Texas
|
|
59-2219994
|
(State or other jurisdiction of incorporation or
organization)
|
|
(I.R.S. Employer Identification No.)
|
1200
Summit Ave, Suite 414, Fort Worth, Texas 76102
|
(Address
of principal executive offices) (Zip
Code)
|
Large accelerated
filer
☐
|
|
Accelerated
filer
☐
|
|
Non-accelerated
filer
☐
|
|
Smaller reporting
company
☑
|
Emerging growth
company
☑
|
|
|
Page
|
Letter from the CEO
|
(i)
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|
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|
ITEM 1.
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BUSINESS
|
1
|
|
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ITEM 1A
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RISK FACTORS
|
3
|
|
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ITEM 1B
|
UNRESOLVED STAFF COMMENTS
|
14
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|
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ITEM 2
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PROPERTIES
|
14
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|
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ITEM 3
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LEGAL PROCEEDINGS
|
14
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|
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ITEM 4
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MINE SAFETY DISCLOSURES
|
15
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|
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ITEM 5
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MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
16
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ITEM 6
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SELECTED FINANCIAL DATA
|
17
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ITEM 7
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
|
18
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ITEM 7A
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
20
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ITEM 8
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
21
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ITEM 9
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
22
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ITEM 9A
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CONTROLS AND PROCEDURES
|
22
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ITEM 9B
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OTHER INFORMATION
|
22
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ITEM 10
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
23
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|
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ITEM 11
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EXECUTIVE COMPENSATION
|
26
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|
|
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ITEM 12
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
28
|
|
|
|
ITEM 13
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
29
|
|
|
|
ITEM 14
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PRINCIPAL ACCOUNTING FEES AND SERVICES
|
29
|
|
|
|
ITEM 15
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
31
|
YEAR
|
|
QUARTER
ENDING
|
HIGH
|
LOW
|
2017
|
|
March 31,
2017
|
$0.100
|
$0.038
|
|
|
June 30,
2017
|
$0.100
|
$0.058
|
|
|
September 30,
2017
|
$0.078
|
$0.048
|
|
|
December 31,
2017
|
$0.070
|
$0.046
|
2016
|
|
March 31,
2016
|
$0.890
|
$0.050
|
|
|
June 30,
2016
|
$0.080
|
$0.050
|
|
|
September 30,
2016
|
$0.070
|
$0.040
|
|
|
December 31,
2016
|
$0.050
|
$0.040
|
Report of Independent Registered Public Accounting
Firm
|
F-1
|
|
|
Consolidated Balance Sheets
|
F-2
|
|
|
Consolidated Statements of Operations
|
F-3
|
|
|
Consolidated Statements of Changes in Stockholders’ Equity
(Deficit)
|
F-4
|
|
|
Consolidated Statements of Cash Flows
|
F-5
|
|
|
Notes to the Consolidated Financial Statements
|
F-6
|
|
December
31,
|
|
|
2017
|
2016
|
Assets
|
|
|
Current assets
|
|
|
Cash
|
$463,189
|
$833,480
|
Accounts
receivable, net of allowance for bad debt of $28,910 and
$21,947
|
786,250
|
744,044
|
Royalty
receivable
|
50,250
|
50,250
|
Inventory,
net of allowance for obsolescence for $144,996 and
$153,023
|
711,397
|
348,457
|
Prepaid
and other assets
|
26,274
|
19,782
|
Total current assets
|
2,037,360
|
1,996,013
|
|
|
|
Long-term assets:
|
|
|
Property,
plant and equipment, net of accumulated depreciation of $56,951 and
$41,328
|
63,211
|
34,939
|
Intangible
assets, net of accumulated amortization of $434,999 and
$369,974
|
117,291
|
140,336
|
Total long-term assets
|
180,502
|
175,275
|
|
|
|
Total assets
|
$2,217,862
|
$2,171,288
|
|
|
|
Liabilities and stockholders' equity (deficit)
|
|
|
Current liabilities
|
|
|
Accounts
payable
|
$225,462
|
$238,229
|
Accounts
payable - related parties
|
60,000
|
93,655
|
Accrued
royalties
|
244,422
|
276,916
|
Deferred
rent
|
13,920
|
-
|
Accrued
Commission
|
46,534
|
-
|
Current
lease obligation
|
-
|
3,766
|
Accrued
interest
|
324,986
|
367,411
|
Derivative
liabilities
|
-
|
44
|
Notes
payable
|
-
|
414,338
|
Convertible
notes payable – related parties
|
1,200,000
|
-
|
Total current liabilities
|
2,115,324
|
1,394,359
|
|
|
|
Long-term liabilities
|
|
|
Convertible
notes payable - related parties
|
-
|
1,200,000
|
Total long-term liabilities
|
-
|
1,200,000
|
|
|
|
Total liabilities
|
2,115,324
|
2,594,359
|
|
|
|
Stockholders' equity (deficit)
|
|
|
Series
C Convertible Preferred Stock, $10 par value, 100,000 shares
authorized; 85,561 issued and outstanding as of December 31, 2017
and 85,646 issued and outstanding as of December 31,
2016
|
855,610
|
856,460
|
Common
Stock: $.001 par value; 250,000,000 shares authorized; 113,427,943
issued and 113,423,854 outstanding as of December 31, 2017 and
109,690,387 issued and 109,686,298 outstanding as of December 31,
2016
|
113,428
|
109,690
|
Additional
paid-in capital
|
46,013,982
|
45,822,570
|
Treasury
stock
|
(12,039)
|
(12,039)
|
Accumulated
deficit
|
(46,868,443)
|
(47,199,752)
|
Total
stockholders' equity (deficit)
|
102,538
|
(423,071)
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
$2,217,862
|
$2,171,288
|
|
Years
Ended
|
|
|
December
31,
|
|
|
2017
|
2016
|
Revenues
|
$6,304,741
|
$5,507,853
|
|
|
|
Cost of goods sold
|
806,038
|
943,579
|
|
|
|
Gross profit
|
5,498,703
|
4,564,274
|
|
|
|
Operating expenses
|
|
|
Selling,
general and administrative expense
|
5,275,402
|
3,946,124
|
Other
administrative expense
|
-
|
818,665
|
Depreciation
and amortization
|
80,648
|
60,883
|
Bad
debt expense
|
22,207
|
10,735
|
Total operating expenses
|
5,378,257
|
4,836,407
|
|
|
|
Operating income/(loss)
|
120,444
|
(272,133)
|
|
|
|
Other income / (expense)
|
|
|
Gain
on settlement of debt
|
286,873
|
-
|
Debt
forgiveness
|
50,646
|
30,592
|
Change
in fair value of derivative liability
|
44
|
266
|
Other
income
|
125
|
21
|
Interest
expense
|
(126,825)
|
(174,493)
|
Total other income / (expense)
|
210,863
|
(143,614)
|
|
|
|
Net income/(loss)
|
331,309
|
(415,747)
|
|
|
|
Series
C preferred stock dividends
|
(139,006)
|
(261,716)
|
|
|
|
Net income/(loss) available to common stockholders
|
$192,303
|
$(677,463)
|
|
|
|
Basic
net loss per share of common stock
|
$0.00
|
$(0.01)
|
|
|
|
Diluted net loss
per share of common stock
|
$0.00
|
$(0.01)
|
|
|
|
Weighted
average number of common shares outstanding, basic
|
111,381,832
|
108,604,489
|
|
|
|
Weighted
average number of common shares outstanding, diluted
|
208,645,538
|
108,604,489
|
|
Preferred Stock
Series C Shares
|
$10.00 Par Value Amount
|
Common Stock Shares
|
$0.001 Par Value Amount
|
Additional Paid-In Capital
|
Treasury Stock Shares
|
Treasury Stock Amount
|
Accumulated Deficit
|
Total Stockholders' Equity (Deficit)
|
Balance at
December 31, 2015
|
80,218
|
$802,180
|
107,274,816
|
$107,274
|
$44,615,321
|
(4,089)
|
$(12,039)
|
$(46,784,005)
|
$(1,271,269)
|
Issuance of
Common stock for:
|
|
|
|
|
|
|
|
|
|
Services
|
-
|
-
|
1,316,667
|
1,317
|
56,183
|
-
|
-
|
-
|
57,500
|
Conversion
of Series C Preferred Stock
|
(1,000)
|
(10,000)
|
1,000,000
|
1,000
|
9,000
|
-
|
-
|
-
|
-
|
Series
C Dividend
|
-
|
-
|
98,904
|
99
|
(99)
|
-
|
-
|
-
|
-
|
Issuance of
Preferred stock for:
|
|
|
|
|
|
|
|
|
|
Cash
|
6,428
|
64,280
|
-
|
-
|
385,720
|
-
|
-
|
-
|
450,000
|
Recognition
of vesting stock
|
-
|
-
|
-
|
-
|
(2,220)
|
-
|
-
|
-
|
(2,220)
|
Warrant
expense
|
-
|
-
|
-
|
-
|
758,665
|
-
|
-
|
-
|
758,665
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(415,747)
|
(415,747)
|
Balance at
December 31, 2016
|
85,646
|
$856,460
|
109,690,387
|
$109,690
|
$45,822,570
|
(4,089)
|
$(12,039)
|
$(47,199,752)
|
$(423,071)
|
Issuance of
Common stock for:
|
|
|
|
|
|
|
|
|
|
Services
|
-
|
-
|
1,600,000
|
1,600
|
58,650
|
-
|
-
|
-
|
60,250
|
Conversion
of Series C Preferred Stock
|
(800)
|
(8,000)
|
800,000
|
800
|
7,200
|
-
|
-
|
-
|
-
|
Series
C Dividend
|
-
|
-
|
137,556
|
138
|
(138)
|
-
|
-
|
-
|
-
|
Common
stock issued for settlement of debt
|
-
|
-
|
1,200,000
|
1,200
|
82,800
|
-
|
-
|
-
|
84,000
|
Issuance of
Preferred stock for:
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Cash
|
715
|
7,150
|
-
|
-
|
42,900
|
-
|
-
|
-
|
50,050
|
Net
income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
331,309
|
331,309
|
Balance at
December 31, 2017
|
85,561
|
$855,610
|
113,427,943
|
$113,428
|
$46,013,982
|
(4,089)
|
$(12,039)
|
$(46,868,443)
|
$102,538
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
|
2017
|
2016
|
Cash flows from operating activities:
|
|
|
Net
income/(loss)
|
$331,309
|
$(415,747)
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
|
|
Depreciation
and amortization
|
80,648
|
60,883
|
Forgiveness
of debt
|
(50,646)
|
30,592
|
Gain
on settlement of debt
|
(286,873)
|
-
|
Bad
debt expense
|
22,207
|
10,735
|
Inventory
obsolescence
|
57,483
|
152,547
|
Common
stock issued for services
|
60,250
|
55,280
|
(Gain)
loss on change in fair value of derivative liabilities
|
(44)
|
(266)
|
Warrant
expense
|
-
|
758,665
|
Changes
in assets and liabilities:
|
|
|
(Increase)
decrease in accounts receivable
|
(64,413)
|
(503,233)
|
(Increase)
decrease in royalties receivable
|
-
|
150,750
|
(Increase)
decrease in inventory
|
(420,423)
|
(91,226)
|
(Increase)
decrease in prepaids and other assets
|
(6,492)
|
94,227
|
Increase
(decrease) in accrued royalties and dividends
|
(32,494)
|
(46,146)
|
Increase
(decrease) in accounts payable
|
26,942
|
15,877
|
Increase
(decrease) in accounts payable related parties
|
(33,655)
|
72,556
|
Increase
(decrease) in accrued liabilities
|
60,454
|
-
|
Increase
(decrease) in accrued interest payable
|
115,885
|
63,751
|
Net cash flows provided by (used in) operating
activities
|
(139,862)
|
409,245
|
|
|
|
Cash flows from investing activities:
|
|
|
Purchase
of property and equipment
|
(43,895)
|
(3,029)
|
Purchase
of intangible assets
|
(41,980)
|
-
|
Net
cash flows used in investing activities
|
(85,875)
|
(3,029)
|
|
|
|
Cash flows from financing activities:
|
|
|
Payments
on capital lease obligation
|
(3,766)
|
(4,711)
|
Payments
on debt
|
(190,838)
|
(200,362)
|
Cash
proceeds from sale of series C preferred stock
|
50,050
|
450,000
|
Net cash flows (used in) provided by financing
activities
|
(144,554)
|
244,927
|
|
|
|
Net increase (decrease) in cash
|
(370,291)
|
651,143
|
Cash and cash equivalents, beginning of period
|
833,480
|
182,337
|
Cash and cash equivalents, end of period
|
$463,189
|
$833,480
|
|
|
|
Cash paid during the period for:
|
|
|
Interest
|
$10,937
|
$49,559
|
Income
taxes
|
-
|
-
|
|
|
|
Supplemental non-cash investing and financing
activities:
|
|
|
Common
stock issued for Series C dividends
|
$137
|
$99
|
Common
stock issued for conversion of Series C Preferred
Stock
|
8,000
|
10,000
|
Issuance
of vested stock
|
-
|
167
|
|
2017
|
2016
|
Basic
net income (loss) per share:
|
|
|
Numerator:
|
|
|
Net
income (loss)
|
$331,309
|
$(415,747)
|
Denominator:
|
|
|
Weighted-average
common shares outstanding
|
111,381,832
|
108,604,489
|
|
|
|
Basic
net income (loss) per share
|
$0.00
|
$(0.01)
|
|
|
|
Diluted
net income (loss) per share:
|
|
|
Numerator:
|
|
|
Net
income (loss)
|
$331,309
|
$(415,747)
|
Series
C dividends
|
(139,006)
|
|
Diluted
net income (loss)
|
$192,303
|
$(415,747)
|
Denominator:
|
|
|
Weighted-average
common shares outstanding
|
111,381,832
|
108,604,489
|
Common
stock warrants
|
694,834
|
-
|
Convertible
debt
|
-
|
-
|
Preferred
shares
|
96,568,871
|
-
|
Weighted
average shares used in computing diluted net income (loss) per
share
|
208,645,538
|
108,604,489
|
|
|
|
Diluted
net income (loss) per share
|
$0.00
|
$(0.00)
|
|
2017
|
2016
|
Preferred
shares
|
-
|
92,915,071
|
Convertible
debt
|
19,890,414
|
18,082,186
|
Recurring Fair Value Measure
|
Level
1
|
Level
2
|
Level
3
|
Total
|
Liabilities
|
|
|
|
|
Derivative Liabilities as of December 31, 2017
|
$-
|
$-
|
$-
|
$-
|
Derivative Liabilities as of December 31, 2016
|
$-
|
$-
|
$44
|
$44
|
|
|
|
|
|
|
|
|
|
Accrued
Interest
|
|
||||||
Related
Party
|
|
Nature of
Relationship
|
|
Term of the
agreement
|
|
Principal amount
|
|
|
2017
|
|
|
2016
|
|
|||
S. Oden
Howell Revocable Trust ("HRT")
|
|
Mr. S.
Oden Howell, Jr. became a member of the Board of Directors in June
of 2015
|
|
The
note is secured, bears interest at 10% per annum, matures June 15,
2018, and is convertible into shares of the Company's Series C
Convertible Preferred Stock at a conversion price of $70.00 per
share at any time prior to maturity.
|
|
$
|
600,000
|
|
|
$
|
162,493
|
|
|
$
|
96,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
James
W. Stuckert Revocable Trust ("SRT")
|
|
Mr.
James W. Stuckert became a member of the Board of Directors in
September of 2015
|
|
The
note is secured, bears interest at 10% per annum, matures June 15,
2018, and is convertible into shares of the Company's Series C
Convertible Preferred Stock at a conversion price of $70.00 per
share at any time prior to maturity.
|
|
$
|
600,000
|
|
|
$
|
162,493
|
|
|
$
|
96,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total
|
|
|
|
|
|
$
|
1,200,000
|
|
|
$
|
324,986
|
|
|
$
|
192,328
|
|
|
|
|
|
Principal Amount
|
|
|
Accrued Interest
|
|
||||||||||
Note Payable
|
|
Terms of the agreement
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
||||
March
4, 2011 Note Payable
|
|
223,500
note payable; (i) interest accrues at 13% per annum; (ii) maturity
date of September 4, 2011; (iii) $20,000 fee due at maturity date
with a $1,000 per day fee for each day the principal and interest
is late. This note was settled in full on November 1, 2017 (see
Note 11 "Legal Proceedings")
|
|
$
|
-
|
|
|
$
|
223,500
|
|
|
$
|
-
|
|
|
$
|
147,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter 2012 Secured Subordinated Promissory Notes
|
|
Three notes in the aggregate principal amount of $110,000; (i)
interest accrues at 5% per annum; (ii) maturity date of October 12,
2012; (iii) after the maturity date interest shall accrue at 18%
per annum and the company shall pay to the note holders on a pro
rata basis, an amount equal to twenty percent of the sales proceeds
received by the Company and its subsidiary, WCI, from the sale of
surgical powders, until such time as the note amounts have been
paid in full. As of December 31, 2017, all of these notes have been
repaid in full.
|
|
$
|
|
-
|
|
$
|
104,571
|
|
|
$
|
-
|
|
|
$
|
8,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
28, 2012 Promissory Note
|
|
$51,300
note payable (i) interest accrues at 10% per annum; (ii) original
maturity date of December 31, 2012; (iii) default interest rate of
15% per annum. As of December 31, 2017, the note is paid in
full.
|
|
$
|
-
|
|
|
$
|
11,300
|
|
|
$
|
|
-
|
|
$
|
19,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quest
Capital Investors, LLC
|
|
Furniture
purchase agreement in the original amount of $11,700 with $300
payments due each month. Secured by fixed assets of the Company. As
of December 31, 2017, the note is paid in full.
|
|
$
|
-
|
|
|
$
|
300
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 28,
2015 Promissory Note
|
|
$96,000
note payable (i) interest accrues at 10% per annum; (ii) original
maturity date of May 28, 2016; (iii) amended maturity date of June
30, 2017. As of December 31, 2017, the note is paid in
full.
|
|
$
|
-
|
|
|
$
|
74,667
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
-
|
|
|
$
|
414,338
|
|
|
$
|
-
|
|
|
$
|
175,083
|
|
Cost
|
Patent
|
Software
|
Total
|
Balance
at December 31, 2016
|
$510,310
|
$-
|
$510,310
|
Implementation
costs
|
|
41,980
|
41,980
|
Balance
at December 31, 2017
|
$510,310
|
$41,980
|
$552,290
|
Accumulated amortization
|
|
|
|
Balance
at December 31, 2016
|
$369,974
|
$-
|
$369,974
|
Amortization
expense
|
51,032
|
13,993
|
65,025
|
Balance
at December 31, 2017
|
$421,006
|
$13,993
|
$434,999
|
Net carrying amount
|
|
|
|
Balance
at December 31, 2016
|
$140,336
|
$-
|
$140,336
|
Balance
at December 31, 2017
|
$89,304
|
$27,987
|
$117,291
|
For the Year Ended December 31, 2017
|
||
|
Shares
|
Weighted Average Exercise Price
|
Outstanding
at beginning of period
|
67,246,300
|
$0.12
|
Granted
|
-
|
-
|
Exercised
|
-
|
-
|
Forfeited
|
(60,051,300)
|
0.12
|
Expired
|
(2,095,000)
|
0.13
|
Outstanding
at end of period
|
5,100,000
|
$0.06
|
For the Year Ended December 31, 2016
|
||
|
Shares
|
Weighted Average Exercise Price
|
Outstanding
at beginning of period
|
9,736,844
|
$0.19
|
Granted
|
60,000,000
|
0.12
|
Exercised
|
-
|
-
|
Forfeited
|
-
|
-
|
Expired
|
(2,490,544)
|
0.60
|
Outstanding
at end of period
|
67,246,300
|
$0.12
|
Warrants
Outstanding
|
Warrants
Exercisable
|
||||
Range of Exercise Prices
|
Number Outstanding
|
Weighted-Average Remaining Contract Life
|
Weighted- Average Exercise Price
|
Number Exercisable
|
Weighted-Average Exercise Price
|
$0.06
|
4,500,000
|
1
|
$0.06
|
4,500,000
|
$0.06
|
0.08
|
200,000
|
1
|
0.08
|
200,000
|
0.08
|
0.09
|
400,000
|
1
|
0.09
|
400,000
|
0.09
|
$0.06 -0.09
|
5,100,000
|
1
|
$0.06
|
5,100,000
|
$0.06
|
Warrants
Outstanding
|
Warrants
Exercisable
|
||||
Range of Exercise Prices
|
Number Outstanding
|
Weighted-Average Remaining Contract Life
|
Weighted- Average Exercise Price
|
Number Exercisable
|
Weighted-Average Exercise Price
|
$0.06
|
4,500,000
|
2
|
$0.06
|
4,500,000
|
$0.06
|
0.08
|
550,000
|
1
|
0.08
|
550,000
|
0.08
|
0.09
|
625,000
|
1
|
0.09
|
625,000
|
0.09
|
0.12
|
60,000,000
|
4
|
0.12
|
12,000,000
|
0.12
|
0.15
|
1,571,300
|
1
|
0.15
|
1,571,300
|
0.15
|
$0.06 -.15
|
67,246,300
|
4
|
$0.12
|
19,246,300
|
$0.12
|
For the Year Ended
December 31, 2017
|
||
|
Options
|
Weighted Average Exercise Price
|
Outstanding
at beginning of period
|
1,093,500
|
$0.15
|
Granted
|
1,150,000
|
0.06
|
Exercised
|
-
|
-
|
Forfeited
|
(150,000)
|
(a)
|
Expired
|
(943,500)
|
0.15
|
Outstanding
at end of period
|
1,150,000
|
$0.06
|
For the Year Ended
December 31, 2016
|
||
|
Options
|
Weighted Average Exercise Price
|
Outstanding
at beginning of period
|
1,093,500
|
$0.15
|
Granted
|
-
|
-
|
Exercised
|
-
|
-
|
Forfeited
|
-
|
-
|
Expired
|
-
|
-
|
Outstanding
at end of period
|
1,093,500
|
$0.15
|
As of December 31,
2017
|
As
of December 31, 2017
|
||||
Stock Options
Outstanding
|
Stock Options Exercisable
|
|
|||
Exercise Price
|
Number Outstanding
|
Weighted-Average Remaining Contract Life
|
Weighted- Average Exercise Price
|
Number Exercisable
|
Weighted-Average Exercise Price
|
$0.06
|
1,150,000
|
5
|
$0.06
|
-
|
$-
|
As of December 31,
2016
|
As of December 31, 2016
|
||||
Stock Options
Outstanding
|
Stock Options Exercisable
|
|
|||
Exercise Price
|
Number Outstanding
|
Weighted-Average Remaining Contract Life
|
Weighted- Average Exercise Price
|
Number Exercisable
|
Weighted-Average Exercise Price
|
$0.15
|
943,500
|
1.75
|
$0.15
|
943,500
|
$0.15
|
(a)
|
150,000
|
-
|
-
|
-
|
-
|
$0.15
|
1,093,500
|
1.63
|
$0.15
|
943,500
|
$0.15
|
Year
|
|
2017
|
|
2016
|
|
Dividend yield:
|
|
0%
|
|
0%
|
|
Expected volatility
|
|
127.73%
to 0%
|
|
146.67
to 110.19%
|
|
Risk free interest rate
|
|
0.00 to 1.07%
|
|
0.00 to 1.07%
|
|
Expected life (years)
|
|
0.00 to 0.00
|
|
0.00 to 0.56
|
|
Balance, December 31, 2015
|
$(310)
|
Derivative
warrants exchanged for debt
|
|
Loss
on change in fair value of derivative
liabilities
|
266
|
Balance, December 31, 2016
|
(44)
|
Loss
on change in fair value of derivative
liabilities
|
44
|
Balance, December 31, 2017
|
$-
|
|
2017
|
2016
|
Net
operating loss carry forwards, (21% as of December 31, 2017 and 34%
as of December 31, 2016
|
$7,295,315
|
$11,781,690
|
Valuation
allowance
|
(7,295,315)
|
(11,781,690)
|
Net
non-current deferred tax asset
|
$-
|
$-
|
|
2017
|
2016
|
Expected
federal income tax benefit
|
$(112,645)
|
$141,354
|
Goodwill
amortization
|
142,386
|
142,386
|
Gain
on settlement of debt
|
114,757
|
-
|
NOL
carryover reduced by settlement of debt
|
(114,403)
|
-
|
Change
in valuation allowance
|
(11,807)
|
(5,369)
|
Expired
capital loss carryover
|
(9,227)
|
-
|
Other
|
(9,061)
|
(1,720)
|
Derivative
gain
|
-
|
90
|
Stock-based
compensation
|
-
|
(276,741)
|
Income
tax expense (benefit)
|
$0
|
$0
|
NAME
|
|
AGE
|
|
POSITION
|
|
YEAR FIRST
ELECTED
|
S. Oden
“Denny” Howell Jr.
|
|
78
|
|
Director
|
|
2015
|
John C.
Siedhoff
|
|
58
|
|
Director
|
|
2014
|
James
W. Stuckert
|
|
80
|
|
Director
|
|
2015
|
NAME
|
|
AGE
|
|
POSITION
|
J.
Michael Carmena
|
|
62
|
|
Chief
Executive Officer and Chief Financial Officer
|
Name and
Principal Position
|
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-equity
incentive compensation ($)
|
Non-qualified
deferred compensation earnings ($)
|
All other
compensation
($)
|
Total
($)
|
J. Michael
Carmena (a)
|
|
2016
|
8,636
|
-
|
-
|
|
-
|
-
|
-
|
8,636
|
|
|
2017
|
175,000
|
-
|
-
|
30,000
|
-
|
-
|
-
|
205,000
|
|
|
|
|
|
|
|
|
|
|
|
Deborah J.
Hutchinson (b)
|
|
2016
|
200,000
|
-
|
25,000
|
-
|
-
|
-
|
-
|
225,000
|
|
|
2017
|
170,000
|
-
|
-
|
|
-
|
-
|
-
|
170,000
|
|
|
|
|
|
|
|
|
|
|
|
Darren Stine (c)
|
|
2016
|
120,000
|
-
|
20,000
|
-
|
-
|
-
|
-
|
140,000
|
|
|
2017
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Name
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-equity
incentive plan compensation ($)
|
Non-qualified
deferred compensation earnings ($)
|
All other
compensation
($)
|
Total
($)
|
S. Oden
“Denny” Howell Jr.
|
$10,500
|
|
|
|
|
$10,500
|
Phillip J.
Rubinfeld
|
$10,500
|
|
|
|
|
$10,500
|
John C.
Siedhoff
|
$10,500
|
|
|
|
$280,000
|
$290,500
|
James W.
Stuckert
|
$10,500
|
|
|
|
|
$10,500
|
|
OPTION
AWARDS
|
STOCK
AWARDS
|
||||
Name
|
Number of
Securities Underlying Unexercised Options
(Exercisable)
|
Number of
Securities Underlying Unexercised Options
(Unexercisable)
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number of
Shares of Stock That Have Not Vested
|
Market Value
of Shares of Stock That Have Not Vested ($)
|
J.
Michael Carmena
|
—
|
500,000
|
0.06
|
12/31/2022
|
500,000
|
30,000
|
Robert
K. Mart
|
—
|
300,000
|
0.06
|
12/31/2022
|
300,000
|
18,000
|
Zachary
B. Fleming
|
—
|
200,000
|
0.06
|
12/31/2022
|
200,000
|
12,000
|
Jay
Speelhoffer
|
—
|
100,000
|
0.06
|
12/31/2022
|
100,000
|
6,000
|
Sherlene
Bagley
|
—
|
50,000
|
0.06
|
12/31/2022
|
50,000
|
3,000
|
|
—
|
1,150,000
|
|
|
1,150,000
|
69,000
|
|
Common Stock
|
Preferred Stock
|
||
OFFICERS AND DIRECTORS:
|
Number of Shares Beneficially Owned
|
Beneficial Ownership Percentage
|
Number of Shares Beneficially Owned
|
Beneficial Ownership Percentage
|
James W Stuckert (1)
|
72,795,489
|
32.07%
|
—
|
—
|
S. Oden “Denny” Howell Jr.
|
42,092,429
|
18.54%
|
—
|
—
|
John C. Siedhoff
|
7,150,000
|
3.15%
|
—
|
—
|
J. Michael Carmena (2)
|
—
|
—
|
—
|
—
|
All directors and executive officers as a group (4
persons)
|
122,037,918
|
53.77%
|
—
|
—%
|
Related
Party
|
|
Nature of
Relationship
|
|
Terms of the
Agreement
|
|
Principal
Amount
|
|
|
Accrued
Interest
|
|
||
S. Oden Howell Revocable Trust
|
|
Mr. S.
Oden Howell, Jr. became a member of the Board in June of
2015.
|
|
See
“June 15, 2015 Convertible Promissory
Note”.
|
|
|
600,000
|
|
|
|
162,493
|
|
|
|
|
|
|
|
|
|
|
|
|||
James W. Stuckert Revocable Trust
|
|
Mr.
James W. Stuckert became a member of the Board in September of
2015.
|
|
See
“June 15, 2015 Convertible Promissory
Note”.
|
|
|
600,000
|
|
|
|
162,493
|
|
Total
|
|
|
|
|
|
$
|
1,200,000
|
|
|
$
|
324,986
|
|
Exhibit No.
|
|
Description
|
|
Agreement and Plan of Merger, dated as of September 17, 2009, by
and among BioPharma Management Technologies, Inc., a Texas
corporation, Wound Management Technologies, Inc., a Texas
corporation, BIO Acquisition, Inc., and the undersigned
shareholders (Incorporated by reference to Exhibit 2.1 to the
Company’s Current Report on Form 8-K filed September 21,
2009)
|
|
|
|
|
|
Articles of Incorporation (Incorporated by reference to Exhibit 3.1
to the Company’s Registration Statement on Form S-1 filed
April 11, 2008)
|
|
|
|
|
|
Articles of Amendment to Articles of Incorporation (Incorporated by
reference to Exhibit A to the Company’s Information Statement
filed with the Commission on May 13, 2008)
|
|
|
|
|
|
Bylaws (Incorporated by reference to Exhibit 3.2 to the
Company’s Registration Statement on Form S-1 filed April 11,
2008)
|
|
|
|
|
|
Certificate of Designations, Number, Voting Power, Preferences and
Rights of Series A Convertible Preferred Stock (Incorporated by
reference to Exhibit 3.1(i) to the Company’s Current Report
on Form 8-K filed November 30, 2007)
|
|
|
|
|
|
Certificate of Designations, Number, Voting Power, Preferences and
Rights of Series B Convertible Redeemable Preferred Stock
(Incorporated by reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K filed June 25, 2010)
|
|
|
|
|
|
Wound Management Technologies, Inc. 2010 Omnibus Long-Term
Incentive Plan dated March 12, 2010 effective subject to
shareholder approval on or before March 11, 2011 (Incorporated by
reference to Exhibit 4.1 to the Company’s Quarterly Report on
Form 10-Q filed August 16, 2010)
|
|
|
|
|
4.4
|
|
Certificate of Designations, Number, Voting Power, Preferences and
Rights of Series C Convertible Preferred Stock (Incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on
Form 8-K/A filed February 6, 2014 amending the Company’s
Current Report on Form 8-K filed October 15, 2013)
|
|
|
|
|
Certificate of Designations, Number, Voting Power, Preferences and
Rights of Series D Convertible Preferred Stock (Incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on
Form 8-K filed November 14, 2013)
|
|
|
|
|
|
Letter Agreement dated April 26, 2016 by and between Wound
Management Technologies, Inc., Evolution Venture Partners, LLC and
Middlebury Securities, LLC (Incorporated by reference to Exhibit
10.1 to the Company’s Form 8-K filed May 2,
2016)
|
|
|
|
|
|
Consulting Agreement dated April 25, 2016 by and between Wound
Management Technologies, Inc. and John Siedhoff (Incorporated by
reference to Exhibit 10.1 to the Company’s Form 8-K filed
April 29, 2016)
|
|
|
|
|
10.3 |
|
Amendment to Consulting Agreement dated March 10, 2017, by and between the Company and John Siedhoff (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 10, 2017) |
|
||
|
Termination Agreement effective September 29, 2017, by and between
the Company and Evolution Venture Partners LLC (Incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K dated October 11,
2017)
|
|
|
|
|
|
List of Subsidiaries*
|
|
|
|
|
|
Certification of Principal Executive Officer in accordance with 18
U.S.C. Section 1350, as adopted by Section 302 of the
Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
Certification of Principal Financial Officer in accordance with 18
U.S.C. Section 1350, as adopted by Section 302 of the
Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
Certification of Principal Executive Officer in accordance with 18
U.S.C. Section 1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002*
|
|
|
|
|
|
Certification of Principal Financial Officer in accordance with 18
U.S.C. Section 1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002*
|
|
|
|
|
101
|
|
Interactive Data Files pursuant to Rule 405 of Regulation
S-T
|
|
WOUND MANAGEMENT TECHNOLOGIES, INC.
|
|
|
|
|
|
|
March
29, 2018
|
By:
|
/s/ J.
Michael Carmena
|
|
|
|
J.
Michael Carmena
|
|
|
|
Chief
Financial Officer
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ J.
Michael Carmena
|
|
CEO
(Principal Executive Officer)
|
|
March
29, 2018
|
J. Michael Carmena
|
|
|
|
|
|
|
|
|
|
/s/ J.
Michael Carmena
|
|
Chief
Financial Officer (Principal Financial and Accounting
Officer)
|
|
March
29, 2018
|
J.
Michael Carmena
|
|
|
|
|
|
|
|
|
|
/s/ James
W. Stuckert
|
|
Director
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March
29, 2018
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James
W. Stuckert
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/s/ Mr.
John Siedhoff
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Director
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March
29, 2018
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Mr.
John Siedhoff
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/s/ Oden
Howell, Jr.
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Director
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March
29, 2018
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Oden
Howell, Jr.
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Wound
Care Innovations, LLC
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Nevada
limited liability company
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Innovate
OR, Inc.
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Texas
corporation
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Resorbable
Orthopedic Products, Inc.
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Texas
limited liability company
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|
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Pharma
Tech International, LLC
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Nevada limited
liability company
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Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Mar. 31, 2018 |
Jun. 30, 2017 |
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Principal Net of Discount | |||
Entity Registrant Name | WOUND MANAGEMENT TECHNOLOGIES, INC. | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Entity Central Index Key | 0000714256 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY | ||
Entity Public Float | $ 6,062,571 | ||
Entity Common Stock, Shares Outstanding | 236,642,901 |
Statement - CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Series C Preferred Stock Par Value | $ 10 | $ 10 |
Series C Preferred Stock shares authorized | 100,000 | 100,000 |
Series C Preferred Stock shares issued | 85,561 | 85,646 |
Series C Preferred Stock shares outstanding | 85,561 | 85,646 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 250,000,000 | 250,000,000 |
Common Stock, shares issued | 113,427,943 | 109,690,387 |
Common Stock, shares outstanding | 113,423,854 | 109,686,298 |
1. NATURE OF OPERATIONS |
12 Months Ended |
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Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | Wound Management Technologies, Inc. was incorporated in the State of Texas in December 2001 as MB Software, Inc. In May 2008, MB Software, Inc. changed its name to Wound Management Technologies, Inc. The Company distributes collagen-based wound care products to healthcare providers such as physicians, clinics and hospitals. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION
The terms “the Company,” “we,” “us” and “WMT” are used in this report to refer to Wound Management Technologies, Inc. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of WMT and its wholly-owned subsidiaries: Wound Care Innovations, LLC a Nevada limited liability company (“WCI”); Resorbable Orthopedic Products, LLC, a Texas limited liability company (“Resorbable); and Innovate OR, Inc. (“InnovateOR”) formerly referred to as BioPharma Management Technologies, Inc., a Texas corporation (“BioPharma”). All intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the amounts of revenues and expenses during the reporting period. On a regular basis, management evaluates these estimates and assumptions. Actual results could differ from those estimates.
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company considers all highly liquid debt investments purchased with an original maturity of three months or less to be cash equivalents. Marketable securities include investments with maturities greater than three months but less than one year. For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities, and amounts due to related parties, the carrying amounts approximate fair value due to their short maturities.
INCOME / LOSS PER SHARE
The Company computes income/loss per share in accordance with Accounting Standards Codification “ASC” Topic No. 260, “Earnings per Share,” which requires the Company to present basic and dilutive income/loss per share when the effect is dilutive. Basic income/loss per share is computed by dividing income/loss available to common stockholders by the weighted average number of common shares available. Diluted income/loss per share is computed similar to basic income/loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
The calculation of basic and diluted net loss per share for the years ended December 31, 2017 and 2016 are as follows:
The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2017 and 2016 as such shares would have had an anti-dilutive effect:
REVENUE RECOGNITION
In accordance with the guidance in “ASC” Topic No. 605, “Revenue Recognition,” the Company recognizes revenue when (a) persuasive evidence of an arrangement exists, (b) delivery has occurred or services have been rendered, (c) the fee is fixed or determinable, and (d) collectability is reasonable assured. Revenue is recognized upon delivery. Revenue is recorded on the gross basis, which includes handling and shipping, because the Company has risks and rewards as a principal in the transaction based on the following: (a) the Company maintains inventory of the product, (b) the Company is responsible for order fulfillment, and (c) the Company establishes the price for the product. The Company recognizes royalty revenue in the period the royalty bearing products are sold.
The Company recognizes revenue based on bill and hold arrangements when the seller has transferred to the buyer the significant risks and rewards of ownership of the goods; the seller does not retain effective control over the goods or continuing managerial involvement to the degree usually associated with ownership; the amount of revenue can be measured reliably; it is probable that the economic benefits of the sale will flow to the seller; any costs incurred or to be incurred related to the sale can be measured reliably; it is probable that delivery will be made; the goods are on hand, identified, and ready for delivery; the buyer specifically acknowledges the deferred delivery instructions; and the usual payment terms apply.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company establishes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectability. Bad debt reserves are maintained based on a variety of factors, including the length of time receivables are past due and a detailed review of certain individual customer accounts. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. The Company recorded bad debt expense of $22,207 and $10,735 in 2017 and 2016, respectively. The allowance for doubtful accounts at December 31, 2017 was $28,910 and the amount at December 31, 2016 was $21,947.
INVENTORIES
Inventories are stated at the lower of cost or net realizable value, with cost computed on a first-in, first-out basis. Inventories consist of finished goods, powders, gels and the related packaging supplies. The Company recorded inventory obsolescence expense of $57,483 in 2017 and $152,547 in 2016. The allowance for obsolete and slow-moving inventory had a balance of $144,996 and $153,023 at December 31, 2017 and December 31, 2016, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed utilizing the straight-line method over the estimated economic life of the assets, which ranges from five to ten years. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period. As of December 31, 2017, fixed assets consisted of $120,162 including furniture and fixtures, computer equipment, phone equipment and the Company websites. As of December 31, 2016, fixed assets consisted of $76,267 including furniture and fixtures, computer equipment, phone equipment and the Company websites. The depreciation expense recorded in 2017 was $15,623 and the depreciation expense recorded in 2016 was $9,852. The balance of accumulated depreciation was $56,951 and $41,328 at December 31, 2017 and December 31, 2016, respectively. The Company paid $43,895 to acquire fixed assets during 2017.
INTANGIBLE ASSETS
As of December 31, 2017, and 2016 intangible assets include a patent acquired in 2009 with a historical cost of $510,310. The patent is being amortized over its estimated useful life of 10 years using the straight-line method. Amortization expense recognized was $65,025 and $51,031 during 2017 and 2016. In 2017, the Company put into service a business software. The costs to implement this software which totaled $41,980 are included in intangible assets and are being amortized over the initial term of the license which is three years.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets and certain identifiable intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, undiscounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. There was no impairment recorded during the years ended December 31, 2017 and 2016.
FAIR VALUE MEASUREMENTS
As defined in Accounting Standards Codification (“ASC”) Topic No. 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.
The three levels of the fair value hierarchy defined by ASC Topic No. 820 are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
At December 31, 2016 and 2015, the Company’s financial instruments consist of the derivative liabilities related to stock purchase warrants which were valued using the Black-Scholes Option Pricing Model, a level 3 input.
Our intangible assets have also been valued using the fair value accounting treatment and a description of the methodology used, including the valuation category, is described below in Note 5 “Intangible Assets.”
The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of December 31, 2017 and 2016.
DERIVATIVES
The Company entered into derivative financial instruments to manage its funding of current operations. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately.
INCOME TAXES
Income taxes are accounted for under the asset and liability method, whereby deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all, of the deferred tax asset will not be realized.
BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE
The convertible feature of certain notes payable provides for a rate of conversion that is below the market value of the Company’s common stock. Such a feature is normally characterized as a "Beneficial Conversion Feature" ("BCF"). In accordance with ASC Topic No. 470-20-25-4, the intrinsic value of the embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the debt equal to the intrinsic value of that feature to additional paid in capital. When applicable, the Company records the estimated fair value of the BCF in the consolidated financial statements as a discount from the face amount of the notes. Such discounts are accreted to interest expense over the term of the notes using the effective interest method.
ADVERTISING EXPENSE
In accordance with ASC Topic No. 720-35-25-1, the Company recognizes advertising expenses the first time the advertising takes place. Such costs are expensed immediately if such advertising is not expected to occur.
SHARE-BASED COMPENSATION
The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718. Stock-based compensation to employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period. The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. The Company estimates the fair value of stock-based payments using the Black-Scholes option-pricing model for common stock options and warrants and the closing price of the Company’s common stock for common share issuances.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to current period presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers which is to be effective for reporting periods beginning after December 15, 2017. The Company has reviewed the pronouncement and believes it will not have a material impact on the Company’s financial position, operations or cash flows.
In February 2016, the FASB issued ASC 842 Leases which is to be effective for reporting periods beginning after December 15, 2018. The Company is currently reviewing any impact that it will have on the Company’s financial position, operations or cash flows.
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3. OTHER SIGNIFICANT TRANSACTIONS |
12 Months Ended | ||||||||
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Dec. 31, 2017 | |||||||||
Other Significant Transactions | |||||||||
OTHER SIGNIFICANT TRANSACTIONS | Evolution Partners LLC Letter Agreement and Termination Agreement
On October 10, 2017, Wound Management Technologies, Inc. (the “Company”) and Evolution Venture Partners LLC (“EVP”) entered into a termination agreement (the “Termination Agreement”) terminating, effective as of September 29, 2017, that certain letter agreement dated April 26, 2016, (the “Agreement”), by and between the Company, EVP, and Middlebury Securities, LLC (“Middlebury”). Middlebury terminated its charter on or about July 27, 2016, and therefore is not a party to the Termination Agreement. The Agreement had an initial term of one year (with an automatic six-month renewal term) and provided for:
The total amount of the consulting fee and warrant expense was $818,665 and is recognized in 2016 as “Other administrative expenses” in the Consolidated Statement of Operations.
As of the termination date, there were no Financing Transactions or Strategic Transactions (as defined in the Agreement) being considered by the Company and no such transactions occurred.
Pursuant to the Termination Agreement, EVP canceled the Warrant in exchange for the Company’s issuance to EVP of 750,000 shares of the Company’s Common Stock. There was no incremental increase in the fair value of the modified stock-based compensation award as of the modification date and accordingly, no additional compensation cost was recognized.
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4. NOTES PAYABLE |
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NOTES PAYABLE | CONVERTIBLE NOTES PAYABLE – RELATED PARTIES
Funds are advanced to the Company from various related parties as necessary to meet working capital requirements. Below is a summary of outstanding convertible notes due to related parties, including accrued interest separately recorded, as of December 31, 2017 and 2016:
On June 15, 2015, the Company entered into term loan agreements with The James W. Stuckert Revocable Trust (“SRT) and The S. Oden Howell Revocable Trust (“HRT”), pursuant to which SRT made a loan to the Company in the amount of $600,000 and HRT made a loan to the Company in the amount of $600,000 under Senior Secured Convertible Promissory Notes (the “Notes”). Both SRT and HRT are controlled by affiliates of the Company. The Notes each carry an interest rate of 10% per annum, and (subject to various default provisions) all unpaid principal and accrued but unpaid interest under the Notes is due and payable on June 15, 2018. The Notes may be prepaid in whole or in part upon ten days’ written notice, and all unpaid principal and accrued interest under the Notes may be converted, at the option of SRT and HRT, into shares of the Company’s Series C Convertible Preferred Stock at a conversion price of $70.00 per share at any time prior to maturity.”). The Company’s obligations under the two notes are secured by all the assets of the Company and its subsidiaries.
NOTES PAYABLE
The following is a summary of amounts due to unrelated parties, including accrued interest separately recorded, as of December 31, 2017 and 2016:
During the year ended December 31, 2016, the Company paid $26,762 principal and $49,559 in accrued interest for three of the non-related party notes. In June and July of 2016, two of the parties' notes were amended and they agreed to forgive a portion of the accrued interest in the amounts of $22,943 and $7,649 for a total of $30,592.
During 2017, the WMTI reached an agreement to settle an outstanding payable with WellDyne Health, LLC, (“WellDyne”), a third party that had provided shipping and consulting services on behalf of the Company effective through September 19, 2015. As part of that settlement, WellDyne forgave $39,709 of the outstanding payable.
During 2017, the Company paid a total of $190,838 principal to three non-related party note holders and reached an agreement with them to forgive $10,937 in accrued interest. As a result, all three notes were paid in full. The Company also settled $223,500 note payable and $147,373 accrued interest in Common Stock, see note 11.
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5. INTANGIBLE ASSETS |
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INTANGIBLE ASSETS | Patent
On September 29, 2009, the Company entered into an Asset Purchase Agreement (the “Agreement”), whereby the Company acquired a patent from in exchange for 500,000 shares of the Company’s common stock and the assumption of a legal fee payable in the amount of $47,595 which is related to the patent. Based on the guidance in ASC Topic No. 350-30, the patent was recorded as an intangible asset of $462,715, or approximately $.93 per share plus $47,595 for the assumed liability. The intangible asset is being amortized over an estimated ten-year useful life.
Software Implementation
In 2017, the Company put into service a business software. The costs to implement this software which totaled $41,980 are included in intangible assets and are being amortized over the initial term of the license which is three years.
The activity for the intangible assets is summarized below:
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6. CUSTOMERS AND SUPPLIERS |
12 Months Ended |
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Dec. 31, 2017 | |
Notes to Financial Statements | |
CUSTOMERS AND SUPPLIERS | The Company had one significant customer which accounted for approximately 16% of the Company’s sales in 2017 and had two significant customers which accounted for approximately 18% and 14% of the Company’s sales in 2016. The loss of the sales generated by these customers would have a significant effect on the operations of the Company.
The Company purchases all raw materials inventory for its principal product from one vendor. If this vendor became unable to provide materials in a timely manner and the Company was unable to find alternative vendors, the Company's business, operating results and financial condition would be materially adversely affected.
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7. COMMITMENTS AND CONTINGENCIES |
12 Months Ended |
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Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | ROYALTY AGREEMENTS
Effective January 3, 2008, WCI entered into separate exclusive license agreements with both Applied Nutritionals, LLC (“Applied”) and its founder George Petito (“Petito”), pursuant to which WCI obtained the exclusive world-wide license to make products incorporating intellectual property covered by a patent related to CellerateRX products. The licenses are limited to the human health care market, (excluding dental and retail) for external wound care (including surgical wounds) and include any new product developments based on the licensed patent and processes and any continuations. Although the term of these licenses expired on February 27, 2018, the agreements permit WCI to continue to sell and distribute products for a period not exceeding six (6) months from the effective termination date.
In consideration for the licenses, WCI agreed to pay Applied and Petito, (in the aggregate), the following royalties, beginning January 3, 2008: (a) an advance royalty of $100,000; (b) a royalty of 15% of gross sales occurring during the first year of the license; (c) an additional advance royalty of $400,000 on January 3, 2009; plus (d) a royalty of 3% of gross sales for all sales occurring after the payment of the $400,000 advance royalty. In addition, WCI must maintain a minimum aggregate annual royalty payment of $375,000 for 2009 and thereafter if the royalty percentage payments made do not meet or exceed that amount. The amounts listed in the two preceding sentences are the aggregate of amounts paid/owed to Applied and Petito) and the Company has paid the minimum aggregate annual royalty payments each year since 2008, including both 2017 and 2016. Sales of CellerateRX occurring after the termination date are subject to the 3% royalty. The total unpaid royalties as of December 31, 2017 and 2016, is $244,422 and $276,916, respectively.
On September 29, 2009, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), by and among the Company, RSI-ACQ, LLC, a wholly-owned subsidiary of the Company (RSI), Resorbable Orthopedic Products, LLC (“Resorbable”) and Resorbable’s members, pursuant to which, RSI acquired substantially all of Resorbable’s assets, in exchange for (i) 500,000 shares of the Company’s common stock, and (ii) a royalty equal to eight percent (8%) of the net revenues generated from products sold by the Company or any of its affiliates, which products are developed from or otherwise utilize any of the patented technology acquired from Resorbable. The royalty is paid to Barry Constantine Consultant LLC for distribution to the original patent holders, (including Mr. Constantine) and/or their heirs.
PREPAID FROM INVENTORY CONTRACT
In November of 2016, ROP entered into a contract with the contract manufacturer of HemaQuell® product to purchase $13,787 of product. This amount was recorded as an asset in the “Prepaid and Other Assets” account at December 31, 2016, based on the contractual obligation of the parties.
OFFICE LEASE
The Company’s corporate office is located at 1200 Summit Avenue, Suite 414, Fort Worth, TX 76102. The lease was entered into in March of 2017, with an effective date of May 1, 2017. The lease expires on the last day of the fiftieth (50th) full calendar month following the effective date (June 30, 2021). Monthly base rental payments are as follows: months 1-2, $0; months 3-14, $7,250; months 15-26, $7,401; months 27-38, $7,552; and months 39-50, $7,703.
PAYABLES TO RELATED PARTIES
As of December 31, 2017, and 2016, the Company had outstanding payable to related parties totaling $60,000 and $93,655, respectively. The payables are unsecured, bear no interest and due on demand.
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8. STOCKHOLDERS EQUITY |
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STOCKHOLDERS EQUITY | PREFERRED STOCK
There are currently 5,000,000 shares of Series A Preferred Stock authorized, with no shares of Series A Preferred Stock issued or outstanding as of December 31, 2017 and 2016.
Effective June 24, 2010, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series B Convertible Redeemable Preferred Stock (the “Certificate”) with the Texas Secretary of State, designating 7,500 shares of Series B Preferred Stock, par value $10.00 per share (the “Series B Shares”). The Series B Shares rank senior to shares of all other common and preferred stock with respect to dividends, distributions, and payments upon dissolution. Each of the Series B Shares is convertible at the option of the holder into shares of common stock as provided in the Certificate. There were no Series B Shares issued or outstanding as of December 31, 2017 and 2016.
On October 11, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series C Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 100,000 shares of Series C Preferred Stock, par value $10.00. The Series C Preferred Stock is entitled to accruing dividends (payable, at the Company’s options, in either cash or stock) of 5% per annum until October 10, 2016, and 3% per annum until October 10, 2018.
The Series C Preferred Stock is senior to the Company’s common stock and any other currently issued series of the Company’s preferred stock upon liquidation and is entitled to a liquidation preference per share equal to the original issuance price of such shares of Series C Preferred Stock together with the amount of all accrued but unpaid dividends thereon. Each of the Series C Shares is convertible at the option of the holder into 1,000 shares of common stock as provided in the Certificate. Additionally, each holder of Series C Preferred Stock shall be entitled to vote on all matters submitted for a vote of the holders of Common Stock a number of votes equal to the number of full shares of Common Stock into which such holder’s Series C shares could then be converted. As of December 31, 2017, and December 31, 2016, there were 85,561 and 85,646 shares of Series C Preferred Stock issued and outstanding, respectively.
During the year ended December 31, 2016, the Company issued 6,428 shares of Series C preferred stock to Directors of the Company for cash proceeds of $450,000.
On March 10, 2017, the Company issued 715 shares of Series C preferred stock in exchange for cash in the amount of $50,050.
During 2017, one shareholder converted 800 shares of Series C preferred stock and dividend of $9,692 to common stock of 937,556 shares.
Series C preferred stock dividends were $139,006 and $261,716 for the years ended December 31, 2017 and December 31, 2016, respectively. As of December 31, 2017, the aggregate outstanding accumulated arrearages of cumulative dividends was $909,557, ($10.63 per share). As of the date of this filing, $1,060,098 Series C preferred stock dividends have been converted to 15,144,247 shares of common stock at $0.07 per share.
On November 13, 2013, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series D Convertible Preferred Stock (the “Certificate of Designations”), under which it designated 25,000 shares of Series D Preferred Stock. Shares of Series D Preferred Stock are not entitled to any preference with respect to dividend or upon liquidation and will automatically convert (at a ratio of 1,000-to-1) into shares of the Company’s common stock, par value $0.001 upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. On September 3, 2014, the Company increased its authorized common stock to 250,000,000 shares. As a result, all outstanding Series D preferred shares were converted to common stock.
In November of 2013, the Company granted an aggregate of 15,000 shares of Series D preferred stock to employees and nonemployees for services. 9,000 of the shares were granted to employees and vested immediately upon grant; 4,000 shares were granted to a nonemployee and vested immediately upon grant; 1,000 of the shares were granted to an employee and vested in equal tranches over three years through October 1, 2016; and 1,000 of the shares were granted to a nonemployee and vested in equal tranches over three years through September 15, 2016. The aggregate fair value of the awards was determined to be $1,046,669 of which $925,787 was recognized during the year ended December 31, 2013; $79,318 was recognized during the year ended December 31, 2014; $6,628, (net forfeitures of $19,173) was recognized during the year ended December 31, 2015; and $8,109 was recognized during the year ended December 31, 2016. As of October 1, 2016, all shares have vested, no further expense is to be recognized.
During the year ended December 31, 2014, the Company granted an aggregate of 1,445 shares of Series D preferred stock to three nonemployees which vested immediately upon grant. The aggregate fair value of the awards was determined to be $157,050 which was recognized during the year ended December 31, 2014 and no further expense is to be recognized.
On September 3, 2014, the Company increased its authorized common stock to 250,000,000 shares. Accordingly, the 16,545 outstanding shares of Series D preferred stock were automatically converted into 16,545,000 common shares.
As of December 31, 2017, and December 31, 2016 there were no shares of Series D Preferred Stock issued and outstanding.
On May 30, 2014, the Company filed a Certificate of Designations, Number, Voting Power, Preferences and Rights of Series E Convertible Preferred Stock (The “Certificate of Designations”), under which it designated 5,000 shares of Series E Preferred Stock. Shares of Series E Preferred Stock are not entitled to any preference with respect to dividends or upon liquidation, and will automatically convert (at a ratio of 1,000 shares of Common Stock for every one share of Series E Preferred Stock) into shares of the Company’s common stock, $0.001 par value upon approval of the Company’s stockholders (and filing of) and amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of Common Stock from 100,000,000 to 250,000,000. As of December 31, 2017, there were no shares of Series E Preferred Stock issued and outstanding.
The Company evaluated the Series C preferred stock under FASB ASC 815 and determined that they do not qualify as derivative liabilities. The Company then evaluated the Series C preferred stock for beneficial conversion features under FASB ASC 470-30 and determined that none existed.
COMMON STOCK
On September 3, 2014, the Company held a stockholders meeting. The stockholders approved an amendment to the Company’s Articles of Incorporation to increase the authorized shares of common stock of the Company from 100,000,000 to 250,000,000.
On March 31, 2016 the Company issued 1,098,904 shares of common stock in conversion of 1,000 shares of Series C Preferred stock and $6,924 of related dividends.
On October 26, 2016, the Company issued 1,150,000 shares of common stock valued at $57,500 to employees. During the year ended December 31, 2016, an aggregate of 499,967 common shares were issued upon the vesting of previously granted stock awards and the Company recorded a net reversal of $2,220 of stock-based compensation related to the amortization of stock awards to employees and nonemployees net of reversal of the unvested portion of forfeited awards.
On October 26, 2016, the Company agreed to grant three tranches of shares of common stock, 250,000, 250,000, and 250,000 to a sales consultant which are to be earned upon meeting specific performance measures agreed upon. The measures include achieving three specific sales targets per month for 3 consecutive months. The first one of these was earned January 31st, 2017, and 250,000 shares were granted in March 2017.
During the year ended December 31, 2016, an aggregate of 166,667 shares of fully vested common stock under previously issued stock awards was returned and cancelled. The share cancellation was recognized at par value.
On March 9, 2017, the Company issued 150,000 shares of common stock to each of the Company’s then four Board Directors, (a total of 600,000 shares valued at $42,000).
On March 10, 2017, the Company issued 250,000 shares of common stock valued at $18,250 to a contract consultant upon achievement of specified revenue targets which occurred January 31, 2017.
On July 31, 2017, the Company issued 937,556 shares of common stock for the conversion of 800 shares of Series C Convertible Preferred Stock and $9,629 of related Series C dividends
On November 22, 2017, the Company issued 1,200,000 shares of common stock valued at $84,000 for settlement of debt (see NOTE 11 below for a discussion of the settlement).
On November 22, 2017, the Company issued 750,000 shares of common stock valued at $0 to a contract consultant upon termination of contract (see NOTE 3 above for a discussion of the termination).
WARRANTS
At December 31, 2017, there were 5,100,000 warrants outstanding with a weighted average exercise price of $0.06. At December 31, 2016, there were 67,246,300 warrants outstanding with a weighted average exercise price of $0.12.
A summary of the status of the warrants granted at December 31, 2017 and 2016, and changes during the years then ended is presented below:
The following table summarizes the outstanding warrants as of December 31, 2017:
The following table summarizes the outstanding warrants as of December 31, 2016:
STOCK OPTIONS
A summary of the status of the stock options granted for the years ended December 31, 2017 and 2016, and changes during the period then ended is presented below:
(a) On January 1, 2015, the Company granted three tranches of options, 25,000, 25,000, and 100,000 which vest upon meeting specific performance measures. The measures include achieving three specific sales targets per month for 3 consecutive months. The exercise price and expiration date of each tranche will be set upon achieving the targets. As of the date of this filing the performance measures have not been met. As a result, the exercise price is undetermined and these options are excluded from the calculation of weighted average remaining life. As of December 31, 2017, the options were forfeited.
On December 31, 2017, the Company granted a total of 1,150,000 options to five employees. The shares vest in equal annual amounts over three years and the aggregate fair value of the awards was determined to be $61,322 and no expense was recognized.
The following table summarizes the outstanding options as of December 31, 2017:
The following table summarizes the outstanding options as of December 31, 2016:
(a) On January 1, 2015, the Company granted three tranches of options, 25,000, 25,000, and 100,000 which vest upon meeting specific performance measures. The measures include achieving three specific sales targets per month for 3 consecutive months. The exercise price and expiration date of each tranche will be set upon achieving the targets. As of the date of this filing the performance measures have not been met. As a result, the exercise price is undetermined and these options are excluded from the calculation of weighted average remaining life. As of December 31, 2017, the options were forfeited.
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9. DERIVATIVE LIABILITIES |
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Derivative Liability [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE LIABILITIES | During 2017 and 2016, the Company had outstanding common stock warrants that contained anti-dilution provisions including provisions for the adjustment of the exercise price if the Company issues common stock or common stock equivalents at a price less than the exercise price. In addition, the Company also had outstanding convertible notes payable to various lenders that were convertible at discounts ranging from 30% to 50% of the fair market value of the Company’s common stock.
As of December 31, 2017, the Company did not have a sufficient number of common shares authorized to fulfill the possible exercise of all outstanding warrants and the conversion of all outstanding convertible notes payable. As a result, the Company determined that the warrants and the embedded beneficial conversion features of the debt instruments do not qualify for equity classification. Accordingly, the warrants and conversion options are treated as derivative liabilities and are carried at fair value. As of December 31, 2017, no outstanding common stock warrants with anti-dilution provision remained outstanding.
The Company estimates the fair value of the derivative warrant liabilities by using the Black-Scholes Option Pricing Model and the derivative liabilities related to the conversion features in the outstanding convertible notes using the Black-Scholes Option Pricing Model assuming maximum value, a Level 3, input, with the following assumptions used:
The following table sets forth the changes in the fair value of derivative liabilities for the years ended December 31, 2016 and 2015:
The aggregate gain (loss) on derivative liabilities for the years ended December 31, 2017 and December 31, 2016 was $44 and $266, respectively.
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10. INCOME TAXES |
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INCOME TAXES | The Company accounts for income taxes in accordance with ASC Topic No. 740, “Income Taxes.” This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards.
A 100% valuation allowance has been provided for all deferred tax assets, as the ability of the Company to generate sufficient taxable income in the future is uncertain.
The unexpired net operating loss carry forward at December 31, 2017 is approximately $34,740,000 with various expiration dates between 2019 and 2037 if not utilized. All tax years starting with 2014 are open for examination.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) significantly revised U.S. corporate income tax law by, among other things, reducing the corporate income tax rate from 34% to 21%. As a result of this effective tax rate change the Net operating loss carry forward as of December 31, 2017, decreased from $11,928,740 to $7,295,315, a decrease of $4,633,425. Because the Company recognizes a valuation allowance for the entire balance, there is no net impact to the Company’s balance sheet or results of operations.
Non-current deferred tax asset:
Reconciliations of the expected federal income tax benefit based on the statutory income tax rate of 34% to the actual benefit for the years ended December 31, 2017 and 2016 are listed below.
The Company has no tax positions at December 31, 2017 and 2016 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended December 31, 2017 and 2016, the Company recognized no interest and penalties.
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11. LEGAL PROCEEDINGS |
12 Months Ended |
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Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | Ken Link v. Wound Management Technologies, Inc., et al. On November 14, 2011, Ken Link instituted litigation against Wound Management Technologies, Inc. and Scott A. Haire in the District Court of Tarrant County Texas, Cause No. 342-256486-11 of the 342nd Judicial District, alleging default under the terms of a certain promissory note executed by Wound Management Technologies, Inc. and guaranteed by Scott A. Haire. Ken Link asserted at that point in time that the unpaid balance of the note, including accrued interest as of December 4, 2011, was the sum of $355,292, Mr. Link asserted that he was entitled to receive 200,000 shares of the Company’s common stock. Mr. Link was also seeking attorney’s fees and interest at 13% per annum, plus $1,000 per day. We disputed the claim, because we believed the contract was tainted by usury, and therefore, a usury counterclaim would more than offset the unpaid balance of the promissory note.
The note, in the original principal amount of $223,500, required the payment of interest accrued at 13% per annum; an additional one-time charge of $20,000 due on maturity; the issuance of 200,000 shares of stock as interest; and a $1,000 per day late fee for each day the principal and interest is late. It was our contention that these sums made the contract usurious and the usury claims more than offset the amount of the unpaid indebtedness. Furthermore, we filed an action for recovery of damages for usury under the Texas Finance Code for a note which was previously executed by the Company and payable to Ken Link, which was in fact paid to Mr. Link in full. In addition, Wound Management was seeking recovery of attorney’s fees pursuant to the usury provisions of the Texas Finance Code. While the amount of the promissory note remained unpaid, the counterclaims more than offset the maximum amount that could be asserted on the promissory note. The case was set for trial the week of October 21, 2013, but after three (3) days of trial before a jury, the judge declared a mistrial. Subsequently, Ken Link amended his pleadings and alleged that Wound Management Technologies, Inc. never intended to pay the $223,500 promissory note and sought damages for fraud and the loss of the benefit of the bargain relating to the shares of stock, plus interest as set forth in the note, exemplary damages, and attorney's fees. The case was subsequently reset for trial the week of December 1, 2014, and the judge again declared a mistrial. On September 4, 2015, Ken Link again amended his pleadings seeking the sums he says were owed to him resulting from the advance by him in the amount of $223,500. The case was set for trial the week of May 15, 2017. but again, after three (3) days of trial before a jury, the judge declared a mistrial.
The case was subsequently reset for trial the week of October 30, 2017, and during a break in the proceedings, (November 1, 2017), the Company and Ken Link entered into a binding settlement agreement, which resulted in dismissal with prejudice of all claims and counterclaims asserted in Cause No. 342-256486-11, in exchange for which the Company delivered to Ken Link 1,200,000 shares of Wound Management Technologies, Inc. common stock in total satisfaction of all obligations between the parties. As a result of this settlement, the Note Payable to Mr. Link in the amount of $223,500 was cancelled along with accrued interest in the amount of $147, 253. The fair value of the 1,200,000 shares of common stock issued was $84,000 based on the stock price when issued, the Company recognized gain on settlement of debt of $286,873.
Wound Management Technologies, Inc. v. Fox Lake Animal Hospital, PSP: Wound Management Technologies, Inc. instituted litigation in Cause No. 96-263918-13 in the 96th District Court of Tarrant County, Texas against Fox Lake Animal Hospital, PSP and Bohdan Rudawksi, Trustee of the Fox Lake Animal Hospital, PSP. The cause of action asserts that the loan transaction between Wound Management Technologies, Inc. and Fox Lake Animal Hospital PSP involved the collection of illegal usurious interest for the reason that while the face amount of the promissory note is $39,000, but the loan actually loaned for a 6-month period was $25,000, resulting in an interest rate in excess of the maximum rate permitted by the Texas Finance Code. Wound Management Technologies, Inc. is seeking to recover the penalties authorized by the Texas Finance Code, together with the attorney’s fees. Fox Lake Animal Hospital and Bohdan Rudawski, Trustee have filed a counterclaim where they allege there were misrepresentations by Wound Management Technologies, Inc. that would be excuse them from having to pay penalties under the Texas Finance Code for charging usurious interest. Fox Lake Animal Hospital and Bohdan Rudawski, Trustee further claim that actions asserted violates the Federal Securities Exchange Act and alleged fraud and fraud in the inducement in entering into the promissory note.
Wound Management Technologies, Inc. v. Bohdan Rudawski: Wound Management Technologies, Inc. instituted litigation in Cause No. 352-263856-13 in the 352nd District Court of Tarrant County, Texas against Bohdan Rudawksi. The case has been postponed until September of 2016. The cause of action asserts that the loan transaction between Wound Management Technologies, Inc. and Bohdan Rudawski involved the collection of illegal usurious interest for the reason that while the face amount of the promissory note is $156,000, but the loan actually loaned for a 6-month period was $100,000, charging an effective interest rate of over 100% which violates the provisions of the Texas Finance Code. Wound Management Technologies, Inc. is seeking to recover the penalties authorized by the Texas Finance Code, together with the attorney’s fees. Bohdan Rudawski has filed an answer and alleges there was not an absolute obligation to repay the note, attempting to defeat the usury claim. Bohdan Rudawski has further asserted that the claims violate the Federal Securities Exchange Act and allege fraud of inducement in entering into the promissory note.
The 352nd Judicial District Court entered an order in December, 2016 consolidating the Bohdan Rudawski case and the Fox Lake Animal Hospital case into the 352nd Court case. The case was tried and went to the jury on March 22, 2018. The jury, in response to the question concerning the fraud counterclaim, reached a verdict that there was no fraud, therefore, a Judgment should be entered finding that the Defendants take nothing by virtue of their fraud claim.
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12. CAPITAL LEASE OBLIGATION |
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Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
CAPITAL LEASE OBLIGATION | In December 2014, the Company entered into a Capital Lease agreement for the purchase of a phone system. The agreement required a down payment of $2,105 and 36 monthly payments of $375. The Company recorded an asset of $13,512 and a capital lease obligation of $13,512. Aggregate payments under the capital lease were $3,766 and $4,733 during 2017 and 2016, respectively. At December 31, 2017, the balance was paid in full. |
13. SUBSEQUENT EVENTS |
12 Months Ended |
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Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | In accordance with applicable accounting standards for the disclosure of events that occur after the balance sheet date but before the financial statements are issued, all significant events or transactions that occurred after December 31, 2017, are outlined below:
On March 6, 2018 the Company issued 22,651,356 shares of common stock for the conversion of $1,200,000 in convertible debt.
In February and March 2018, the company issued 100,567,691 shares of common stock for conversion of 85,561 shares of Series C Convertible Preferred Stock and $1,050,468 of related Series C dividends.
As of the date of this report there are no Series C Convertible Preferred stock shares outstanding.
In response to the expiration of Applied Nutritionals’ patent covering the use of hydrolyzed collagen in wound care on February 27, 2018, the Company submitted an FDA 510(k) application on March 26, 2018, seeking U.S. marketing clearance for our new internally sourced hydrolyzed collagen.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION | The terms “the Company,” “we,” “us” and “WMT” are used in this report to refer to Wound Management Technologies, Inc. The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles.
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PRINCIPLES OF CONSOLIDATION | The accompanying consolidated financial statements include the accounts of WMT and its wholly-owned subsidiaries: Wound Care Innovations, LLC a Nevada limited liability company (“WCI”); Resorbable Orthopedic Products, LLC, a Texas limited liability company (“Resorbable); and Innovate OR, Inc. (“InnovateOR”) formerly referred to as BioPharma Management Technologies, Inc., a Texas corporation (“BioPharma”). All intercompany accounts and transactions have been eliminated.
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USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION | The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the amounts of revenues and expenses during the reporting period. On a regular basis, management evaluates these estimates and assumptions. Actual results could differ from those estimates. |
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CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES | The Company considers all highly liquid debt investments purchased with an original maturity of three months or less to be cash equivalents. Marketable securities include investments with maturities greater than three months but less than one year. For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities, and amounts due to related parties, the carrying amounts approximate fair value due to their short maturities. |
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LOSS PER SHARE | The Company computes income/loss per share in accordance with Accounting Standards Codification “ASC” Topic No. 260, “Earnings per Share,” which requires the Company to present basic and dilutive income/loss per share when the effect is dilutive. Basic income/loss per share is computed by dividing income/loss available to common stockholders by the weighted average number of common shares available. Diluted income/loss per share is computed similar to basic income/loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
The calculation of basic and diluted net loss per share for the years ended December 31, 2017 and 2016 are as follows:
The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2017 and 2016 as such shares would have had an anti-dilutive effect:
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REVENUE RECOGNITION | In accordance with the guidance in “ASC” Topic No. 605, “Revenue Recognition,” the Company recognizes revenue when (a) persuasive evidence of an arrangement exists, (b) delivery has occurred or services have been rendered, (c) the fee is fixed or determinable, and (d) collectability is reasonable assured. Revenue is recognized upon delivery. Revenue is recorded on the gross basis, which includes handling and shipping, because the Company has risks and rewards as a principal in the transaction based on the following: (a) the Company maintains inventory of the product, (b) the Company is responsible for order fulfillment, and (c) the Company establishes the price for the product. The Company recognizes royalty revenue in the period the royalty bearing products are sold.
The Company recognizes revenue based on bill and hold arrangements when the seller has transferred to the buyer the significant risks and rewards of ownership of the goods; the seller does not retain effective control over the goods or continuing managerial involvement to the degree usually associated with ownership; the amount of revenue can be measured reliably; it is probable that the economic benefits of the sale will flow to the seller; any costs incurred or to be incurred related to the sale can be measured reliably; it is probable that delivery will be made; the goods are on hand, identified, and ready for delivery; the buyer specifically acknowledges the deferred delivery instructions; and the usual payment terms apply.
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ALLOWANCE FOR DOUBTFUL ACCOUNTS | The Company establishes an allowance for doubtful accounts to ensure accounts receivable are not overstated due to uncollectability. Bad debt reserves are maintained based on a variety of factors, including the length of time receivables are past due and a detailed review of certain individual customer accounts. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. The Company recorded bad debt expense of $22,207 and $10,735 in 2017 and 2016, respectively. The allowance for doubtful accounts at December 31, 2017 was $28,910 and the amount at December 31, 2016 was $21,947. |
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INVENTORIES | Inventories are stated at the lower of cost or net realizable value, with cost computed on a first-in, first-out basis. Inventories consist of finished goods, powders, gels and the related packaging supplies. The Company recorded inventory obsolescence expense of $57,483 in 2017 and $152,547 in 2016. The allowance for obsolete and slow-moving inventory had a balance of $144,996 and $153,023 at December 31, 2017 and December 31, 2016, respectively.
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PROPERTY AND EQUIPMENT | Property and equipment is recorded at cost. Depreciation is computed utilizing the straight-line method over the estimated economic life of the assets, which ranges from five to ten years. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period. As of December 31, 2017, fixed assets consisted of $120,162 including furniture and fixtures, computer equipment, phone equipment and the Company websites. As of December 31, 2016, fixed assets consisted of $76,267 including furniture and fixtures, computer equipment, phone equipment and the Company websites. The depreciation expense recorded in 2017 was $15,623 and the depreciation expense recorded in 2016 was $9,852. The balance of accumulated depreciation was $56,951 and $41,328 at December 31, 2017 and December 31, 2016, respectively. The Company paid $43,895 to acquire fixed assets during 2017. |
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INTANGIBLE ASSETS | As of December 31, 2017, and 2016 intangible assets include a patent acquired in 2009 with a historical cost of $510,310. The patent is being amortized over its estimated useful life of 10 years using the straight-line method. Amortization expense recognized was $65,025 and $51,031 during 2017 and 2016. In 2017, the Company put into service a business software. The costs to implement this software which totaled $41,980 are included in intangible assets and are being amortized over the initial term of the license which is three years. |
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IMPARIMENT OF LONG LIVED ASSETS | Long-lived assets and certain identifiable intangibles to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived assets and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, undiscounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value. There was no impairment recorded during the years ended December 31, 2017 and 2016. |
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FAIR VALUE MEASUREMENTS | As defined in Accounting Standards Codification (“ASC”) Topic No. 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.
The three levels of the fair value hierarchy defined by ASC Topic No. 820 are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
At December 31, 2016 and 2015, the Company’s financial instruments consist of the derivative liabilities related to stock purchase warrants which were valued using the Black-Scholes Option Pricing Model, a level 3 input.
Our intangible assets have also been valued using the fair value accounting treatment and a description of the methodology used, including the valuation category, is described below in Note 5 “Intangible Assets.”
The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of December 31, 2017 and 2016.
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DERIVATIVES | The Company entered into derivative financial instruments to manage its funding of current operations. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately. |
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INCOME TAXES | Income taxes are accounted for under the asset and liability method, whereby deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all, of the deferred tax asset will not be realized. |
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BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE | The convertible feature of certain notes payable provides for a rate of conversion that is below the market value of the Company’s common stock. Such a feature is normally characterized as a "Beneficial Conversion Feature" ("BCF"). In accordance with ASC Topic No. 470-20-25-4, the intrinsic value of the embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the debt equal to the intrinsic value of that feature to additional paid in capital. When applicable, the Company records the estimated fair value of the BCF in the consolidated financial statements as a discount from the face amount of the notes. Such discounts are accreted to interest expense over the term of the notes using the effective interest method. |
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ADVERTISING EXPENSE | In accordance with ASC Topic No. 720-35-25-1, the Company recognizes advertising expenses the first time the advertising takes place. Such costs are expensed immediately if such advertising is not expected to occur. |
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SHARE-BASED COMPENSATION | The Company accounts for stock-based compensation to employees in accordance with FASB ASC 718. Stock-based compensation to employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period. The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. The Company estimates the fair value of stock-based payments using the Black-Scholes option-pricing model for common stock options and warrants and the closing price of the Company’s common stock for common share issuances. |
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RECLASSIFICATIONS | Certain prior period amounts have been reclassified to conform to current period presentation. |
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers which is to be effective for reporting periods beginning after December 15, 2017. The Company has reviewed the pronouncement and believes it will not have a material impact on the Company’s financial position, operations or cash flows.
In February 2016, the FASB issued ASC 842 Leases which is to be effective for reporting periods beginning after December 15, 2018. The Company is currently reviewing any impact that it will have on the Company’s financial position, operations or cash flows. |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Summary Of Significant Accounting Policies Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share |
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Schedule of fair value measurement on recurring basis |
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4. NOTES PAYABLE (Tables) |
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Notes Payable Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of notes payable - related parties |
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Schedule of notes payable |
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5. INTANGIBLE ASSETS (Tables) |
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Intangible Assets Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets |
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8. STOCKHOLDERS EQUITY (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Stockholders Equity Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A Summary Of The Status Of The Warrants Granted |
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Schedule of warrants by warrant price range |
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Schedule of option activity |
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Schedule of options by option price range |
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9. DERIVATIVE LIABILITIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||
Derivative Liabilities Tables | |||||||||||||||||||||||||||||||
Fair value of the derivative warrant liabilities by using the Black-Scholes Option Pricing Model |
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Changes in fair value of derivative liabilities |
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10. INCOME TAXES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of deferred tax assets |
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Schedule of federal statutory rate |
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Basic net income (loss) per share: | ||
Net income (loss) | $ 331,309 | $ (415,747) |
Weighted-average common shares outstanding | 111,381,832 | 108,604,489 |
Basic net income (loss) per share | $ 0 | $ (0.01) |
Diluted net income (loss) per share: | ||
Net income (loss) | $ 331,309 | $ (415,747) |
Series C dividends | (139,006) | 0 |
Diluted net income (loss) | $ 192,303 | $ (415,747) |
Weighted-average common shares outstanding | 111,381,832 | 108,604,489 |
Common stock warrants | 694,834 | 0 |
Convertible debt | 0 | 0 |
Preferred shares | 96,568,871 | 0 |
Weighted average shares used in computing diluted net income (loss) per share | 208,645,538 | 108,604,489 |
Diluted net income (loss) per share | $ 0 | $ (0.01) |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Derivative Liability | $ 0 | $ 44 |
Level 1 | ||
Derivative Liability | 0 | 0 |
Level 2 | ||
Derivative Liability | 0 | 0 |
Level 3 | ||
Derivative Liability | $ 0 | $ 44 |
4. NOTES PAYABLE (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Notes payable related party | $ 1,200,000 | |
Accrued interest related party | $ 324,986 | $ 192,328 |
S. Oden Howell Revocable Trust | ||
Nature of relationship | Mr. S. Oden Howell, Jr. became a member of the Board of Directors in June of 2015 | |
Terms of the agreement | The note is secured, bears interest at 10% per annum, matures June 15, 2018, and is convertible into shares of the Company's Series C Convertible Preferred Stock at a conversion price of $70.00 per share at any time prior to maturity. | |
Notes payable related party | $ 600,000 | |
Accrued interest related party | $ 162,493 | 96,164 |
James W. Stuckert Revocable Trust | ||
Nature of relationship | Mr. James W. Stuckert became a member of the Board of Directors in September of 2015 | |
Terms of the agreement | The note is secured, bears interest at 10% per annum, matures June 15, 2018, and is convertible into shares of the Company's Series C Convertible Preferred Stock at a conversion price of $70.00 per share at any time prior to maturity. | |
Notes payable related party | $ 600,000 | |
Accrued interest related party | $ 162,493 | $ 96,164 |
4. NOTES PAYABLE (Details 1) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Principal Amount | $ 0 | $ 414,338 |
Accrued Interest | 175,083 | 175,083 |
March 2011 Note Payable | ||
Principal Amount | 0 | 223,500 |
Accrued Interest | 147,373 | 147,374 |
Third Quarter 2012 Secured Subordinated Promissory Notes | ||
Principal Amount | 0 | 104,571 |
Accrued Interest | 8,200 | 8,200 |
September 28, 2012 Promissory Note | ||
Principal Amount | 0 | 11,300 |
Accrued Interest | 19,510 | 19,510 |
Quest Capital Investors, LLC | ||
Principal Amount | 0 | 300 |
Accrued Interest | 0 | 0 |
May 28, 2015 Promissory Note | ||
Principal Amount | 0 | 74,667 |
Accrued Interest | $ 0 | $ 0 |
5. INTANGIBLE ASSETS (Details) |
12 Months Ended |
---|---|
Dec. 31, 2017
USD ($)
| |
Cost, beginning | $ 510,310 |
Implementation costs | 41,980 |
Cost, ending | 552,290 |
Accumulated amortization, beginning | 369,974 |
Amortization expense | 65,025 |
Accumulated amortization, ending | 434,999 |
Net carrying amount, beginning | 140,336 |
Net carrying amount, ending | 117,291 |
Patents | |
Cost, beginning | 510,310 |
Implementation costs | 0 |
Cost, ending | 510,310 |
Accumulated amortization, beginning | 369,974 |
Amortization expense | 51,032 |
Accumulated amortization, ending | 421,006 |
Net carrying amount, beginning | 140,336 |
Net carrying amount, ending | 89,304 |
Software | |
Cost, beginning | 0 |
Implementation costs | 41,980 |
Cost, ending | 41,980 |
Accumulated amortization, beginning | 0 |
Amortization expense | 13,993 |
Accumulated amortization, ending | 13,993 |
Net carrying amount, beginning | 0 |
Net carrying amount, ending | $ 27,987 |
8. STOCKHOLDERS' EQUITY (Details) - Warrants - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Number of Warrants | ||
Outstanding beginning balance, Shares | 67,246,300 | 9,736,844 |
Granted | 0 | 60,000,000 |
Exercised | 0 | 0 |
Forfeited | (60,051,300) | 0 |
Expired | (2,095,000) | (2,490,544) |
Outstanding ending balance | 5,100,000 | 67,246,300 |
Weighted average exercise price | ||
Outstanding beginning balance, Weighted average exercise price | $ 0.12 | $ 0.19 |
Granted, Weighted average exercise price | 0.00 | 0.12 |
Exercised, Weighted average exercise price | 0.00 | 0.00 |
Forfeited, Weighted average exercise price | 0.12 | 0.00 |
Expired, Weighted average exercise price | 0.13 | 0.60 |
Outstanding ending balance, Weighted average exercise price | $ 0.06 | $ 0.12 |
8. STOCKHOLDERS' EQUITY (Details 2) - Stock Options - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Outstanding beginning balance, Shares | 1,093,500 | 1,093,500 |
Number of Options Granted | 1,150,000 | 0 |
Number of Options Exercised | 0 | 0 |
Number of Options Forfeited | (150,000) | 0 |
Number of Options Expired | (943,500) | 0 |
Outstanding ending balance | 1,150,000 | 1,093,500 |
Outstanding beginning balance, Weighted average exercise price | $ 0.15 | $ 0.15 |
Weighted Average Exercise Price Granted | 0.06 | 0.00 |
Weighted Average Exercise Price Exercised | 0.00 | 0.00 |
Weighted Average Exercise Price Forfeited | 0.00 | 0.00 |
Weighted Average Exercise Price Expired | 0.15 | 0.00 |
Outstanding ending balance, Weighted average exercise price | $ 0.06 | $ 0.15 |
8. STOCKHOLDERS' EQUITY (Details 3) - Stock Options - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Outstanding ending balance, Weighted average exercise price | $ 0.06 | $ 0.15 |
Outstanding beginning balance, Shares | 1,093,500 | 1,093,500 |
Number of Options Granted | 1,150,000 | 0 |
Outstanding ending balance | 1,150,000 | 1,093,500 |
Weighted-Average Remaining Contract Life | 5 years | 1 year 7 months 17 days |
Number Exercisable | 0 | 943,500 |
Stock Options Exercisable Weighted-Average Exercise Price | $ 0 | $ 0.15 |
9. DERIVATIVE LIABILITIES (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Equity [Abstract] | ||
Expected dividend yield | 0.00% | 0.00% |
Expected volatility, min | 0.00% | 110.19% |
Expected volatility, max | 127.73% | 146.67% |
Risk-free interest rate, min | 0.00% | 0.00% |
Risk-free interest rate, max | 1.07% | 1.07% |
Expected option life in years, min | 0 years | 0 years |
Expected option life in years, max | 0 years | 6 months 22 days |
9. DERIVATIVE LIABILITIES (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Derivative Liabilities Details 1 | ||
Beginning Balance | $ (44) | $ (310) |
Gain (Loss) on change in fair value of derivative liabilities | 44 | 266 |
Ending Balance | $ 0 | $ (44) |
10. INCOME TAXES (Details) - USD ($) |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Non-current deferred tax asset: | ||
34% of net operating loss carry forwards | $ 7,295,315 | $ 11,781,690 |
Valuation allowance non current | (7,295,315) | (11,781,690) |
Net non-current deferred tax asset | $ 0 | $ 0 |
10. INCOME TAXES (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Taxes Details 1 | ||
Expected federal income tax benefit | $ (112,645) | $ 141,354 |
Goodwill amortization | 142,386 | 142,386 |
Gain on settlement of debt | 114,757 | 0 |
NOL carryover reduced by settlement of debt | (114,403) | 0 |
Change in valuation allowance | (11,807) | (5,369) |
Expired capital loss carryover | (9,227) | 0 |
Other | (9,061) | (1,720) |
Derivative gain | 0 | 90 |
Stock-based compensation | 0 | (276,941) |
Income tax expense (benefit) | $ 0 | $ 0 |
10. INCOME TAXES (Details Narrative) |
Dec. 31, 2017
USD ($)
|
---|---|
Income Taxes Details Narrative | |
Net operating loss carryforward | $ 34,740,000 |
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