0001553350-16-002325.txt : 20160812 0001553350-16-002325.hdr.sgml : 20160812 20160812161120 ACCESSION NUMBER: 0001553350-16-002325 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 40 CONFORMED PERIOD OF REPORT: 20160630 FILED AS OF DATE: 20160812 DATE AS OF CHANGE: 20160812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GelTech Solutions, Inc. CENTRAL INDEX KEY: 0001403676 STANDARD INDUSTRIAL CLASSIFICATION: PLASTIC MATERIAL, SYNTH RESIN/RUBBER, CELLULOS (NO GLASS) [2820] IRS NUMBER: 562600575 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-52993 FILM NUMBER: 161828358 BUSINESS ADDRESS: STREET 1: 1460 PARK LANE SOUTH STREET 2: SUITE 1 CITY: JUPITER STATE: FL ZIP: 33458 BUSINESS PHONE: 561-427-6144 MAIL ADDRESS: STREET 1: 1460 PARK LANE SOUTH STREET 2: SUITE 1 CITY: JUPITER STATE: FL ZIP: 33458 10-Q 1 gltc_10q.htm QUARTERLY REPORT Quarterly Report

 



 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2016


OR


o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ________________ to ________________


Commission file number 0-52993


GelTech Solutions, Inc.

(Exact name of registrant as specified in its charter)


Delaware

  

56-2600575

(State or other jurisdiction of

  

(I.R.S. Employer

incorporation or organization)

  

Identification No.)

  

  

  

1460 Park Lane South, Suite 1, Jupiter, Florida

  

33458

(Address of principal executive offices)

  

(Zip Code)

 

Registrant’s telephone number, including area code: (561) 427-6144


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  þ     No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  þ     No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.


Large accelerated filer

o

 

Accelerated filer

o

  

 

 

  

 

Non-accelerated filer  

o

(Do not check if a smaller reporting company)

Smaller reporting company

þ


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o     No  þ

 

Class

  

Outstanding at August 12, 2016

Common Stock, $0.001 par value per share

  

51,591,131 shares

 

  




 



Table of Contents

 

 

PART I – FINANCIAL INFORMATION

 

                             

 

                             

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS.

1

 

 

 

 

Consolidated Balance Sheets as of  June 30, 2016 (Unaudited) and December 31, 2015

1

 

 

 

 

Consolidated Statements of Operations for the three and six  months ended June 30, 2016 and 2015 (Unaudited)

2

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 (Unaudited)

3

 

 

 

 

Condensed Notes to Consolidated Financial Statements (Unaudited)

5

 

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

12

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

17

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES.

18

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS.

19

 

 

 

ITEM 1A.

RISK FACTORS.

19

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

19

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

19

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES.

19

 

 

 

ITEM 5.

OTHER INFORMATION.

19

 

 

 

ITEM 6.

EXHIBITS.

19

 

 

 

SIGNATURES

 

20

 



  





 


 

PART I – FINANCIAL INFORMATION

 

ITEM 1. 

CONSOLIDATED FINANCIAL STATEMENTS.

 

GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


 

 

As of

June 30,

 

 

As of

December 31,

 

 

 

2016

 

 

2015

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

168,185

 

 

$

135,266

 

Accounts receivable trade, net

 

 

197,155

 

 

 

156,733

 

Settlement receivable

 

 

300,000

 

 

 

 

Inventories

 

 

1,397,339

 

 

 

1,428,157

 

Prepaid expenses and other current assets

 

 

26,239

 

 

 

89,808

 

Total current assets

 

 

2,088,918

 

 

 

1,809,964

 

 

 

 

 

 

 

 

 

 

Furniture, fixtures and equipment, net

 

 

253,212

 

 

 

134,259

 

Deposits

 

 

16,086

 

 

 

16,086

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

2,358,216

 

 

$

1,960,309

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

193,064

 

 

$

271,566

 

Accrued expenses

 

 

322,123

 

 

 

344,094

 

Settlement accrual

 

 

320,631

 

 

 

80,000

 

Deferred revenue

 

 

14,667

 

 

 

 

Insurance premium finance contract

 

 

8,013

 

 

 

54,611

 

Total current liabilities

 

 

858,498

 

 

 

750,271

 

Convertible notes - related party, net of discounts

 

 

2,951,234

 

 

 

2,946,118

 

Convertible line of credit – related party, net of discounts

 

 

3,801,642

 

 

 

2,746,336

 

Total liabilities

 

 

7,611,374

 

 

 

6,442,725

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

 

 

 

Preferred stock: $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding

 

 

 

 

 

 

Common stock: $0.001 par value; 150,000,000 shares authorized; 51,166,606 and 48,972,496 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively.

 

 

51,167

 

 

 

48,972

 

Additional paid in capital

 

 

40,451,921

 

 

 

38,754,495

 

Accumulated deficit

 

 

(45,756,246

)

 

 

(43,285,883

)

Total stockholders' deficit

 

 

(5,253,158

)

 

 

(4,482,416

)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' deficit

 

$

2,358,216

 

 

$

1,960,309

 



The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

  




1



 


GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


 

 

For the

Three Months Ended

June 30,

 

 

For the

Six Months Ended

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

     

                        

   

  

                        

   

  

                        

   

  

                        

 

Sales

 

$

484,934

 

 

$

433,246

 

 

$

703,304

 

 

$

533,603

 

Cost of goods sold

 

 

135,112

 

 

 

219,559

 

 

 

211,135

 

 

 

254,371

 

Gross profit

 

 

349,822

 

 

 

213,687

 

 

 

492,169

 

 

 

279,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

1,005,203

 

 

 

1,390,152

 

 

 

2,179,675

 

 

 

2,462,828

 

Research and development

 

 

37,514

 

 

 

27,757

 

 

 

155,463

 

 

 

38,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

1,042,717

 

 

 

1,417,909

 

 

 

2,335,138

 

 

 

2,501,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(692,895

)

 

 

(1,204,222

)

 

 

(1,842,969

)

 

 

(2,222,335

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

300,000

 

 

 

1,700

 

 

 

300,000

 

 

 

1,900

 

Interest income

 

 

3

 

 

 

3

 

 

 

6

 

 

 

5

 

Gain (loss) on conversion of interest

 

 

 

 

 

 

 

 

(72,765

)

 

 

12,841

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(596,648)

 

Loss on extension of warrants

 

 

 

 

 

 

 

 

(206,620

)

 

 

 

Loss on settlement

 

 

(320,631

)

 

 

(412,867

)

 

 

(320,631

)

 

 

(412,867

)

Interest expense

 

 

(173,870

)

 

 

(80,080

)

 

 

(327,384

)

 

 

(168,296

)

Total other income (expense)

 

 

(194,498

)

 

 

(491,244

)

 

 

(627,394

)

 

 

(1,163,065

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(887,393

)

 

$

(1,695,466

)

 

$

(2,470,363

)

 

$

(3,385,400

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted

 

$

(0.02

)

 

$

(0.04

)

 

$

(0.05

)

 

$

(0.07

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

 

50,409,090

 

 

 

47,511,512

 

 

 

49,894,633

 

 

 

47,248,260

 



The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.





2



 


GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


 

 

For the Six Months Ended

June 30,

 

 

 

2016

 

 

2015

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Reconciliation of net loss to net cash used in operating activities:

 

 

 

 

 

 

Net loss

 

$

(2,470,363

)

 

$

(3,385,400

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Bad debt expense (recovery)

 

 

(21,875

)

 

 

2,024

 

Depreciation

 

 

34,990

 

 

 

28,446

 

Amortization of debt discounts

 

 

65,654

 

 

 

33,847

 

Loss (gain) on conversion of interest

 

 

72,765

 

 

 

(12,841

)

Loss on extinguishment of debt

 

 

 

 

 

596,648

 

Warrants issued for services

 

 

44,477

 

 

 

 

Common stock issued for services

 

 

11,267

 

 

 

 

Loss on extension of warrants

 

 

206,620

 

 

 

 

Employee stock option compensation expense

 

 

298,808

 

 

 

588,127

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(18,547

)

 

 

(174,423

)

Settlement receivable

 

 

(300,000

)

 

 

 

Inventories

 

 

30,818

 

 

 

(137,992

)

Prepaid expenses and other current assets

 

 

63,569

 

 

 

49,846

 

Accounts payable

 

 

(78,502

)

 

 

201,778

 

Deferred revenue

 

 

14,667

 

 

 

 

Settlement accrual

 

 

240,631

 

 

 

451,000

 

Accrued expenses

 

 

276,206

 

 

 

127,831

 

Net cash used in operating activities

 

 

(1,528,815

)

 

 

(1,631,109

)

 

 

 

 

 

 

 

 

 

Cash flows from Investing Activities

 

 

 

 

 

 

 

 

Purchases of equipment

 

 

(153,943

)

 

 

(11,893

)

Net cash used in investing activities

 

 

(153,943

)

 

 

(11,893

)

 

 

 

 

 

 

 

 

 

Cash flows from Financing Activities

 

 

 

 

 

 

 

 

Proceeds from sale of stock under stock purchase agreement

 

 

407,275

 

 

 

 

Proceeds from sale of stock and warrants

 

 

150,000

 

 

 

150,000

 

Proceeds from sale of stock in private placements

 

 

 

 

 

104,250

 

Proceeds from advances on convertible line of credit with related parties

 

 

1,205,000

 

 

 

1,375,000

 

Payments on insurance finance contract

 

 

(46,598

)

 

 

(54,740

)

Net cash provided by financing activities

 

 

1,715,677

 

 

 

1,574,510

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash

 

 

32,919

 

 

 

(68,492

)

Cash - beginning

 

 

135,266

 

 

 

195,615

 

Cash - ending

 

$

168,185

 

 

$

127,123

 



The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.


Continued



3



 


GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(UNAUDITED)


 

 

For the

Six Months Ended

June 30,

 

 

 

2016

 

 

2015

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,188

 

 

$

1,486

 

Cash paid for income taxes

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

Supplementary Disclosure of Non-cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Beneficial conversion feature of convertible notes

 

$

105,116

 

 

$

75,609

 

Loan discount from warrants

 

$

105,116

 

 

$

75,609

 

Stock issued for vehicle

 

$

 

 

$

16,000

 

Stock issued for services

 

$

 

 

$

1,674

 

Stock issued for accrued interest

 

$

298,177

 

 

$

149,811

 



The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.





4





GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(Unaudited)


NOTE 1 Organization, Basis of Presentation and Summary of Significant Accounting Policies


Organization


GelTech Solutions, Inc., or GelTech or the Company, generates revenue primarily from marketing products based around the following four product categories (1) FireIce®, a water enhancing powder that can be utilized both as a fire suppressant in wildland and urban firefighting, including fires in underground utility structures, and in wildland firefighting as a medium-term fire retardant to protect wildlands, structures and firefighters; (2) FireIce Shield®, a line of products used by industry, police departments and first responders to protect assets from fire; (3) Soil2O® “Dust Control”, our application which is used for dust mitigation in the aggregate, road construction, mining, as well as, other industries that deal with daily dust control issues and (4) Soil2O®, a product which reduces the use of water and is primarily marketed to golf courses and commercial landscapers and most recently to homeowners via the Soil2O® Home Lawn Kit. The Company also markets equipment that is used in the application of these primary products including (1) Emergency Manhole FireIce Delivery System, or EMFIDS, an innovative system designed to deliver FireIce® into a manhole in the event of a fire or explosion and (2) FireIce® Home Defense Unit, a system for applying FireIce® to structures to protect them from wildfires.


Our unaudited condensed consolidated financial statements have been prepared on a going concern basis, and we need to generate sufficient material revenues to support the ongoing business of GelTech.


The corporate office is located in Jupiter, Florida.


Basis of Presentation


The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its three wholly-owned subsidiaries: FireIce Gel, Inc., GelTech International, Inc. and Weather Tech Innovations, Inc. There has been no activity in FireIce Gel, Inc., Weather Tech Innovations, Inc. and GelTech International, Inc.  


These unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (”SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by "GAAP" for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The information included in these unaudited consolidated interim financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Conditions and Results of Operations contained in this report and the audited consolidated financial statements and accompanying notes included in the Company’s Transition Report on Form 10-KT for the six months ended December 31, 2015 filed on June 30, 2016.


Inventories


Inventories are stated at the lower of cost or market, with cost being determined using the first-in, first-out method. Inventories as of June 30, 2016 consisted of raw materials and finished goods in the amounts of $577,740 and $819,599, respectively.


Use of Estimates


The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable; however, actual results could differ materially from these estimates. Significant estimates for the six months ended June 30, 2016 include the allowance for doubtful accounts, depreciation and amortization, valuation of inventories, valuation of options and warrants granted for services or settlements, valuation of common stock granted for services or debt conversion, valuation of debt discount related to the beneficial conversion feature of convertible notes, accruals for litigation losses and the valuation of deferred tax assets.




5



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(Unaudited)



Revenue Recognition


Revenue from sales of products is recognized when persuasive evidence of an arrangement exists, products have been shipped to the customer, economic risk of loss has passed to the customer, the price is fixed or determinable, collection is reasonably assured, and any future obligations of the Company are insignificant. Revenue is shown net of returns and allowances. The Company provides certain customers with the right of return for unsold product. Sales to these customers are recorded as the customer sells the product, thus removing the right of return.


Products shipped from either our third-party fulfillment companies or our Jupiter, Florida or Irwindale, California locations are shipped FOB shipping point. Normal payment terms are net 30 days depending on the arrangement we have with the customer. As such, revenue is recognized when product has been shipped from either the third-party fulfillment company or from the Jupiter, Florida or Irwindale, California locations.


The Company follows the guidance of ASC 605-50-25, “Revenue Recognition, Customer Payments”. Accordingly, any incentives received from vendors are recognized as a reduction of the cost of products. Promotional products or samples given to customers or potential customers are recognized as a cost of goods sold. However, products we utilize to perform demonstrations for potential customers are recorded as a marketing expense in operations.


During the three months ended June 30, 2016, the Company entered into two agreements with a state forestry agency whereby the Company agreed to pay for and build two fixed airport mixing facilities in order to support the state agency’s aerial wildland firefighting operations.  In connection with the agreement, the state agency has the use of the equipment in exchange for paying a premium price per bucket for our HVO-F aerial FireIce product and also making an initial minimum purchase of 200 buckets per year.  As such, the Company has deferred the premium portion of the bucket price for the minimum purchase amount and will recognize the revenue related to the premium over 12 months.  For the six months ended June 30, 2016, the Company deferred $16,000 of the minimum purchase amounts and recognized $1,333 in revenue.


Net Earnings (Loss) per Share


The Company computes net earnings (loss) per share in accordance with ASC 260-10, “Earnings per Share.” ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. The Company’s diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.  At June 30, 2016, there were options to purchase 10,710,340 shares of the Company’s common stock, warrants to purchase 12,198,183 shares of the Company’s common stock and 18,819,502 shares of the Company’s common stock are reserved for convertible notes which may dilute future earnings per share.


Stock-Based Compensation


The Company accounts for employee stock-based compensation in accordance with ASC 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units, and employee stock purchases based on estimated fair values.


Determining Fair Value Under ASC 718-10


The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables.


The Company estimates volatility based upon the historical stock price of the Company and estimates the expected term for employee stock options using the simplified method for employees and directors and the contractual term for non-employees.  The risk free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities.



6



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(Unaudited)



The fair values of stock options and warrants granted during the period from January 1, 2016 to June 30, 2016 were estimated using the following assumptions:


Risk free interest rate

 

0.64% - 1.49%

Expected term (in years)

 

2.0 - 5.0

Dividend yield

 

––

Volatility of common stock

 

103.14% - 104.54%

Estimated annual forfeitures

 

––


New Accounting Pronouncements


In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires an entity to measure most inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The accounting standard is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company does not expect this accounting standard to have a significant impact on the Company’s consolidated financial position or results of operations.

 

No additional Accounting Standards Updates (ASUs) which were not effective until after June 30, 2016 are expected to have a significant effect on the Company's consolidated financial position or results of operations.


NOTE 2 – Going Concern


These unaudited consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize it assets and discharge its liabilities in the normal course of business.  As of June 30, 2016, the Company had an accumulated deficit and stockholders’ deficit of $45,756,246 and $5,253,158 respectively, incurred losses from operations of $1,842,969 for the six months ended June 30, 2016 and used cash in operations of $1,528,815 during the six months ended June 30, 2016.  In addition, the Company has not yet generated revenue sufficient to support ongoing operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


During the six months ended June 30, 2016, the Company received $1,205,000 in advances from its convertible line of credit with its president and principal shareholder. The Company also received $407,275 from Lincoln Park Capital Fund LLC in connection with a $10 million stock purchase agreement entered into in August 2015. See Note 4.


Management believes that the Purchase Agreement with Lincoln Park, additional funding from its president and principal shareholder and the revenue prospects from the Wildland industry provide the opportunity for the Company to continue as a going concern.  Ultimately, the continuation of the Company as a going concern is dependent upon the ability of the Company to generate sufficient revenue to attain profitable operations.


NOTE 3 – Convertible Note Agreements – Related Party


The Company currently has three debt facilities outstanding, all of them held by its president and principal shareholder.




7



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(Unaudited)



One convertible note in the amount of $1,997,483, dated February 1, 2013 was a consolidation of prior debt instruments. The note bore annual interest of 7.5%, was convertible at $0.35 per share and due December 31, 2016. On February 12, 2015, this note was modified by securing the note with all the assets of the Company and by extending the due date of the note from December 31, 2016 to December 31, 2020. The modification was accounted for as a debt extinguishment in accordance with ASC 470. As a result of the modification the Company recorded a loss on extinguishment of debt of $34,586. During the six months ended June 30, 2016, the Company recognized interest expense of $74,700. As of June 30, 2016, the principal balance of the note is $1,997,483 and accrued interest amounted to $61,566. In February 2016, the Company issued 428,032 shares of common stock to its president and principal shareholder in payment of accrued interest of $149,811 resulting in a loss on conversion of interest of $72,765.


A second convertible note in the amount of $1,000,000 dated July 11, 2013 related to a new funding on that date. The note bore annual interest of 7.5%, was convertible at $1.00 per share and was due July 10, 2018. In connection with the note, the Company issued five–year warrants to purchase 500,000 shares of common stock at an exercise price of $1.30 per share. On February 12, 2015, this note was modified by securing the note with all the assets of the Company, by extending the due date of the note from July 10, 2018 to December 31, 2020 and by reducing the conversion rate of the note from $1.00 to $0.35 per share. The modification was accounted for as a debt extinguishment in accordance with ASC 470. As a result of the modification, the Company recorded a loss on extinguishment of debt of $562,062. Also, in connection with the modification the Company recorded a note discount of $60,390, related to the relative fair value of the warrants attached to the note. For the six months ended June 30, 2016 the Company recorded interest expense of $5,116 to amortize the discounts related to the warrants of the note, originated in July 2013. As of June 30, 2016, the balance of the unamortized discount related to the warrants was $46,249. As of June 30, 2016, the principal balance on this note is $1,000,000 and accrued interest amounted to $72,740.

 

In connection with the debt modifications described above, the Company entered into a Secured Revolving Convertible Promissory Note Agreement for up to $4 million with its president and principal shareholder.  On April 8, 2016, the Company and its president and principal shareholder entered into the First Amendment to Secured Revolving Convertible Promissory Note Agreement increasing the credit facility from $4 million to $5 million.  Under the agreement, the Company may, with the prior approval of its president and principal shareholder, receive advances under this agreement. Each advance bears an annual interest rate of 7.5%, is due December 31, 2020 and is convertible at the rate equal to the closing price of the Company’s common stock on the day prior to the date the parties agree to the advance. In addition, the Company will issue the Company’s president and principal shareholder two year warrants to purchase shares of common stock at an exercise price of $2.00 per share. The number of warrants issued equals 50% of the number of shares issuable upon the conversion of the related advance.


For the six months ended June 30, 2016, the Company received eight advances totaling $1,205,000 with conversion rates between $0.35 and $0.55 per share, and issued two year warrants to purchase 1,491,593 shares of common stock at an exercise price of $2.00 per share. In connection with these advances, the Company has recorded loan discounts related to the warrants and the beneficial conversion features of the advances amounting to $105,116 and $105,116, respectively. During the six months ended June 30, 2016, the Company has recognized interest expense of $60,538 related to the amortization of loan discounts. As of June 30, 2016, the principal balance of the advances was $4,470,000, the balance of the unamortized discounts related to the warrants and the beneficial conversion feature was $334,179 and $334,179, respectively, and the balance of accrued interest was $121,252.


The calculated loan discounts were based on the relative fair value of the warrants which were calculated by the Company using the Black Scholes option pricing model, using volatilities of between 103.14% and 104.23%, based on the Company’s historical stock price, discount rates from 0.64% to 0.90%, and expected terms of 2 years, the term of the warrants.


NOTE 4 – Stockholders’ Deficit


Preferred Stock


The Company has authorized 5,000,000 shares of preferred stock, par value $0.001 per share with such rights, preferences and limitation as may be set from time to time by resolution of the board of directors and the filing of a certificate of designation as required by Delaware General Corporation Law.




8



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(Unaudited)



Common Stock


On August 12, 2015, GelTech signed a $10 million Purchase Agreement with Lincoln Park. The Company also entered into a Registration Rights Agreement with Lincoln Park whereby we agreed to file a registration statement related to the transaction with the SEC covering the shares that may be issued to Lincoln Park under the Purchase Agreement.

 

Under the terms and subject to the conditions of the Purchase Agreement, GelTech has the right to sell, and Lincoln Park is obligated to purchase, up to $10 million in shares of the Company’s common stock, subject to certain limitations, from time to time, over the 30-month period commencing on the date that a registration statement, which the Company agreed to file with the SEC pursuant to the Registration Rights Agreement, is declared effective by the SEC.  The Company filed the registration statement with the SEC on October 5, 2015 and it was declared effective by the SEC on October 16, 2015.


During the three months ended March 31, 2016, the Company issued 508,822 shares of common stock in exchange for $225,245 in connection with the Lincoln Park Purchase Agreement.


During the three months ended June 30, 2016, the Company issued 507,129 shares of common stock in exchange for $182,030 in connection with the Lincoln Park Purchase Agreement.


In February 2016, the Company issued 428,032 shares of common stock to its president and principal shareholder in payment of accrued interest of $149,811 resulting in a loss on conversion of interest of $72,765.


During the three months ended March 31, 2016, the Company issued 13,947 shares of common stock in payment of investor relation services values at $6,000.  In addition, the Company issued 3,581 shares of common stock in payment of consulting services valued at $1,656.


During the three months ended June 30, 2016, the Company issued 4,167 shares of common stock in payment of investor relation services valued at $2,000.  In addition, the Company issued 3,489 shares of common stock in payment of consulting services valued at $1,611.


In April 2016, the Company issued 296,371 shares of commons stock to its president and principal shareholder upon the conversion of accrued interest in the amount of $148,365 related to the advances under the Secured Revolving Convertible Promissory Note Agreement. No gain or loss will be recognized on the conversion as the conversion price used was the current price of the stock.


In June 2016, the Company issued 428,572 shares of common stock and two year warrants to purchase 214,286 shares of common stock at an exercise price of $2.00 per share to a director and his wife in exchange for $150,000 in connection with a private placement.


Stock-Based Compensation


Stock-based compensation expense recognized under ASC 718-10 for the period January 1, 2016 to June 30, 2016, was $282,074 for stock options granted to employees and directors. This expense is included in selling, general and administrative expenses in the unaudited consolidated statements of operations. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. At June 30, 2016 the total compensation cost for stock options not yet recognized was approximately $52,356.  This cost will be recognized over the remaining vesting term of the options of approximately two years.


Stock-based awards granted to non-employees, in the form of warrants to purchase the Company’s common stock, are valued at fair value in accordance with the measurement and recognition criteria of ASC 505-50 "Equity Based payments to Non-Employees.” Stock based compensation to non-employees recognized for the six months ended June 30, 2016 was $61,211.


In April 2016, the Company issued ten year options to purchase 30,000 shares of common stock at an exercise price of $0.39 per share to a new director.  The options vest annually over three years, subject to the continued service on the board.  The options were valued using the Black-Scholes option pricing model using a volatility of 103.79% based upon the historical price of the company’s stock, a term of 6.5 years, using the simplified method and a risk free rate of 1.52%.  The calculated fair value, $9,631 will be recognized over the requisite service period.



9



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(Unaudited)



Warrants to Purchase Common Stock


Warrants Issued as Settlements


During the six months ended June 30, 2016, there were no warrants granted for settlements.


Warrants Issued for Cash or Services


In January 2016, the Company granted a one year extension for warrants to purchase 3,968,258 shares of common stock which were set to expire at various dates in 2016.  Of the warrants extended, 2,443,565 were held by our president and principal shareholder and a director.  In connection with the extension, the Company recorded other expense of approximately $207,000 for the six months ended June 30, 2016 representing the difference between the fair value of the old warrants and the extended warrants.


During the six months ended June 30, 2016, the Company issued five year warrants to purchase 150,000 shares of common stock at an exercise price of $0.39 per share in exchange for legal services.  The warrants were valued with the Black-Scholes option pricing model using a volatility of 103.14% based upon the historical price of the company’s stock, a term of five years, the term of the warrants and a risk free rate of 1.49%.  The calculated fair value, $44,477 was recorded as expense for the six months ended June 30, 2016.


During the six months ended June 30, 2016, the Company issued two year warrants to purchase 1,491,593 shares of common stock at an exercise price of $2.00 per shares in connection with advances of $1,205,000 from its president and principal shareholder related to the convertible line of credit agreement.


In June 2016, the Company issued two year warrants to purchase 214,286 shares of common stock at an exercise price of $2.00 per share to a director and his wife in connection with a private placement.


NOTE 5 – Commitments and Contingencies


The Company was sued by a former employee on June 23, 2008, alleging breach of a consulting agreement and an employment agreement entered into in May and June 2007, respectively. In addition, the plaintiff sought to recover certain of his personal property, which was used or stored in the Company’s offices and alleges the Company invaded his privacy by looking at his personal computer (which was used in the Company’s business) in the Company’s offices.  On October 14, 2015, the Court issued an order on Defendant GelTech’s Motion for Attorney’s Fees and Costs granting GelTech attorney fees and costs in excess of the amount of its litigation accrual for the case.  As such, the Company reversed the litigation accrual resulting in other income of $56,956 which was included in the Company’s statement of operations for the six months ended December 31, 2015.  In November 2015, the Court issued a Final Judgement against the plaintiff in the amount of $510,499.  The plaintiff has filed appeals which are pending.


In July 2016, the Company entered into a settlement agreement with the plaintiff whereby the Company agreed to pay the plaintiff $250,000 and issue the plaintiff five year warrants to purchase 250,000 shares of common stock at an exercise price of $0.37 per share, in exchange for the dismissal of all claims against the Company.  The warrants were valued using the Black-Scholes option pricing model using a volatility of 104.54% based upon the historical price of the company’s stock, a term of five years, the term of the warrants and a risk free rate of 1.01%, resulting in a fair value of $70,631.  As such, the Company recorded a loss on settlement of $320,631 for the six months ended June 30, 2016.  


In June 2016, the Company entered into a settlement agreement with its employment practices insurance company related to the Company’s suit against the insurance company for failure to cover post trial legal costs related to the suit described above in this Note 5.  Under the settlement agreement, the insurance company agreed to pay the Company $300,000, which payment was received in July 2016.  As such the Company recorded a gain on settlement of $300,000 for the six months ended June 30, 2016.


In January 2016, the Company entered into a settlement agreement with a former shareholder of the Company’s predecessor company under which the Company paid $80,000 in exchange for a general release.




10



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(Unaudited)



NOTE 6 – Related Party Transactions


During the six months ended June 30, 2016, the Company issued warrants to its president and principal shareholder in exchange for cash as more fully described in Notes 3 and 8.


NOTE 7 – Concentrations


The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through June 30, 2016. As of June 30, 2016, there were no cash balances held in depository accounts that are not insured.


At June 30, 2016, four customers accounted for 36.8%, 21.7%, 15.1% and 12.4% of accounts receivable.


For the six months ended June 30, 2016, three customers accounted for 20.0%, 18.6% and 17.3% of sales.


Approximately 13.4% of revenue was generated from customers outside the United States during the six months ended June 30, 2016.


During the six months ended June 30, 2016, sales primarily resulted from three products, FireIce®, Soil2O® and FireIce Shield® which made up 68.1%, 14.1% and 14.0%, respectively, of total sales. Of the FireIce® sales, 94.1% related to the sale of FireIce® products and 5.6% related to sales of the FireIce extinguishers and educator equipment.  Of the Soil2O® sales, 39.8% related to traditional sales of Soil2O® and 57.8% related to sales of Soil2O® Dust Control.  Of the FireIce Shield® sales, 46.6% consisted sales of asset protection canisters and refills and 52.7% consisted of sale of spray bottles for use by welders and plumbers.  


One vendor accounted for 62.2% of the Company’s approximately $166,000 in purchases of raw material, finished goods and packaging during the six months ended June 30, 2016.


During the six months ended June 30, 2016, our president and principal shareholder provided 100% of the Company’s debt financing.  


NOTE 8 Subsequent Events


In accordance with the 2007 Equity Incentive Plan, on July 1, 2016, the Company issued options to purchase 680,000 shares of common stock to directors. The options have an exercise price of $0.37 per share, vest on June 30, 2017¸ subject to continuing service as a director and have a ten-year term. The options were valued using the Black-Scholes model using a volatility of 104.37% (derived using the historical market price for the Company’s common stock), an expected term of 5.5 years (using the simplified method) and a discount rate of 1.49%. The fair value of these options, $198,236, will be recognized as expense over the requisite service period.


Since July 1, 2016, the Company has issued two year warrants to purchase 261,116 shares of common stock at an exercise price of $2.00 per share in exchange for advances in the amount of $175,000 from the Company’s president and principal shareholder in connection with the secured convertible line of credit agreement. The conversion rate of the advance was $0.3351.


Since July 1, 2016, the Company has issued 151,927 shares of common stock to Lincoln Park in exchange for $49,205 in connection with the Purchase Agreement.


Since July 1, 2016, the Company has issued 2,328 shares of common stock in exchange for consulting services valued at $900.


In July 2016, the Company issued 270,270 shares of common stock and two year warrants to purchase 135,135 shares of common stock at an exercise price of $2.00 per share in exchange for $100,000 in connection with a private placement with an accredited investor.


In July 2016, the Company issued 208,333 shares of common stock to its president and principal stockholder in payment of accrued interest in the amount of $75,000 related to a convertible note.




11



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES



ITEM 2. 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Certain statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements that involve risks and uncertainties. Words such as may, will, should, would, anticipates, expects, intends, plans, believes, seeks, estimates and similar expressions identify such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements.  Factors that could cause or contribute to these differences include those discussed in the Risk Factors contained in our Transition Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on March 31, 2016.


Overview


GelTech Solutions, Inc., or GelTech or the Company, generates revenue primarily from marketing products based around the following four product categories (1) FireIce®, a water enhancing powder that can be utilized both as a fire suppressant in wildland and urban firefighting, including fires in underground utility structures, and in wildland firefighting as a medium-term fire retardant to protect wildlands, structures and firefighters; (2) FireIce Shield®, a line of products used by industry, police departments and first responders to protect assets from fire; (3) Soil2O® “Dust Control”, our application which is used for dust mitigation in the aggregate, road construction, mining, as well as, other industries that deal with daily dust control issues and (4) Soil2O®, a product which reduces the use of water and is primarily marketed to golf courses and commercial landscapers and most recently to homeowners via the Soil2O® Home Lawn Kit. The Company also markets equipment that is used in the application of these primary products including (1) Emergency Manhole FireIce Delivery System, or EMFIDS, an innovative system designed to deliver FireIce® into a manhole in the event of a fire or explosion; (2) the FireIce Shield CTP System, a mobile spray unit that can be used to protect communication tower electronics during hot work and (3) FireIce® Home Defense Unit, a system for applying FireIce® to structures to protect them from wildfires.


Our unaudited consolidated financial statements have been prepared on a going concern basis, and we need to generate sufficient material revenues to support the ongoing business of the Company.


RESULTS OF OPERATIONS


FOR THE SIX MONTHS ENDED JUNE 30, 2016 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2015.


The following tables set forth, for the periods indicated, results of operations information from our interim unaudited consolidated financial statements:

 

 

 

Six Months Ended

June 30,

 

 

Change

 

 

Change

 

 

 

2016

 

 

2015

 

 

(Dollars)

 

 

(Percentage)

 

Sales

 

$

703,304

 

 

$

533,603

 

 

$

169,701

 

 

 

31.8

%

Cost of Goods Sold

 

 

211,135

 

 

 

254,371

 

 

 

(43,236

)

 

 

(17.0

%)

Gross Profit

 

 

492,169

 

 

 

279,232

 

 

 

212,937

 

 

 

76.3

%

Operating Expenses:

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     

Selling General and Administrative

 

 

2,179,675

 

 

 

2,462,828

 

 

 

(283,153

)

 

 

(11.5

%)

Research and Development

 

 

155,463

 

 

 

38,739

 

 

 

116,724

 

 

 

301.3

%

Loss from Operations

 

 

(1,842,969

)

 

 

(2,222,335

)

 

 

379,366

 

 

 

(17.7

%)

Other Income (Expense)

 

 

(627,394

)

 

 

(1,163,065

)

 

 

535,671

 

 

 

(46.1

%)

Net Loss

 

$

(2,470,363

)

 

$

(3,385,400

)

 

$

915,037

 

 

 

(27.0

%)




12



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES



Sales


Sales of product during the six months ended June 30, 2016 consisted of $478,933 for FireIce® and related products, $99,483 for Soil2O® and Soil2O® Dust Control, $98,570 for FireIce Shield® and $3,858 for GT-W14.  FireIce® sales consisted of $440,742 related to product sales primarily to wildland firefighting agencies and $13,718 related to sales of extinguishers and product to our municipal distributor. The Soil2O® sales consisted of sales of Soil2O® topical of $38,652 and sales of Soil2O® dust control of $56,229. Sales of FireIce Shield® consisted of sales of asset protection canisters of $45,978 plus sales of FireIce Shield spray bottles of $51,917.  Both FireIce® wildland sales and Soil2O® dust control sales are seasonal in nature with both peak seasons lasting from March through October.  We anticipate FireIce Shield® sales to be less seasonal. We expect additional states to join our growing roster of wildland agencies using FireIce. In addition, our FireIce Shield product is gaining acceptance with welders, plumbers and others working under flammable and hot conditions. Based on these factors, we expect that our revenues will increase in the future.


Cost of Goods Sold


The decrease in cost of goods sold was the result of the inventory amounting to $67,439 written off for obsolescence during the six months ended June 30, 2015 which was partially offset by the increase in sales. Cost of sales as a percentage of sales was 30.0% for the six months ended June 30, 2016 as compared to 35.0% for the six months ended June 30, 2015, after factoring out the obsolescence write off.  We expect future cost of sales as a percentage of sales will be consistent with the cost of sales percentage for the six months ended June 30, 2016.


Selling, General and Administrative Expenses (SG&A)


The decrease in SG&A expenses for the six months ended June 30, 2016 resulted primarily from (1) a decrease in equity base compensation of $289,319 resulting from fewer warrants granted to consultants during the six months ended June 30, 2016; (2) a decrease in professional fees resulting from a reduction of fees related to litigation of approximately $106,000 which was partially offset by an increase in audit fees of approximately $37,000 due to the change in our fiscal year end; (3) a decrease in sales and marketing expense related to last year’s marketing campaign for the Soil2O® Home Lawn Kit and (4) a decrease in bad debt expense of $23,899 due to the receipt of payment for an account that was previously written off.  These decreases were partially offset by (1) an increase in salaries and employee benefits of $57,379 as a result of additional consulting fees and commissions which were partially offset by reductions in staff; (2) an increase in investor relations expense of $20,216 as a result of our hiring a new investor relations firm; and (3) an increase in travel expense of $32,254 related primarily to setting up airbases in one state and one Canadian province.


Research and Development Expenses


The research and development expenses for the six months ended June 30, 2016 related to third party testing to determine the efficacy of GelTech’s products for new and existing applications.


Loss from Operations


The decrease in loss from operations resulted from the higher gross profit and the lower operating expenses as described above.


Other Income (Expense)


Other expense during the six months ended June 30, 2016 consisted of (1) interest expense of $327,384; (2) a loss on litigation settlement of $320,631 resulting from claims brought against the Company by a former employee, which was partially offset by a gain on settlement of $300,000 relating to a claim filed by the Company against its employment practices insurance carrier; (3) a loss on extending the term of certain warrants for an additional one year period of $206,620; and (4) a loss on conversion of interest of $72,765  Other expense for the six months ended June 30, 2015 consisted of (1) a loss on extinguishment of debt of $596,648; (2) a loss on settlement of $412,867 related to a former director and employee, and (3) interest expense of $168,296 which was partially offset by a gain on conversion of interest of $12,841.




13



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES



Net Loss


The lower net loss for the six months ended June 30, 2016 resulted from the higher gross profit, and lower operating costs and lower other expense as described above. Net loss per common share was $0.05 and $0.07, respectively, for the six months ended June 30, 2016 and 2015. The weighted average number of shares outstanding for the six months ended June 30, 2016 and 2015 were 49,894,633 and 47,248,260, respectively.


FOR THE THREE MONTHS ENDED JUNE 30, 2016 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2015.


The following tables set forth, for the periods indicated, results of operations information from our interim unaudited consolidated financial statements:

 

 

 

Three Months Ended

June 30,

 

 

Change

 

 

Change

 

 

 

2016

 

 

2015

 

 

(Dollars)

 

 

(Percentage)

 

Sales

 

$

484,934

 

 

$

433,246

 

 

$

56,688

 

 

 

11.9

%

Cost of Goods Sold

 

 

135,112

 

 

 

219,559

 

 

 

(84,447

)

 

 

(38.5

%)

Gross Profit

 

 

349,822

 

 

 

213,687

 

 

 

136135

 

 

 

63.7

%

Operating Expenses:

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     

Selling General and Administrative

 

 

1,005,203

 

 

 

1,390,152

 

 

 

(384,949

)

 

 

(27.7

%)

Research and Development

 

 

37,514

 

 

 

27,757

 

 

 

9,757

 

 

 

35.1

%

Loss from Operations

 

 

(692,895

)

 

 

(1,204,222

)

 

 

511,327

 

 

 

(42.5

%)

Other Income (Expense)

 

 

(194,498

)

 

 

(491,244

)

 

 

296,746

 

 

 

(60.4

%)

Net Loss

 

$

(887,393

)

 

$

(1,695,466

)

 

$

808,073

 

 

 

(47.7

%)


Sales


Sales of product during the three months ended June 30, 2016 consisted of $376,233 for FireIce® and related products, $39,349 for Soil2O®, $45,763 for FireIce Shield® and $1,209 for GT-W14.  FireIce® sales consisted of $353,225 related to product sales primarily to wildland firefighting agencies and $11,273 related to sales of extinguishers and product to our municipal distributor. The Soil2O® sales consisted of sales of Soil2O® topical of $9,184 and sales of Soil2O® dust control of $27,798. Sales of FireIce Shield® consisted of sales of asset protection canisters of $1,408 plus sales of FireIce Shield spray bottles of $44,120.  Both FireIce® and Soil2O® dust control sales are seasonal in nature with both peak seasons lasting from March through October.  We anticipate that FireIce Shield® sales will be less seasonal. We expect additional states to join our growing roster of wildland agencies using FireIce. In addition, our FireIce Shield product is gaining acceptance with welders, plumbers and others working under flammable and hot conditions. Based on these factors, we expect that our revenues will increase in the future.


Cost of Goods Sold


The decrease in cost of goods sold was the result of a write-off of inventory for obsolescence amounting to $67,439 during the three months ended June 30, 2015 which was partially offset by the increase in sales. Cost of sales as a percentage of sales was 27.8% for the three months ended June 30, 2016 as compared to 35.1% for the three months ended June 30, 2015, after factoring out the obsolescence write off.  We expect future cost of sales as a percentage of sales will be consistent with the cost of sales percentage for the six months ended June 30, 2016.




14



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES



Selling, General and Administrative Expenses (SG&A)


The decrease in SG&A expenses for the three months ended June 30, 2016 resulted primarily from (1) a decrease in equity base compensation  of $241,758 resulting from fewer warrants granted to consultants during the three months ended June 30, 2016; (2) a decrease in professional fees of $131,862 resulting from a reduction of fees related to litigation of approximately $91,000 which, a decrease in general legal expense of approximately $32,000 due to fewer public filings during the quarter and a reduction of legal fees related to patents and trademarks of approximately $9,000; (3) a decrease in sales and marketing expense of $32,058 related to last year’s marketing campaign for the Soil2O® Home Lawn Kit and (4) a decrease in bad debt expense of $23,899 due to the receipt of payment for an account that was previously written off.  These decreases were partially offset by (1) an increase in salaries and employee benefits of $16,860 as a result of additional consulting fees and commissions which were partially offset by reductions in staff; (2) an increase in facilities expense of $16,997 as a result of our using two additional strategically located third party warehouses for inventory; and (3) an increase in travel expense of $20,942 related primarily to setting up airbases in two states and one Canadian province.


Research and Development Expenses


The research and development expenses for the three months ended June 30, 2016 related to third party testing to determine the efficacy of GelTech’s products for new and existing applications.


Loss from Operations


The improvement in the loss from operations for the three months ended June 30, 2016 resulted from the higher gross profit and lower operating expenses as described above.


Other Income (Expense)


Other expense during the three months ended June 30, 2016 consisted of (1) interest expense of $173,870 and (2) a loss on litigation settlement of $320,631 resulting from claims brought against the Company by a former employee, which was partially offset by a gain on settlement of $300,000 relating to a claim filed by the Company against its employment practices insurance carrier.  Other expense for the three months ended June 30, 2015 consisted of (1) a loss on settlement of $412,867 related to a former director and employee, and (3) interest expense of $80,080.

  

Net Loss


The lower net loss for the three months ended June 30, 2016 resulted from the higher gross profit, lower operating expenses and lower other expense as described above. Net loss per common share was $0.02 and $0.04, respectively, for the three months ended June 30, 2016 and 2015. The weighted average number of shares outstanding for the three months ended June 30, 2016 and 2015 were 50,409,090 and 47,511,512, respectively.


LIQUIDITY AND CAPITAL RESOURCES


A summary of our cash flows is as follows:


 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

   

Net cash used in operating activities

$

(649,362

)

 

$

(765,731

)

 

$

(1,528,815

)

 

$

(1,631,109

)

Net cash used in investing activities

 

(101,585

)

 

 

(11,364

)

 

 

(153,943

)

 

 

(11,893

)

Net cash provided by financing activities

 

836,646

 

 

 

827,072

 

 

 

1,715,677

 

 

 

1,574,510

 

Net increase (decrease) in cash

$

85,699

 

 

$

49,977

 

 

$

32,919

 

 

$

(68,492

)


Net Cash Used in Operating Activities


Net cash used during the six months ended June 30, 2016 resulted primarily from the net loss of $2,470,363, a decrease in accounts payable of $78,502 and increases in accounts receivable and settlement receivable of $18,547 and $300,000, respectively, which were partially offset by the losses on extension of warrants and conversion of interest of $206,620 and $72,765, respectively, stock based compensation of $298,808 and increases in accrued liabilities and accrued settlements of, $276,206 and $240,631, respectively.



15



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES



Net cash used during the six months ended June 30, 2015 resulted primarily from the net loss of $3,385,400 and an increase in inventories and accounts receivable of $174,423 and $137,992, respectively.  These were partially offset by the loss on extinguishment of debt of $596,648, stock based compensation of $588,127, increases in accounts payable and accrued liabilities of $201,778 and $127,831, respectively, and an increase in accrued settlements of $451,000.


Net Cash Used in Investing Activities


The major difference in net cash used in investing activities for the six months ended June 30, 2016 as compared to the six months ended June 30, 2015 resulted from the purchase of equipment to mix and store our wildland product on airbases and for an additional vehicle for the Company’s wildland operations.


Net Cash Provided By Financing Activities


During the six months ended June 30, 2016, the Company received $407,275 in exchange for 1,015,951 shares of common stock in connection with a stock purchase agreement with Lincoln Park, received $1,205,000 from advances under the $5 million secured convertible line of credit facility with our president and principal shareholder, and received $150,000 in exchange for 428,572 shares of common stock and two year warrants to purchase 214,286 shares of common stock at an exercise price of $2.00 per share in connection with private placements with a director and his wife. In addition, the Company issued two year warrants to purchase 1,491,593 shares of common stock at an exercise price of $2.00 per share in connection with the convertible line of credit advances. The amounts received were used to make payments on insurance premium finance contracts of $46,598, as well as providing working capital.


During the six months ended June 30, 2015, the Company received $150,000 in exchange for 652,174 shares of common stock and two year warrants to purchase 326,087 shares of common stock at an exercise price of $2.00 per share in connection with a private placement and received $1,375,000 from advances under the convertible line of credit facility, all from our president and principal shareholder.  In addition, the Company issued two year warrants to purchase 2,104,990 shares of common stock at an exercise price of $2.00 per share in connection with the convertible line of credit advances. The Company also received $104,250 in exchange for 255,428 shares of commons stock in connection with private placements with three accredited investors. The amounts received were used to make payments on insurance premium finance contracts of $54,740 as well as providing working capital.


Historical Financings


Since January 1, 2016, GelTech has received $1,380,000 in advances, at conversion rates from $0.3351 to $0.55 per share against its convertible secured line of credit agreement with its president and principal shareholder. In connection with these advances the Company has issued two-year warrants to purchase 1,752,709 shares of common stock at $2.00 per share.  


Since January 1, 2016, the Company has received $456,480 in exchange for 1,167,878 shares of common stock in connection with the stock purchase agreement with Lincoln Park and has received $250,000 in exchange for 698,842 shares of common stock and two year warrants to purchase 349,421 shares of common stock at an exercise price of $2.00 per share in connection with private placements with a director and his wife and one other accredited investor.


Liquidity and Capital Resource Considerations


As of August 12, 2016, we had approximately $286,000 in available cash.


In August 2015, GelTech signed a $10 million Purchase Agreement with Lincoln Park. The Company also entered into a Registration Rights Agreement with Lincoln Park whereby we agreed to file a registration statement related to the transaction with the SEC covering the shares that may be issued to Lincoln Park under the Purchase Agreement.

 

Under the terms and subject to the conditions of the Purchase Agreement, GelTech has the right to sell, and Lincoln Park is obligated to purchase, up to $10 million in shares of the Company’s common stock, subject to certain limitations, from time to time, over the 30-month period commencing on the date that a registration statement, which the Company agreed to file with the SEC pursuant to the Registration Rights Agreement, is declared effective by the SEC. The Company filed the registration statement with the SEC on October 5, 2015 and it was declared effective by the SEC on October 16, 2015. Failure of our stock price to increase will impact our ability to meet our working capital needs through Lincoln Park.




16



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES



Until the Company generates sufficient revenue to sustain the business, our operations will continue to rely on Mr. Michael Reger’s investments and the Purchase Agreement with Lincoln Park.  If Mr. Reger were to cease providing working capital, the stock price were to fall below the floor price in the Purchase Agreement with Lincoln Park or the Company is unable to generate substantial cash flows from sales of its products or complete financings, the Company may not be able to remain operational. Although we do not anticipate the need to purchase any additional material capital assets in order to carry out our business, it may be necessary for us to purchase additional support vehicles or mixing base equipment in the future, depending on demand.


Related Party Transactions

 

For information on related party transactions and their financial impact, see Note 6 to the Unaudited Consolidated Financial Statements.


Principal Accounting Estimates

 

In response to the SEC’s financial reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, the Company has selected its most subjective accounting estimation processes for purposes of explaining the methodology used in calculating the estimate, in addition to the inherent uncertainties pertaining to the estimate and the possible effects on the Company’s financial condition. These estimates involve certain assumptions that if incorrect could create a material adverse impact on the Company’s results of operations and financial condition.  


There were no material changes to our principal accounting estimates during the period covered by this report.


RECENT ACCOUNTING PRONOUNCEMENTS

 

For information on recent accounting pronouncements, see Note 1 to the Unaudited Consolidated Financial Statements.

 

Cautionary Note Regarding Forward-Looking Statements


This report contains forward-looking statements including our liquidity and anticipated capital asset requirements and expected increase in sales of our products, revenues and number of states ordering our products. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods.

 

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the failure to receive material orders from the utility and mining companies, global and domestic economic conditions, budgetary pressures facing state and local governments, our failure to receive or the potential delay of anticipated orders for our products, failure to receive acceptance of FireIce® by State and Local governments, failure to obtain regulatory approval on our products, the failure to keep the Lincoln Park registration statement effective or Lincoln Park suffering unanticipated liquidity issues.


Further information on our risk factors is contained in our filings with the SEC, including our Prospectus dated April 6, 2016. Any forward-looking statement made by us speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.


ITEM 3. 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable to smaller reporting companies

 



17



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES



ITEM 4. 

CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures. Our management carried out an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, required by Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act. Based on their evaluation, our management has concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




18



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES



PART II – OTHER INFORMATION

 

ITEM 1. 

LEGAL PROCEEDINGS.


In July 2016, the Company entered into a settlement agreement with David Hopkins, a former employee, whereby the Company agreed to pay Mr. Hopkins $250,000 and issue him five year warrants to purchase 250,000 shares of common stock at an exercise price of $0.37 per share, in exchange for Mr. Hopkins dismissing all claims against the Company and the Company taking actions to cause the judgement against Mr. Hopkins to be vacated.  


In June 2016, the Company entered into a settlement agreement with its employment practices insurance company related to the Company’s suit against the insurance company for failure to cover post trial legal costs related to the suit by Mr. Hopkins.  Pursuant to the settlement agreement, the insurance company paid the Company $300,000.

 


ITEM 1A.

RISK FACTORS.

 

Not applicable to smaller reporting companies.


ITEM 2. 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.


In addition to those unregistered securities previously disclosed in reports filed with the SEC, we have sold securities without registration under the Securities Act of 1933, or the Securities Act, as described below:


Name or Class of Investor

  

Date of Sale

  

No. of Securities

  

Reason for Issuance

Consultant (1)

 

June 2016

 

3,489 shares of common stock

 

Consulting services valued at $1,611

Consultant (1)

 

April 2016

 

4,167 shares of common stock

 

Investor relations services valued at $2,000

————————

(1)

Exempt under Section 4(a)(2) of the Securities Act and Regulation 506(b) thereunder. The securities were issued to accredited investors and there was no general solicitation.


On August 12, 2016, the Company issued two year warrants to purchase 261,116 shares of common stock at an exercise price of $2.00 per share in exchange for an advance in the amount of $175,000 from Michael Reger, the Company’s president and principal shareholder in connection with the secured convertible line of credit agreement. The conversion rate of the advance was $0.3351.  The transaction was exempt under Section 4(a)(2) of the Securities Act and Regulation 506(b) thereunder.


ITEM 3. 

DEFAULTS UPON SENIOR SECURITIES.

 

None

 

ITEM 4. 

MINE SAFETY DISCLOSURES.


Not Applicable


ITEM 5. 

OTHER INFORMATION.


None, with the exception of the advancement by Mr. Michael Reger disclosed under Part II, Item 2 above.


ITEM 6. 

EXHIBITS.

 

The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-Q.



19



GELTECH SOLUTIONS, INC. AND SUBSIDIARIES



SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 

 

GELTECH SOLUTIONS, INC.

 

 

 

 

 

August 12, 2016

 

/s/ Peter Cordani

 

 

 

Peter Cordani

 

 

 

Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

August 12, 2016

 

/s/ Michael R. Hull

 

 

 

Michael R. Hull

 

 

 

Chief Financial Officer

(Principal Financial Officer)

 

 

 







20





INDEX TO EXHIBITS


 

  

  

  

Incorporated by Reference

  

Filed or

Furnished

No.

   

Exhibit Description

   

Form

   

Date

   

Number

   

Herewith

 

 

 

 

 

 

 

 

 

 

 

3.1

  

Certificate of Incorporation

  

Sb-2

  

7/20/07

  

3.1

  

  

3.2

 

Certificate of Amendment to the Certificate of Incorporation – Increase of Authorized Capital

 

10-Q

 

2/12/14

 

3.2

 

 

3.3

  

Amended and Restated Bylaws

  

Sb-2

  

7/20/07

  

3.2

  

  

3.4

  

Amendment No. 1 to the Amended and Restated Bylaws

  

10-K

  

9/28/10

  

3.3

  

  

3.5

 

Amendment No. 2 to the Amended and Restated Bylaws

 

8-K

 

9/26/11

 

3.1

 

 

3.6

 

Amendment No. 3 to the Amended and Restated Bylaws

 

8-K

 

9/27/12

 

3.1

 

 

10.1

 

Lincoln Park Purchase Agreement dated August 11, 2015

 

8-K

 

8/12/15

 

10.1

 

 

10.2

 

Lincoln Park Registration Rights Agreement dated August 11, 2015

 

8-K

 

8/12/15

 

10.2

 

 

10.3

 

Amendment No. 1 Lincoln Park Warrant

 

8-K

 

8/12/15

 

10.3

 

 

31.1

  

Certification of Principal Executive Officer (Section 302)

  

  

  

  

  

  

  

Filed

31.2

  

Certification of Principal Financial Officer (Section 302)

  

  

  

  

  

  

  

Filed

32.1

  

Certification of Principal Executive Officer and Principal Financial Officer (Section 906)

  

  

  

  

  

  

  

Furnished*

101 INS

  

XBRL Instance Document

  

  

  

  

  

  

  

Filed

101 SCH

  

XBRL Taxonomy Extension Schema

  

  

  

  

  

  

  

Filed

101 CAL

  

XBRL Taxonomy Extension Calculation Linkbase

  

  

  

  

  

  

  

Filed

101 LAB

  

XBRL Taxonomy Extension Label Linkbase

  

  

  

  

  

  

  

Filed

101 PRE

 

XBRL Taxonomy Extension Presentation Linkbase

 

 

 

 

 

 

 

Filed

101 DEF

 

XBRL Taxonomy Extension Definition Linkbase

 

 

 

 

 

 

 

Filed

———————

*

This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.


Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our stockholders who make a written request to GelTech Solutions, Inc., 1460 Park Lane South, Suite 1, Jupiter, Florida 33458, Attention: Corporate Secretary.












EX-31.1 2 gltc_ex31z1.htm CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER Certification



Exhibit 31.1


CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER


I, Peter Cordani, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of GelTech Solutions, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 12, 2016

 

/s/ Peter Cordani

Peter Cordani

Chief Executive Officer

(Principal Executive Officer)






EX-31.2 3 gltc_ex31z2.htm CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER Certification



Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

 

I, Michael Hull, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of GelTech Solutions, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 12, 2016

 

/s/ Michael Hull

Michael Hull

Chief Financial Officer

(Principal Financial Officer)






EX-32.1 4 gltc_ex32z1.htm CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 Certification



Exhibit 32.1


CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002




In connection with the quarterly report of GelTech Solutions, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof, I, Peter Cordani, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


1.

The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and


2.

The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.




/s/ Peter Cordani

Peter Cordani

Chief Executive Officer

(Principal Executive Officer)

Dated: August 12, 2016





In connection with the quarterly report of GelTech Solutions, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof, I, Michael Hull, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


1.

The quarterly report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and


2.

The information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Michael Hull

Michael Hull

Chief Financial Officer

(Principal Financial Officer)

Dated: August 12, 2016














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Document and Entity Information - shares
6 Months Ended
Jun. 30, 2016
Aug. 12, 2016
Document And Entity Information    
Entity Registrant Name GelTech Solutions, Inc.  
Entity Central Index Key 0001403676  
Document Type 10-Q  
Document Period End Date Jun. 30, 2016  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   51,591,131
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2016  
Entity Voluntary Filers No  
Entity Well-known Seasoned Issuer No  
Entity Current Reporting Status Yes  
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CONSOLIDATED BALANCE SHEETS - USD ($)
Jun. 30, 2016
Dec. 31, 2015
ASSETS    
Cash $ 168,185 $ 135,266
Accounts receivable trade, net 197,155 156,733
Settlement receivable 300,000
Inventories 1,397,339 1,428,157
Prepaid expenses and other current assets 26,239 89,808
Total current assets 2,088,918 1,809,964
Furniture, fixtures and equipment, net 253,212 134,259
Deposits 16,086 16,086
Total assets 2,358,216 1,960,309
LIABILITIES AND STOCKHOLDERS' DEFICIT    
Accounts payable 193,064 271,566
Accrued expenses 322,123 344,094
Settlement accrual 320,631 80,000
Deferred revenue 14,667
Insurance premium finance contract 8,013 54,611
Total current liabilities 858,498 750,271
Convertible notes - related party, net of discounts 2,951,234 2,946,118
Convertible line of credit - related party, net of discounts 3,801,642 2,746,336
Total liabilities 7,611,374 6,442,725
Commitments and contingencies (Note 5)  
Stockholders' deficit    
Preferred stock: $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding
Common stock: $0.001 par value; 150,000,000 shares authorized; 51,166,606 and 48,972,496 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively. 51,167 48,972
Additional paid in capital 40,451,921 38,754,495
Accumulated deficit (45,756,246) (43,285,883)
Total stockholders' deficit (5,253,158) (4,482,416)
Total liabilities and stockholders' deficit $ 2,358,216 $ 1,960,309
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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Jun. 30, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]    
Preferred stock, par value per share $ 0.001 $ 0.001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value per share $ 0.001 $ 0.001
Common stock, shares authorized 150,000,000 150,000,000
Common stock, shares issued 51,166,606 48,972,496
Common stock, shares outstanding 51,166,606 48,972,496
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Income Statement [Abstract]        
Sales $ 484,934 $ 433,246 $ 703,304 $ 533,603
Cost of goods sold 135,112 219,559 211,135 254,371
Gross profit 349,822 213,687 492,169 279,232
Operating expenses:        
Selling, general and administrative expenses 1,005,203 1,390,152 2,179,675 2,462,828
Research and development 37,514 27,757 155,463 38,739
Total operating expenses 1,042,717 1,417,909 2,335,138 2,501,567
Loss from operations (692,895) (1,204,222) (1,842,969) (2,222,335)
Other income (expense)        
Other income 300,000 1,700 300,000 1,900
Interest income 3 3 6 5
Gain (loss) on conversion of interest (72,765) 12,841
Loss on extinguishment of debt (596,648)
Loss on extension of warrants (206,620)
Loss on settlement (320,631) (412,867) (320,631) (412,867)
Interest expense (173,870) (80,080) (327,384) (168,296)
Total other income (expense) (194,498) (491,244) (627,394) (1,163,065)
Net loss $ (887,393) $ (1,695,466) $ (2,470,363) $ (3,385,400)
Net loss per common share - basic and diluted $ (0.02) $ (0.04) $ (0.05) $ (0.07)
Weighted average shares outstanding - basic and diluted 50,409,090 47,511,512 49,894,633 47,248,260
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Reconciliation of net loss to net cash used in operating activities:    
Net loss $ (2,470,363) $ (3,385,400)
Adjustments to reconcile net loss to net cash used in operating activities:    
Bad debt expense (recovery) (21,875) 2,024
Depreciation 34,990 28,446
Amortization of debt discounts 65,654 33,847
Loss (gain) on conversion of interest 72,765 (12,841)
Loss on extinguishment of debt 596,648
Warrants issued for services 44,477
Common stock issued for services 11,267
Loss on extension of warrants 206,620
Employee stock option compensation expense 298,808 588,127
Changes in assets and liabilities:    
Accounts receivable (18,547) (174,423)
Settlement receivable (300,000)
Inventories 30,818 (137,992)
Prepaid expenses and other current assets 63,569 49,846
Accounts payable (78,502) 201,778
Deferred revenue 14,667
Settlement accrual 240,631 451,000
Accrued expenses 276,206 127,831
Net cash used in operating activities (1,528,815) (1,631,109)
Cash flows from Investing Activities    
Purchases of equipment (153,943) (11,893)
Net cash used in investing activities (153,943) (11,893)
Cash flows from Financing Activities    
Proceeds from sale of stock under stock purchase agreement 407,275
Proceeds from sale of stock and warrants 150,000 150,000
Proceeds from sale of stock in private placements 104,250
Proceeds from advances on convertible line of credit with related parties 1,205,000 1,375,000
Payments on insurance finance contract (46,598) (54,740)
Net cash provided by financing activities 1,715,677 1,574,510
Net (decrease) increase in cash 32,919 (68,492)
Cash - beginning 135,266 195,615
Cash - ending 168,185 127,123
Supplemental Disclosure of Cash Flow Information:    
Cash paid for interest 1,188 1,486
Cash paid for income taxes
Supplementary Disclosure of Non-cash Investing and Financing Activities:    
Beneficial conversion feature of convertible notes 105,116 75,609
Loan discount from warrants 105,116 75,609
Stock issued for vehicle 16,000
Stock issued for services 1,674
Stock issued for accrued interest $ 298,177 $ 149,811
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Organization, Basis of Presentation and Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization, Basis of Presentation and Summary of Significant Accounting Policies

NOTE 1 Organization, Basis of Presentation and Summary of Significant Accounting Policies

 

Organization

 

GelTech Solutions, Inc., or GelTech or the Company, generates revenue primarily from marketing products based around the following four product categories (1) FireIce®, a water enhancing powder that can be utilized both as a fire suppressant in wildland and urban firefighting, including fires in underground utility structures, and in wildland firefighting as a medium-term fire retardant to protect wildlands, structures and firefighters; (2) FireIce Shield®, a line of products used by industry, police departments and first responders to protect assets from fire; (3) Soil2O® “Dust Control”, our application which is used for dust mitigation in the aggregate, road construction, mining, as well as, other industries that deal with daily dust control issues and (4) Soil2O®, a product which reduces the use of water and is primarily marketed to golf courses and commercial landscapers and most recently to homeowners via the Soil2O® Home Lawn Kit. The Company also markets equipment that is used in the application of these primary products including (1) Emergency Manhole FireIce Delivery System, or EMFIDS, an innovative system designed to deliver FireIce® into a manhole in the event of a fire or explosion and (2) FireIce® Home Defense Unit, a system for applying FireIce® to structures to protect them from wildfires.

 

Our unaudited condensed consolidated financial statements have been prepared on a going concern basis, and we need to generate sufficient material revenues to support the ongoing business of GelTech.

 

The corporate office is located in Jupiter, Florida.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its three wholly-owned subsidiaries: FireIce Gel, Inc., GelTech International, Inc. and Weather Tech Innovations, Inc. There has been no activity in FireIce Gel, Inc., Weather Tech Innovations, Inc. and GelTech International, Inc.  

 

These unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (”SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by "GAAP" for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The information included in these unaudited consolidated interim financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Conditions and Results of Operations contained in this report and the audited consolidated financial statements and accompanying notes included in the Company’s Transition Report on Form 10-KT for the six months ended December 31, 2015 filed on June 30, 2016.

 

Inventories

 

Inventories are stated at the lower of cost or market, with cost being determined using the first-in, first-out method. Inventories as of June 30, 2016 consisted of raw materials and finished goods in the amounts of $577,740 and $819,599, respectively.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable; however, actual results could differ materially from these estimates. Significant estimates for the six months ended June 30, 2016 include the allowance for doubtful accounts, depreciation and amortization, valuation of inventories, valuation of options and warrants granted for services or settlements, valuation of common stock granted for services or debt conversion, valuation of debt discount related to the beneficial conversion feature of convertible notes, accruals for litigation losses and the valuation of deferred tax assets.

 

Revenue Recognition

 

Revenue from sales of products is recognized when persuasive evidence of an arrangement exists, products have been shipped to the customer, economic risk of loss has passed to the customer, the price is fixed or determinable, collection is reasonably assured, and any future obligations of the Company are insignificant. Revenue is shown net of returns and allowances. The Company provides certain customers with the right of return for unsold product. Sales to these customers are recorded as the customer sells the product, thus removing the right of return.

 

Products shipped from either our third-party fulfillment companies or our Jupiter, Florida or Irwindale, California locations are shipped FOB shipping point. Normal payment terms are net 30 days depending on the arrangement we have with the customer. As such, revenue is recognized when product has been shipped from either the third-party fulfillment company or from the Jupiter, Florida or Irwindale, California locations.

 

The Company follows the guidance of ASC 605-50-25, “Revenue Recognition, Customer Payments”. Accordingly, any incentives received from vendors are recognized as a reduction of the cost of products. Promotional products or samples given to customers or potential customers are recognized as a cost of goods sold. However, products we utilize to perform demonstrations for potential customers are recorded as a marketing expense in operations.

 

During the three months ended June 30, 2016, the Company entered into two agreements with a state forestry agency whereby the Company agreed to pay for and build two fixed airport mixing facilities in order to support the state agency’s aerial wildland firefighting operations.  In connection with the agreement, the state agency has the use of the equipment in exchange for paying a premium price per bucket for our HVO-F aerial FireIce product and also making an initial minimum purchase of 200 buckets per year.  As such, the Company has deferred the premium portion of the bucket price for the minimum purchase amount and will recognize the revenue related to the premium over 12 months.  For the six months ended June 30, 2016, the Company deferred $16,000 of the minimum purchase amounts and recognized $1,333 in revenue.

 

 

Net Earnings (Loss) per Share

 

The Company computes net earnings (loss) per share in accordance with ASC 260-10, “Earnings per Share.” ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. The Company’s diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.  At June 30, 2016, there were options to purchase 10,710,340 shares of the Company’s common stock, warrants to purchase 12,198,183 shares of the Company’s common stock and 18,819,502 shares of the Company’s common stock are reserved for convertible notes which may dilute future earnings per share.

 

Stock-Based Compensation

 

The Company accounts for employee stock-based compensation in accordance with ASC 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units, and employee stock purchases based on estimated fair values.

 

Determining Fair Value Under ASC 718-10

 

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables.

 

The Company estimates volatility based upon the historical stock price of the Company and estimates the expected term for employee stock options using the simplified method for employees and directors and the contractual term for non-employees.  The risk free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities.

 

The fair values of stock options and warrants granted during the period from January 1, 2016 to June 30, 2016 were estimated using the following assumptions:

 

     
Risk free interest rate   0.64% - 1.49%
Expected term (in years)   2.0 - 5.0
Dividend yield   ––
Volatility of common stock   103.14% - 104.54%
Estimated annual forfeitures   ––

 

New Accounting Pronouncements

 

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires an entity to measure most inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The accounting standard is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company does not expect this accounting standard to have a significant impact on the Company’s consolidated financial position or results of operations.

 

No additional Accounting Standards Updates (ASUs) which were not effective until after June 30, 2016 are expected to have a significant effect on the Company's consolidated financial position or results of operations.

XML 17 R7.htm IDEA: XBRL DOCUMENT v3.5.0.2
Going Concern
6 Months Ended
Jun. 30, 2016
Going Concern [Abstract]  
Going Concern

NOTE 2 – Going Concern


These unaudited consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize it assets and discharge its liabilities in the normal course of business.  As of June 30, 2016, the Company had an accumulated deficit and stockholders’ deficit of $45,756,246 and $5,253,158 respectively, incurred losses from operations of $1,842,969 for the six months ended June 30, 2016 and used cash in operations of $1,528,815 during the six months ended June 30, 2016.  In addition, the Company has not yet generated revenue sufficient to support ongoing operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


During the six months ended June 30, 2016, the Company received $1,205,000 in advances from its convertible line of credit with its president and principal shareholder. The Company also received $407,275 from Lincoln Park Capital Fund LLC in connection with a $10 million stock purchase agreement entered into in August 2015. See Note 4.


Management believes that the Purchase Agreement with Lincoln Park, additional funding from its president and principal shareholder and the revenue prospects from the Wildland industry provide the opportunity for the Company to continue as a going concern.  Ultimately, the continuation of the Company as a going concern is dependent upon the ability of the Company to generate sufficient revenue to attain profitable operations.

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Note Agreements - Related Party
6 Months Ended
Jun. 30, 2016
Convertible Note Agreements - Related Party  
Convertible Note Agreements - Related Party

NOTE 3 – Convertible Note Agreements – Related Party


The Company currently has three debt facilities outstanding, all of them held by its president and principal shareholder.


One convertible note in the amount of $1,997,483, dated February 1, 2013 was a consolidation of prior debt instruments. The note bore annual interest of 7.5%, was convertible at $0.35 per share and due December 31, 2016. On February 12, 2015, this note was modified by securing the note with all the assets of the Company and by extending the due date of the note from December 31, 2016 to December 31, 2020. The modification was accounted for as a debt extinguishment in accordance with ASC 470. As a result of the modification the Company recorded a loss on extinguishment of debt of $34,586. During the six months ended June 30, 2016, the Company recognized interest expense of $74,700. As of June 30, 2016, the principal balance of the note is $1,997,483 and accrued interest amounted to $61,566. In February 2016, the Company issued 428,032 shares of common stock to its president and principal shareholder in payment of accrued interest of $149,811 resulting in a loss on conversion of interest of $72,765.


A second convertible note in the amount of $1,000,000 dated July 11, 2013 related to a new funding on that date. The note bore annual interest of 7.5%, was convertible at $1.00 per share and was due July 10, 2018. In connection with the note, the Company issued five–year warrants to purchase 500,000 shares of common stock at an exercise price of $1.30 per share. On February 12, 2015, this note was modified by securing the note with all the assets of the Company, by extending the due date of the note from July 10, 2018 to December 31, 2020 and by reducing the conversion rate of the note from $1.00 to $0.35 per share. The modification was accounted for as a debt extinguishment in accordance with ASC 470. As a result of the modification, the Company recorded a loss on extinguishment of debt of $562,062. Also, in connection with the modification the Company recorded a note discount of $60,390, related to the relative fair value of the warrants attached to the note. For the six months ended June 30, 2016 the Company recorded interest expense of $5,116 to amortize the discounts related to the warrants of the note, originated in July 2013. As of June 30, 2016, the balance of the unamortized discount related to the warrants was $46,249. As of June 30, 2016, the principal balance on this note is $1,000,000 and accrued interest amounted to $72,740.

In connection with the debt modifications described above, the Company entered into a Secured Revolving Convertible Promissory Note Agreement for up to $4 million with its president and principal shareholder.  On April 8, 2016, the Company and its president and principal shareholder entered into the First Amendment to Secured Revolving Convertible Promissory Note Agreement increasing the credit facility from $4 million to $5 million.  Under the agreement, the Company may, with the prior approval of its president and principal shareholder, receive advances under this agreement. Each advance bears an annual interest rate of 7.5%, is due December 31, 2020 and is convertible at the rate equal to the closing price of the Company’s common stock on the day prior to the date the parties agree to the advance. In addition, the Company will issue the Company’s president and principal shareholder two year warrants to purchase shares of common stock at an exercise price of $2.00 per share. The number of warrants issued equals 50% of the number of shares issuable upon the conversion of the related advance.


For the six months ended June 30, 2016, the Company received eight advances totaling $1,205,000 with conversion rates between $0.35 and $0.55 per share, and issued two year warrants to purchase 1,491,593 shares of common stock at an exercise price of $2.00 per share. In connection with these advances, the Company has recorded loan discounts related to the warrants and the beneficial conversion features of the advances amounting to $105,116 and $105,116, respectively. During the six months ended June 30, 2016, the Company has recognized interest expense of $60,538 related to the amortization of loan discounts. As of June 30, 2016, the principal balance of the advances was $4,470,000, the balance of the unamortized discounts related to the warrants and the beneficial conversion feature was $334,179 and $334,179, respectively, and the balance of accrued interest was $121,252.


The calculated loan discounts were based on the relative fair value of the warrants which were calculated by the Company using the Black Scholes option pricing model, using volatilities of between 103.14% and 104.23%, based on the Company’s historical stock price, discount rates from 0.64% to 0.90%, and expected terms of 2 years, the term of the warrants.

XML 19 R9.htm IDEA: XBRL DOCUMENT v3.5.0.2
Stockholders' Deficit
6 Months Ended
Jun. 30, 2016
Stockholders' Equity Note [Abstract]  
Stockholders' Deficit

NOTE 4 – Stockholders’ Deficit


Preferred Stock


The Company has authorized 5,000,000 shares of preferred stock, par value $0.001 per share with such rights, preferences and limitation as may be set from time to time by resolution of the board of directors and the filing of a certificate of designation as required by Delaware General Corporation Law.


Common Stock


On August 12, 2015, GelTech signed a $10 million Purchase Agreement with Lincoln Park. The Company also entered into a Registration Rights Agreement with Lincoln Park whereby we agreed to file a registration statement related to the transaction with the SEC covering the shares that may be issued to Lincoln Park under the Purchase Agreement.

 

Under the terms and subject to the conditions of the Purchase Agreement, GelTech has the right to sell, and Lincoln Park is obligated to purchase, up to $10 million in shares of the Company’s common stock, subject to certain limitations, from time to time, over the 30-month period commencing on the date that a registration statement, which the Company agreed to file with the SEC pursuant to the Registration Rights Agreement, is declared effective by the SEC.  The Company filed the registration statement with the SEC on October 5, 2015 and it was declared effective by the SEC on October 16, 2015.


During the three months ended March 31, 2016, the Company issued 508,822 shares of common stock in exchange for $225,245 in connection with the Lincoln Park Purchase Agreement.


During the three months ended June 30, 2016, the Company issued 507,129 shares of common stock in exchange for $182,030 in connection with the Lincoln Park Purchase Agreement.


In February 2016, the Company issued 428,032 shares of common stock to its president and principal shareholder in payment of accrued interest of $149,811 resulting in a loss on conversion of interest of $72,765.


During the three months ended March 31, 2016, the Company issued 13,947 shares of common stock in payment of investor relation services values at $6,000.  In addition, the Company issued 3,581 shares of common stock in payment of consulting services valued at $1,656.



During the three months ended June 30, 2016, the Company issued 4,167 shares of common stock in payment of investor relation services valued at $2,000.  In addition, the Company issued 3,489 shares of common stock in payment of consulting services valued at $1,611.


In April 2016, the Company issued 296,371 shares of commons stock to its president and principal shareholder upon the conversion of accrued interest in the amount of $148,365 related to the advances under the Secured Revolving Convertible Promissory Note Agreement. No gain or loss will be recognized on the conversion as the conversion price used was the current price of the stock.


In June 2016, the Company issued 428,572 shares of common stock and two year warrants to purchase 214,286 shares of common stock at an exercise price of $2.00 per share to a director and his wife in exchange for $150,000 in connection with a private placement.


Stock-Based Compensation


Stock-based compensation expense recognized under ASC 718-10 for the period January 1, 2016 to June 30, 2016, was $282,074 for stock options granted to employees and directors. This expense is included in selling, general and administrative expenses in the unaudited consolidated statements of operations. Stock-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. At June 30, 2016 the total compensation cost for stock options not yet recognized was approximately $52,356.  This cost will be recognized over the remaining vesting term of the options of approximately two years.


Stock-based awards granted to non-employees, in the form of warrants to purchase the Company’s common stock, are valued at fair value in accordance with the measurement and recognition criteria of ASC 505-50 "Equity Based payments to Non-Employees.” Stock based compensation to non-employees recognized for the six months ended June 30, 2016 was $61,211.


In April 2016, the Company issued ten year options to purchase 30,000 shares of common stock at an exercise price of $0.39 per share to a new director.  The options vest annually over three years, subject to the continued service on the board.  The options were valued using the Black-Scholes option pricing model using a volatility of 103.79% based upon the historical price of the company’s stock, a term of 6.5 years, using the simplified method and a risk free rate of 1.52%.  The calculated fair value, $9,631 will be recognized over the requisite service period.


Warrants to Purchase Common Stock


Warrants Issued as Settlements


During the six months ended June 30, 2016, there were no warrants granted for settlements.


Warrants Issued for Cash or Services


In January 2016, the Company granted a one year extension for warrants to purchase 3,968,258 shares of common stock which were set to expire at various dates in 2016.  Of the warrants extended, 2,443,565 were held by our president and principal shareholder and a director.  In connection with the extension, the Company recorded other expense of approximately $207,000 for the six months ended June 30, 2016 representing the difference between the fair value of the old warrants and the extended warrants.


During the six months ended June 30, 2016, the Company issued five year warrants to purchase 150,000 shares of common stock at an exercise price of $0.39 per share in exchange for legal services.  The warrants were valued with the Black-Scholes option pricing model using a volatility of 103.14% based upon the historical price of the company’s stock, a term of five years, the term of the warrants and a risk free rate of 1.49%.  The calculated fair value, $44,477 was recorded as expense for the six months ended June 30, 2016.


During the six months ended June 30, 2016, the Company issued two year warrants to purchase 1,491,593 shares of common stock at an exercise price of $2.00 per shares in connection with advances of $1,205,000 from its president and principal shareholder related to the convertible line of credit agreement.


In June 2016, the Company issued two year warrants to purchase 214,286 shares of common stock at an exercise price of $2.00 per share to a director and his wife in connection with a private placement.

XML 20 R10.htm IDEA: XBRL DOCUMENT v3.5.0.2
Commitments and Contingencies
6 Months Ended
Jun. 30, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 5 – Commitments and Contingencies


The Company was sued by a former employee on June 23, 2008, alleging breach of a consulting agreement and an employment agreement entered into in May and June 2007, respectively. In addition, the plaintiff sought to recover certain of his personal property, which was used or stored in the Company’s offices and alleges the Company invaded his privacy by looking at his personal computer (which was used in the Company’s business) in the Company’s offices.  On October 14, 2015, the Court issued an order on Defendant GelTech’s Motion for Attorney’s Fees and Costs granting GelTech attorney fees and costs in excess of the amount of its litigation accrual for the case.  As such, the Company reversed the litigation accrual resulting in other income of $56,956 which was included in the Company’s statement of operations for the six months ended December 31, 2015.  In November 2015, the Court issued a Final Judgement against the plaintiff in the amount of $510,499.  The plaintiff has filed appeals which are pending.


In July 2016, the Company entered into a settlement agreement with the plaintiff whereby the Company agreed to pay the plaintiff $250,000 and issue the plaintiff five year warrants to purchase 250,000 shares of common stock at an exercise price of $0.37 per share, in exchange for the dismissal of all claims against the Company.  The warrants were valued using the Black-Scholes option pricing model using a volatility of 104.54% based upon the historical price of the company’s stock, a term of five years, the term of the warrants and a risk free rate of 1.01%, resulting in a fair value of $70,631.  As such, the Company recorded a loss on settlement of $320,631 for the six months ended June 30, 2016.  


In June 2016, the Company entered into a settlement agreement with its employment practices insurance company related to the Company’s suit against the insurance company for failure to cover post trial legal costs related to the suit described above in this Note 5.  Under the settlement agreement, the insurance company agreed to pay the Company $300,000, which payment was received in July 2016.  As such the Company recorded a gain on settlement of $300,000 for the six months ended June 30, 2016.


In January 2016, the Company entered into a settlement agreement with a former shareholder of the Company’s predecessor company under which the Company paid $80,000 in exchange for a general release.

XML 21 R11.htm IDEA: XBRL DOCUMENT v3.5.0.2
Related Party Transactions
6 Months Ended
Jun. 30, 2016
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 6 – Related Party Transactions


During the six months ended June 30, 2016, the Company issued warrants to its president and principal shareholder in exchange for cash as more fully described in Notes 3 and 8.

XML 22 R12.htm IDEA: XBRL DOCUMENT v3.5.0.2
Concentrations
6 Months Ended
Jun. 30, 2016
Risks and Uncertainties [Abstract]  
Concentrations

NOTE 7 – Concentrations


The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through June 30, 2016. As of June 30, 2016, there were no cash balances held in depository accounts that are not insured.


At June 30, 2016, four customers accounted for 36.8%, 21.7%, 15.1% and 12.4% of accounts receivable.


For the six months ended June 30, 2016, three customers accounted for 20.0%, 18.6% and 17.3% of sales.


Approximately 13.4% of revenue was generated from customers outside the United States during the six months ended June 30, 2016.


During the six months ended June 30, 2016, sales primarily resulted from three products, FireIce®, Soil2O® and FireIce Shield® which made up 68.1%, 14.1% and 14.0%, respectively, of total sales. Of the FireIce® sales, 94.1% related to the sale of FireIce® products and 5.6% related to sales of the FireIce extinguishers and educator equipment.  Of the Soil2O® sales, 39.8% related to traditional sales of Soil2O® and 57.8% related to sales of Soil2O® Dust Control.  Of the FireIce Shield® sales, 46.6% consisted sales of asset protection canisters and refills and 52.7% consisted of sale of spray bottles for use by welders and plumbers.  


One vendor accounted for 62.2% of the Company’s approximately $166,000 in purchases of raw material, finished goods and packaging during the six months ended June 30, 2016.


During the six months ended June 30, 2016, our president and principal shareholder provided 100% of the Company’s debt financing.

XML 23 R13.htm IDEA: XBRL DOCUMENT v3.5.0.2
Subsequent Events
6 Months Ended
Jun. 30, 2016
Subsequent Events [Abstract]  
Subsequent Events

NOTE 8 Subsequent Events


In accordance with the 2007 Equity Incentive Plan, on July 1, 2016, the Company issued options to purchase 680,000 shares of common stock to directors. The options have an exercise price of $0.37 per share, vest on June 30, 2017¸ subject to continuing service as a director and have a ten-year term. The options were valued using the Black-Scholes model using a volatility of 104.37% (derived using the historical market price for the Company’s common stock since it began trading in June 2008), an expected term of 5.5 years (using the simplified method) and a discount rate of 1.49%. The fair value of these options, $198,236, will be recognized as expense over the requisite service period.


Since July 1, 2016, the Company has issued two year warrants to purchase  261,116 shares of common stock at an exercise price of $2.00 per share in exchange for advances in the amount of $175,000 from the Company’s president and principal shareholder in connection with the secured convertible line of credit agreement. The conversion rate of the advance was $0.3351.


Since July 1, 2016, the Company has issued 151,927 shares of common stock to Lincoln Park in exchange for $49,205 in connection with the Purchase Agreement.


Since July 1, 2016, the Company has issued 2,328 shares of common stock in exchange for consulting services valued at $900.


In July 2016, the Company issued 270,270 shares of common stock and two year warrants to purchase 135,135 shares of common stock at an exercise price of $2.00 per share in exchange for $100,000 in connection with a private placement with an accredited investor.

In July 2016, the Company issued 208,333 shares of common stock to its president and principal stockholder in payment of accrued interest in the amount of $75,000 related to a convertible note.

 

XML 24 R14.htm IDEA: XBRL DOCUMENT v3.5.0.2
Organization, Basis of Presentation and Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization

Organization

 

GelTech Solutions, Inc., or GelTech or the Company, generates revenue primarily from marketing products based around the following four product categories (1) FireIce®, a water enhancing powder that can be utilized both as a fire suppressant in wildland and urban firefighting, including fires in underground utility structures, and in wildland firefighting as a medium-term fire retardant to protect wildlands, structures and firefighters; (2) FireIce Shield®, a line of products used by industry, police departments and first responders to protect assets from fire; (3) Soil2O® “Dust Control”, our application which is used for dust mitigation in the aggregate, road construction, mining, as well as, other industries that deal with daily dust control issues and (4) Soil2O®, a product which reduces the use of water and is primarily marketed to golf courses and commercial landscapers and most recently to homeowners via the Soil2O® Home Lawn Kit. The Company also markets equipment that is used in the application of these primary products including (1) Emergency Manhole FireIce Delivery System, or EMFIDS, an innovative system designed to deliver FireIce® into a manhole in the event of a fire or explosion and (2) FireIce® Home Defense Unit, a system for applying FireIce® to structures to protect them from wildfires.

 

Our unaudited condensed consolidated financial statements have been prepared on a going concern basis, and we need to generate sufficient material revenues to support the ongoing business of GelTech.

 

The corporate office is located in Jupiter, Florida.

Basis of Presentation

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its three wholly-owned subsidiaries: FireIce Gel, Inc., GelTech International, Inc. and Weather Tech Innovations, Inc. There has been no activity in FireIce Gel, Inc., Weather Tech Innovations, Inc. and GelTech International, Inc.  

 

These unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (”SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by "GAAP" for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The information included in these unaudited consolidated interim financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Conditions and Results of Operations contained in this report and the audited consolidated financial statements and accompanying notes included in the Company’s Transition Report on Form 10-KT for the six months ended December 31, 2015 filed on June 30, 2016.

Inventories

Inventories

 

Inventories are stated at the lower of cost or market, with cost being determined using the first-in, first-out method. Inventories as of June 30, 2016 consisted of raw materials and finished goods in the amounts of $577,740 and $819,599, respectively.

Use of Estimates

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable; however, actual results could differ materially from these estimates. Significant estimates for the six months ended June 30, 2016 include the allowance for doubtful accounts, depreciation and amortization, valuation of inventories, valuation of options and warrants granted for services or settlements, valuation of common stock granted for services or debt conversion, valuation of debt discount related to the beneficial conversion feature of convertible notes, accruals for litigation losses and the valuation of deferred tax assets.

Revenue Recognition

Revenue Recognition

 

Revenue from sales of products is recognized when persuasive evidence of an arrangement exists, products have been shipped to the customer, economic risk of loss has passed to the customer, the price is fixed or determinable, collection is reasonably assured, and any future obligations of the Company are insignificant. Revenue is shown net of returns and allowances. The Company provides certain customers with the right of return for unsold product. Sales to these customers are recorded as the customer sells the product, thus removing the right of return.

 

Products shipped from either our third-party fulfillment companies or our Jupiter, Florida or Irwindale, California locations are shipped FOB shipping point. Normal payment terms are net 30 days depending on the arrangement we have with the customer. As such, revenue is recognized when product has been shipped from either the third-party fulfillment company or from the Jupiter, Florida or Irwindale, California locations.

 

The Company follows the guidance of ASC 605-50-25, “Revenue Recognition, Customer Payments”. Accordingly, any incentives received from vendors are recognized as a reduction of the cost of products. Promotional products or samples given to customers or potential customers are recognized as a cost of goods sold. However, products we utilize to perform demonstrations for potential customers are recorded as a marketing expense in operations.

 

During the three months ended June 30, 2016, the Company entered into two agreements with a state forestry agency whereby the Company agreed to pay for and build two fixed airport mixing facilities in order to support the state agency’s aerial wildland firefighting operations.  In connection with the agreement, the state agency has the use of the equipment in exchange for paying a premium price per bucket for our HVO-F aerial FireIce product and also making an initial minimum purchase of 200 buckets per year.  As such, the Company has deferred the premium portion of the bucket price for the minimum purchase amount and will recognize the revenue related to the premium over 12 months.  For the six months ended June 30, 2016, the Company deferred $16,000 of the minimum purchase amounts and recognized $1,333 in revenue.

Net Earnings (Loss) per Share

Net Earnings (Loss) per Share

 

The Company computes net earnings (loss) per share in accordance with ASC 260-10, “Earnings per Share.” ASC 260-10 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period. The Company’s diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.  At June 30, 2016, there were options to purchase 10,710,340 shares of the Company’s common stock, warrants to purchase 12,198,183 shares of the Company’s common stock and 18,819,502 shares of the Company’s common stock are reserved for convertible notes which may dilute future earnings per share.

Stock-Based Compensation

Stock-Based Compensation

 

The Company accounts for employee stock-based compensation in accordance with ASC 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options, restricted stock units, and employee stock purchases based on estimated fair values.

 

Determining Fair Value Under ASC 718-10

 

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables.

 

The Company estimates volatility based upon the historical stock price of the Company and estimates the expected term for employee stock options using the simplified method for employees and directors and the contractual term for non-employees.  The risk free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities.

 

The fair values of stock options and warrants granted during the period from January 1, 2016 to June 30, 2016 were estimated using the following assumptions:

 

     
Risk free interest rate   0.64% - 1.49%
Expected term (in years)   2.0 - 5.0
Dividend yield   ––
Volatility of common stock   103.14% - 104.54%
Estimated annual forfeitures   ––

 

New Accounting Pronouncements

New Accounting Pronouncements

 

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires an entity to measure most inventory at the lower of cost and net realizable value, thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The accounting standard is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein. Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company does not expect this accounting standard to have a significant impact on the Company’s consolidated financial position or results of operations.

 

No additional Accounting Standards Updates (ASUs) which were not effective until after June 30, 2016 are expected to have a significant effect on the Company's consolidated financial position or results of operations.

XML 25 R15.htm IDEA: XBRL DOCUMENT v3.5.0.2
Organization, Basis of Presentation and Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2016
Organization And Basis Of Presentation Tables  
Schedule of Fair Value Assumptions for Stock Options
Risk free interest rate   0.64% - 1.49%
Expected term (in years)   2.0 - 5.0
Dividend yield   ––
Volatility of common stock   103.14% - 104.54%
Estimated annual forfeitures   ––
XML 26 R16.htm IDEA: XBRL DOCUMENT v3.5.0.2
Organization, Basis of Presentation and Summary of Significant Accounting Policies (Details)
6 Months Ended
Jun. 30, 2016
USD ($)
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Raw materials $ 577,740
Finished goods 819,599
Deferred revenue 16,000
Revenue recognized $ 1,333
Employee Options and Stock Appreciation Rights [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Shares considered antidilutive | shares 10,710,340
Warrants [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Shares considered antidilutive | shares 12,198,183
Stock Options For Convertible Notes Reserved [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Shares considered antidilutive | shares 18,819,502
XML 27 R17.htm IDEA: XBRL DOCUMENT v3.5.0.2
Organization, Basis of Presentation and Summary of Significant Accounting Policies (Fair Value Assumptions) (Details)
6 Months Ended
Jun. 30, 2016
Risk-free interest rate, minimum 0.64%
Risk-free interest rate, maximum 1.49%
Dividend yield
Volatility of common stock, minimum 103.14%
Volatility of common stock, maximum 104.54%
Estimated annual forfeitures
Minimum [Member]  
Expected term (in years) 2 years
Maximum [Member]  
Expected term (in years) 5 years
XML 28 R18.htm IDEA: XBRL DOCUMENT v3.5.0.2
Going Concern (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Aug. 12, 2015
Related Party Transaction [Line Items]            
Accumulated deficit $ 45,756,246   $ 45,756,246   $ 43,285,883  
Stockholders' deficit 5,253,158   5,253,158   $ 4,482,416  
Loss from operations $ 692,895 $ 1,204,222 1,842,969 $ 2,222,335    
Net cash used in operating activities     1,528,815 $ 1,631,109    
President and Principal Shareholder [Member]            
Related Party Transaction [Line Items]            
Advances from convertible line of credit     1,205,000      
Lincoln Park Capital Fund, LLC. [Member]            
Related Party Transaction [Line Items]            
Common stock issued           $ 10,000,000
Proceeds from issuance of common stock     $ 407,275      
XML 29 R19.htm IDEA: XBRL DOCUMENT v3.5.0.2
Convertible Note Agreements - Related Party (Details) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Feb. 12, 2015
Jul. 11, 2013
Feb. 01, 2013
Feb. 29, 2016
Jun. 30, 2016
Sep. 30, 2015
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Apr. 30, 2016
Apr. 08, 2016
Debt Conversion [Line Items]                      
Loss on extinguishment of debt           $ 596,648    
Loss on conversion of interest           72,765 (12,841)    
Beneficial conversion feature of convertible notes               105,116 75,609    
Loan discount from warrants               $ 105,116 $ 75,609    
President [Member] | Secured Convertible Line of Credit Agreement [Member]                      
Debt Conversion [Line Items]                      
Maximum borrowing capacity $ 4,000,000                   $ 5,000,000
Debt, interest rate 7.50%                    
Maturity date Dec. 31, 2020                    
Term 2 years                    
Number of shares callable by warrants         1,491,593     1,491,593      
Recognized interest expense               $ 60,538      
Exercise price of shares called by warrants $ 2.00       $ 2.00     $ 2.00      
Term               2 years      
Percentage of warrants issued equals of number of shares issuable upon the conversion 50.00%                    
Number of advances received               7      
Expected term, simplified method               2 years      
President and Principal Shareholder [Member] | Secured Convertible Line of Credit Agreement [Member]                      
Debt Conversion [Line Items]                      
Debt issued         $ 4,470,000     $ 4,470,000      
Number of shares callable by warrants         1,491,593     1,491,593      
Accrued interest         $ 121,252     $ 121,252   $ 148,365  
Unamortized discount         334,179     334,179      
Unamortized beneficial conversion feature         $ 334,179     334,179      
Convertible amount               $ 1,205,000      
President and Principal Shareholder [Member] | Common Stock [Member]                      
Debt Conversion [Line Items]                      
Shares issued upon conversion of convertible note       428,032              
Accrued interest       $ 149,811              
Loss on conversion of interest       $ 72,765              
Minimum [Member]                      
Debt Conversion [Line Items]                      
Convertible note, conversion price         $ 0.35     $ 0.35      
Expected term, simplified method               2 years      
Minimum [Member] | President [Member] | Secured Convertible Line of Credit Agreement [Member]                      
Debt Conversion [Line Items]                      
Volatility rate (as a percent)               103.14%      
Discount rate               0.64%      
Maximum [Member]                      
Debt Conversion [Line Items]                      
Convertible note, conversion price         $ 0.55     $ 0.55      
Expected term, simplified method               5 years      
Maximum [Member] | President [Member] | Secured Convertible Line of Credit Agreement [Member]                      
Debt Conversion [Line Items]                      
Volatility rate (as a percent)               104.23%      
Discount rate               0.90%      
Convertible Note Payable Dated February 2013 [Member] | President [Member]                      
Debt Conversion [Line Items]                      
Debt issued         $ 1,997,483     $ 1,997,483      
Debt, interest rate     7.50%                
Convertible note, conversion price     $ 0.35                
Maturity date Dec. 31, 2020   Dec. 31, 2016                
Loss on extinguishment of debt           $ (34,586)          
Accrued interest         61,566     61,566      
Recognized interest expense               74,700      
Convertible Note Payable Dated July 2013 [Member] | President [Member]                      
Debt Conversion [Line Items]                      
Debt issued   $ 1,000,000     1,000,000     1,000,000      
Debt, interest rate   7.50%                  
Convertible note, conversion price $ 0.35 $ 1.00                  
Maturity date Dec. 31, 2020 Jul. 10, 2018                  
Loss on extinguishment of debt           (562,062)          
Term   5 years                  
Number of shares callable by warrants   500,000                  
Accrued interest         72,740     72,740      
Note discount           $ 60,390          
Recognized interest expense               5,116      
Unamortized discount         $ 46,249     $ 46,249      
Exercise price of shares called by warrants   $ 1.30                  
XML 30 R20.htm IDEA: XBRL DOCUMENT v3.5.0.2
Stockholders' Deficit (Preferred Stock) (Details) - $ / shares
Jun. 30, 2016
Dec. 31, 2015
Stockholders' Equity Note [Abstract]    
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, par value per share $ 0.001 $ 0.001
XML 31 R21.htm IDEA: XBRL DOCUMENT v3.5.0.2
Stockholders' Deficit (Common Stock) (Details) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Feb. 12, 2015
Aug. 12, 2016
Jun. 30, 2016
Apr. 30, 2016
Feb. 29, 2016
Jun. 30, 2016
Mar. 31, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Aug. 31, 2015
Aug. 12, 2015
Class of Stock [Line Items]                        
Proceeds from the sale of stock and warrants through private placements                 $ 104,250    
Gain (loss) on conversion of interest             72,765 (12,841)    
Common stock issued for services, shares   2,328                    
Common stock issued for services   $ 900             $ 1,674    
President and Principal Shareholder [Member] | Common Stock [Member]                        
Class of Stock [Line Items]                        
Common stock issued for interest, shares         428,032              
Common stock issued for interest         $ 149,811              
Gain (loss) on conversion of interest         $ 72,765              
President and Principal Shareholder [Member] | Secured Convertible Line of Credit Agreement [Member]                        
Class of Stock [Line Items]                        
Number of shares purchased by warrants     1,491,593     1,491,593     1,491,593      
Common stock issued for interest, shares       296,371                
Accrued interest     $ 121,252 $ 148,365   $ 121,252     $ 121,252      
Lincoln Park Capital Fund, LLC. [Member]                        
Class of Stock [Line Items]                        
Commitment to purchase shares                       $ 10,000,000
Proceeds from issuance of common stock                 $ 407,275      
Consultant Service [Member]                        
Class of Stock [Line Items]                        
Common stock issued for services, shares             3,581          
Common stock issued for services             $ 1,656          
Common stock issued for investor relation services, shares             13,947          
Common stock issued for investor relation services             $ 6,000          
President [Member] | Secured Convertible Line of Credit Agreement [Member]                        
Class of Stock [Line Items]                        
Number of shares purchased by warrants     1,491,593     1,491,593     1,491,593      
Exercise price of warrants $ 2.00   $ 2.00     $ 2.00     $ 2.00      
Debt instrument, maturity date Dec. 31, 2020                      
Common Stock Purchase Agreement [Member] | President and Principal Shareholder [Member] | Common Stock [Member]                        
Class of Stock [Line Items]                        
Common stock issued for cash in connection with stock purchase agreement   $ 175,000                    
Number of shares purchased by warrants   261,116                    
Exercise price of warrants   $ 2.00                    
Conversion price   $ 0.3351                    
Common Stock Purchase Agreement [Member] | Lincoln Park Capital Fund, LLC. [Member] | Common Stock [Member]                        
Class of Stock [Line Items]                        
Commitment to purchase shares                     $ 10,000,000  
Common stock issued for cash in connection with stock purchase agreement   $ 49,205       $ 182,030 $ 225,245          
Common stock issued for cash in connection with stock purchase agreement, shares   151,927       507,129 508,822          
Director and His Wife [Member] | Private Placement [Member]                        
Class of Stock [Line Items]                        
Proceeds from issuance of common stock     $ 150,000                  
Common stock issued in private placement, shares     428,572                  
Number of shares purchased by warrants     214,286     214,286     214,286      
Exercise price of warrants     $ 2.00     $ 2.00     $ 2.00      
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.5.0.2
Stockholders' Deficit (Narrative) (Options) (Details) - USD ($)
1 Months Ended 6 Months Ended
Apr. 30, 2016
Jun. 30, 2016
Jun. 30, 2015
Jan. 31, 2016
Feb. 12, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Share-based compensation expense   $ 298,808 $ 588,127    
Five Year Term Warrant [Member] | Legal Services [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Volatility   103.14%      
Expected term   5 years      
Number of shares callable by warrants   150,000      
Risk free rate   1.49%      
Share-based compensation expense   $ 44,477      
Exercise price of warrants   $ 0.39      
Non Employees [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Share-based compensation expense   $ 61,211      
Secured Convertible Line of Credit Agreement [Member] | President [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Expected term   2 years      
Number of shares callable by warrants   1,491,593      
Exercise price of warrants   $ 2.00     $ 2.00
Advances from related party   $ 1,205,000      
Secured Convertible Line of Credit Agreement [Member] | President and Principal Shareholder [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Number of shares callable by warrants   1,491,593      
New Director [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Options granted 30,000        
Options granted, exercise price $ 0.39        
Options granted, vesting period 3 years        
Volatility 103.79%        
Expected term 6 years 6 months        
Fair value of options granted $ 9,631        
Risk free rate 1.52%        
Employees and Directors [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Share-based compensation expense   $ 282,074      
Share-based compensaion expense not yet recognized   $ 52,356      
Share-based compensation expense period for recognition   2 years      
President and Principal Shareholder [Member] | Secured Convertible Line of Credit Agreement [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Number of shares callable by warrants       3,968,258  
Warrants extended held by employees       2,443,565  
Expense recorded   $ 207,000      
President and Principal Shareholder [Member] | Secured Convertible Line of Credit Agreement [Member] | Two Year Term Warrant [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Warrants issued to purchase common stock   783,963      
Director and His Wife [Member] | Private Placement [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Number of shares callable by warrants   214,286      
Exercise price of warrants   $ 2.00      
XML 33 R23.htm IDEA: XBRL DOCUMENT v3.5.0.2
Commitments and Contingencies (Details) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Jul. 31, 2016
Jun. 30, 2016
Jan. 31, 2016
Jun. 30, 2016
Jun. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Litigation amount           $ 56,956  
Final judgement against plaintiff issued by court           $ 510,499  
Term extension of compensation agreement     $ 80,000        
Term of warrants           5 years  
Gain (loss) on settlement       $ (320,631) $ (412,867) $ (320,631) $ (412,867)
Case Brought By Former Employee [Member]              
Gain (loss) on settlement           $ (320,631)  
Settlement Agreement With Employment Practices Insurance Company [Member]              
Litigation amount   $ 300,000          
Gain (loss) on settlement   $ 300,000          
Subsequent Event [Member] | Case Brought By Former Employee [Member]              
Litigation amount $ (250,000)            
Number of shares callable by warrants 250,000            
Exercise price of warrants $ 0.37            
Volatility 104.54%            
Expected term 5 years            
Risk free rate 1.01%            
Fair value of Warrants $ 70,631            
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.5.0.2
Concentrations (Details)
6 Months Ended
Jun. 30, 2016
USD ($)
Customers
Concentration Risk [Line Items]  
Total EMFIDS parts, raw material and packaging purchases made during the period | $ $ 166,000
Accounts Receivable [Member]  
Concentration Risk [Line Items]  
Number of customers in concentration 4
Sales Revenue [Member]  
Concentration Risk [Line Items]  
Number of customers in concentration 3
Number of products in concentration 3
Sales Revenue [Member] | Non-US [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 13.40%
Inventory purchases [Member]  
Concentration Risk [Line Items]  
Number of customers in concentration 1
Customer One Concentration Risk [Member] | Accounts Receivable [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 36.80%
Customer One Concentration Risk [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 20.00%
Customer Two Concentration Risk [Member] | Accounts Receivable [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 21.70%
Customer Two Concentration Risk [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 18.60%
Customer Three Concentration Risk [Member] | Accounts Receivable [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 15.10%
Customer Three Concentration Risk [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 17.30%
Customer Four Concentration Risk [Member] | Accounts Receivable [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 12.40%
Fire Ice [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 68.10%
Soil 2 O [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 14.10%
FireIce Shield [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 14.00%
FireIce Eductors, EMFIDS and extinguishers [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 5.60%
Soil 2 O Traditional Sales [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 39.80%
Soil 2 O Dust Control Products [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 57.80%
Supplier Two Concentration Risk [Member] | Inventory purchases [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 62.20%
Soil 2 O Soil Cap Products [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 94.10%
Canisters and Refills [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 46.60%
Spray Bottles [Member] | Sales Revenue [Member]  
Concentration Risk [Line Items]  
Concentration risk, percentage 52.70%
XML 35 R25.htm IDEA: XBRL DOCUMENT v3.5.0.2
Subsequent Events (Details) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Jul. 01, 2016
Aug. 12, 2016
Jul. 31, 2016
Apr. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Jun. 30, 2016
Jun. 30, 2015
Common stock issued for services, shares   2,328            
Common stock issued for services   $ 900         $ 1,674
Term of warrants             5 years  
President and Principal Shareholder [Member] | Secured Convertible Line of Credit Agreement [Member]                
Number of shares callable by warrants         1,491,593   1,491,593  
Common stock issued for interest, shares       296,371        
Accrued interest       $ 148,365 $ 121,252   $ 121,252  
President and Principal Shareholder [Member] | Subsequent Event [Member] | Secured Convertible Line of Credit Agreement [Member]                
Common stock issued for interest, shares     208,333          
Accrued interest     $ 75,000          
President and Principal Shareholder [Member] | Common Stock [Member] | Common Stock Purchase Agreement [Member]                
Common stock issued for cash in connection with stock purchase agreement   $ 175,000            
Number of shares callable by warrants   261,116            
Term of warrants   2 years            
Exercise price of warrants   $ 2.00            
Convertible note, conversion price   $ 0.3351            
Lincoln Park Capital Fund, LLC. [Member] | Common Stock [Member] | Common Stock Purchase Agreement [Member]                
Common stock issued for cash in connection with stock purchase agreement, shares   151,927     507,129 508,822    
Common stock issued for cash in connection with stock purchase agreement   $ 49,205     $ 182,030 $ 225,245    
Directors [Member]                
Options granted 680,000              
Options granted, exercise price $ 0.37              
Options granted, term 10 years              
Volatility 104.37%              
Expected term 5 years 6 months              
Discount rate 1.49%              
Share-based compensaion expense not yet recognized $ 198,236              
Investor [Member] | Private Placement [Member] | Subsequent Event [Member]                
Common stock issued in private placement     $ 100,000          
Common stock issued in private placement, shares     270,270          
Number of shares callable by warrants     135,135          
Term of warrants     2 years          
Exercise price of warrants     $ 2.00          
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