise price, options cancelled | $2 | $2 | ' |
Weighted average remaining life (in years), options outstanding | 3.62 | 3.44 | ' |
Number of options exercisable | 816,333 | 845,000 | ' |
Weighted average exercise price, options exercisable | $2.13 | $2.04 | ' |
Net_Loss_Per_Common_Share_Note1
Net Loss Per Common Share, Note (Details) (USD $) | 3 Months Ended | 36 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Net income (loss) | ($1,344,276) | ($816,365) | ($7,794,612) |
Net income (loss) available to preferred stockholders | 38,548 | 98,942 | 464,197 |
Net income (loss) applicable to common stockholders | -1,382,824 | -915,307 | -8,258,809 |
Series A Dividend | ' | ' | ' |
Cumulative dividend | ' | 9,863 | ' |
Series B Dividend | ' | ' | ' |
Cumulative dividend | -22,368 | 59,178 | 39,859 |
Series C Dividend | ' | ' | ' |
Cumulative dividend | 1,904 | 29,901 | 120,172 |
Series D Dividend | ' | ' | ' |
Cumulative dividend | $59,012 | ' | $304,166 |
Commitments_and_Contingencies_1
Commitments and Contingencies Note (Details) (USD $) | 3 Months Ended | 23 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Jun. 30, 2014 | |
Details | ' | ' | ' |
Lease commitment, terms | ' | ' | 'Company leased approximately 2,244 square feet of general office space |
Total rent expense | $19,099 | $8,819 | ' |
Remaining commitment under current lease | 90,000 | ' | ' |
Commitment to purchase equipment | $70,000 | ' | ' |
Related_Party_Transactions_Det
Related Party Transactions (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Richard Giles | ' | ' |
Related party consulting fees | $37,400 | $47,400 |
Repayment of related party notes payable | 250,000 | ' |
Amount of interest paid | $6,250 | ' |
Dworsky Partners, LLC | ' | ' |
Common stock issued to related parties | 41,668 | ' |
Reginald Greenslade | ' | ' |
Common stock issued to related parties | 3,333 | ' |
Supplemental_Cash_Flow_Informa2
Supplemental Cash Flow Information: Schedule of Cash Flow, Supplemental Disclosures (Details) (USD $) | 3 Months Ended | 36 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | |
Details | ' | ' | ' |
Cash paid for interest | $39,116 | $15,889 | $487,345 |
Cash paid for income taxes | ' | ' | 200 |
Series C Dividend payable in accounts payable | 17,574 | 79,073 | 17,574 |
Series D Dividend payable in accrued expenses | 45,665 | ' | 45,665 |
Repayment of senior secured notes payable with Series D preferred shares | ' | ' | 749,982 |
Financing the purchase of equipment under a 5 year loan agreement | ' | ' | 83,507 |
Beneficial conversion feature on warrants issued in conjunction with Series D preferred shares | 13,347 | ' | 190,076 |
Shares issued in acquisition of Dr. Pave | $175,000 | ' | $175,000 |
Subsequent_Events_Note_Details
Subsequent Events, Note (Details) (USD $) | 1 Months Ended | ||||
Apr. 30, 2014 | Apr. 30, 2014 | 14-May-14 | Apr. 29, 2014 | Apr. 15, 2014 | |
Debt offering | Senior Subordinate note payment | Preferred stock conversion to common shares | Preferred stock conversion to common shares | Preferred stock conversion to common shares | |
Total amount of notes outstanding | $570,000 | ' | ' | ' | ' |
Number of warrants issued | 189,997 | ' | ' | ' | ' |
Repayment of notes payable | ' | $250,000 | ' | ' | ' |
Common shares converted from preferred | ' | ' | ' | 4,000 | 146,935 |
Common stock outstanding | ' | ' | 8,422,333 | ' | ' |