10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

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

For the fiscal year ended December 31, 2013

OR

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

For the transition period from _________ to _________

Commission File Number: 001-32509

WORLD SURVEILLANCE GROUP INC.

(Exact name of Registrant as specified in its charter)

Delaware	88-0292161
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

State Road 405, Building M6-306A, Room 1400, Kennedy Space Center, FL 32815

(Address of Principal Executive Offices) (Zip Code)

Issuer's telephone number: (321) 452-3545

Securities registered under Section 12 (b) of the Exchange Act: None

Title of each class Name of exchange on which registered

Securities registered pursuant to Section 12 (g) of the Exchange Act: Common Stock, Par Value $.00001 Per Share

Indicate by check mark whether the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.  Yes ¨      No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ¨      No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No ¨      

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x      No     ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K .   ¨

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

Large accelerated filer	Accelerated filer
Non-accelerated filer     (Do not check if a smaller reporting company)	Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes ¨      No x

The aggregate market value of the registrant’s common stock held by non-affiliates, based on the closing price of the registrant’s common stock on June 30, 2013, the end of the registrant’s most recently completed second fiscal quarter, was approximately $7,626,700.  The number of shares of the registrant’s common stock outstanding as of March 21, 2014 was 706,057,033.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement (which is expected to be filed within 120 days after the registrant’s fiscal year end) relating to the registrant’s Annual Meeting of Stockholders to be held in July 2014 to be filed pursuant to Regulation 14A are incorporated by reference into Part III of this Annual Report on Form 10-K.

EXPLANATORY NOTE

World Surveillance Group Inc. (the “Company” or “we”) is filing this Amendment No. 1 (the “Amendment”) to our annual report on Form 10-K for the year ended December 31, 2013, filed on March 31, 2014 (the “Original Filing”) to provide the interactive data files required by Item 601(b)(101) of Regulation S-K and Sections 405 and 406T of Regulation S-T.

No changes have been made to the Original Filing other than to add the information as described above. This Amendment should be read in conjunction with the Original Filing. This Amendment speaks as of the date of the Original Filing, does not reflect events that may have occurred after the date of the Original Filing and does not modify or update in any way the disclosures made in the Original Filing, except as required to reflect the revisions discussed above.

 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, World Surveillance Group Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: April 3, 2014	WORLD SURVEILLANCE GROUP INC.
	By: /s/ Glenn D. Estrella
	Name: Glenn D. Estrella,
	Title: Chief Executive Officer, President and Director

POWER OF ATTORNEY AND SIGNATURES

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Glenn D. Estrella and W. Jeffrey Sawyers, jointly and severally, his attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof .

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of World Surveillance Group Inc. and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Glenn D. Estrella	Chief Executive Officer, President and Director (Principal Executive Officer)	April 3, 2014
Glenn D. Estrella
/s/ W. Jeffrey Sawyers	Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)	April 3, 2014
W. Jeffrey Sawyers
/s/ Felicia Hess	Director	April 3, 2014
Felicia Hess
/s/ Wayne Jackson	Director	April 3, 2014
Wayne Jackson
	Director	April 3, 2014
Anita Hulo
/s/ Kevin Pruett	Director	April 3, 2014
Kevin Pruett

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ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2013 and 2012

Consolidated Statements of Operations for the years ended December 31, 2013 and 2012

Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2013 and 2012

Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012

Notes to Consolidated Financial Statements

(a)(3) Index to Exhibits

See attached Exhibit Index of this Annual Report on Form 10-K.

(b) Exhibits

The following exhibits are filed as part of this Annual Report on Form 10-K or are incorporated by reference to exhibits previously filed with the SEC. Exhibits which are incorporated herein by reference

can be inspected and copied at the public reference facilities maintained by the Securities and Exchange Commission, 450 Fifth Street, Room 1024, N.W., Washington, DC 20549. Copies of such materials

can also be obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, DC 20549, at prescribed rates.

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
2.1	Stock Purchase Agreement by and among the Company, Lighter Than Air Systems Corp., Felicia Hess and Kevin Hess, dated March 28, 2013 (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 1, 2013 and incorporated herein by reference)
2.2	First Amendment to Agreement by and among the Company, Lighter Than Air Systems Corp., Felicia Hess and Kevin Hess, dated December 31, 2013 (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on January 7, 2014 and incorporated herein by reference)
3.1	Amended and Restated By-Laws of the Company (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on March 7, 2011 and incorporated herein by reference)
3.2	Amended and Restated Certificate of Incorporation (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on July 31, 2013 and incorporated herein by reference)
3.3	Certificate of Ownership of Sanswire Corp. and World Surveillance Group Inc. dated April 4, 2011 (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 19, 2011 and incorporated herein by reference)
4.1	Form of Class A Warrant (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on February 24, 2009 and incorporated herein by reference)
4.2	Form of Class B Warrant (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on February 24, 2009 and incorporated herein by reference)
4.3	Securities Purchase Agreement, dated November 10, 2010, by and among the Company and the purchasers identified therein (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on November 10, 2010 and incorporated herein by reference)
4.4	Form of Common Stock Purchase Warrant (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on February 1, 2011 and incorporated herein by reference)
4.5	Securities Purchase Agreement, dated November 23, 2010, by and among the Company and the purchasers identified therein (filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on March 30, 2011 and incorporated herein by reference)
4.6	Form of Common Stock Purchase Warrant (filed as an Exhibit to the Company’s Annual Report on Form 10-K, as filed with the SEC on March 30, 2011 and incorporated herein by reference)
4.7	Stock Purchase Agreement, dated May 2, 2011, by and among the Company and the purchasers identified therein (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on May 9, 2011 and incorporated herein by reference)
4.8	Registration Rights Agreement, dated May 2, 2011, by and among the Company and the purchasers identified therein (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on May 9, 2011 and incorporated herein by reference)
4.9	Stock Purchase Agreement, dated May 27, 2011, by and among the Company and the purchasers identified therein (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on June 2, 2011 and incorporated herein by reference)
4.10	Registration Rights Agreement, dated May 27, 2011, by and among the Company and the purchasers identified therein (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on June 2, 2011 and incorporated herein by reference)
4.11	Securities Purchase Agreement, dated November 2, 2011, by and among the Company and the purchasers identified therein (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on November 8, 2011 and incorporated herein by reference)
4.12	Form of Common Stock Purchase Warrant (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on November 8, 2011 and incorporated herein by reference)
4.13	Securities Purchase Agreement, dated January 25, 2012, by and between the Company and the purchaser identified therein (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on February 7, 2012 and incorporated herein by reference)
4.14	4 ¾% Secured Convertible Debenture, dated January 25, 2012, by and between the Company and the purchaser identified therein (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on February 7, 2012 and incorporated herein by reference)
4.15	Equity Investment Agreement, dated January 25, 2012, by and between the Company and the purchaser identified therein (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on February 7, 2012 and incorporated herein by reference)
4.16***	Securities Purchase Agreement, dated March 27, 2013, by and among the Company and the purchasers identified therein
4.17***	Securities Purchase Agreement, dated January 14, 2014, by and among the Company and the purchasers identified therein
10.1+	Employment Agreement, dated October 6, 2010, by and between the Company and Barbara M. Johnson (filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on November 12, 2010 and incorporated herein by reference)
10.2+	Amended and Restated Employment Agreement, dated July 30, 2013, by and between the Company and Glenn D. Estrella (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on July 31, 2013 and incorporated herein by reference)

29

10.3+	Employment Agreement, dated February 8, 2011, by and between the Company and Jeffrey Sawyers (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on February 8, 2011 and incorporated herein by reference)
10.4+	Form of Indemnification Agreement (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on February 8, 2011 and incorporated herein by reference)
10.5+	2011 Equity Compensation Incentive Plan (filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on November 14, 2011 and incorporated herein by reference)
10.6+	2013 Equity Compensation Incentive Plan (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on July 31, 2013 and incorporated herein by reference)
10.7+	Form Incentive Stock Option Agreement (filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013 and incorporated herein by reference)
10.8+	Form Non-Qualified Stock Option Agreement (filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013 and incorporated herein by reference)
10.9+	Form Restricted Stock Agreement (filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013 and incorporated herein by reference)
10.10+	Form Restricted Stock Unit Award Agreement (filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on August 14, 2013 and incorporated herein by reference)
10.11+	Agreement dated November 13, 2012, between the Company, Glenn D. Estrella, W. Jeffrey Sawyers and Barbara M. Johnson (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on November 15, 2012 and incorporated herein by reference)
10.12+	Option Agreement, dated November 13, 2012 issued to Glenn D. Estrella (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on November 15, 2012 and incorporated herein by reference)
10.13+	Option Agreement, dated November 13, 2012 issued to W. Jeffrey Sawyers (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on November 15, 2012 and incorporated herein by reference)
10.14+	Option Agreement, dated November 13, 2012 issued to Barbara M. Johnson (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on November 15, 2012 and incorporated herein by reference)
10.15	Option Agreement by and among the Company, Lighter Than Air Systems Corp. and Felicia Hess, dated March 28, 2013 (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 1, 2013 and incorporated herein by reference)
10.16	Escrow Agreement by and among the Company, Lighter Than Air Systems Corp., Fleming PLLC and Felicia Hess, dated March 28, 2013 (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on April 1, 2013 and incorporated herein by reference)
10.17	Independent Contractor Agreement, dated July 29,2013, by and among the Company, Lighter Than Air Systems Corp. and US Technik, Inc. (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on July 31, 2013 and incorporated herein by reference)
10.18	Settlement Agreement, dated December 31, 2012 between the Company and Brio Capital, L.P. and Brio Capital Master Fund Ltd. (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on May 15, 2013 and incorporated herein by reference)
10.19	Ohio Lighter Than Air UAS Consortium Teaming Agreement, dated August 23, 2013, by and between the Company, The Trident Group, Ltd., EWA TRIAD, LLC and Advanced Virtual Engine Test Cell, Inc. (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on August 29, 2013 and incorporated herein by reference)
10.20	Settlement Agreement, dated September 24, 2013, between the Company and Anthony Bocchichio (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on September 27, 2013 and incorporated herein by reference)
10.21+	Form of Wage Conversion Option Agreement, dated September 25, 2013 (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on October 1, 2013 and incorporated herein by reference)
10.22+	Form of Conversion Agreement, dated September 25, 2013 (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on October 1, 2013 and incorporated herein by reference)
10.23+	Agreement dated December 31, 2013, between the Company, Glenn D. Estrella, Barbara M. Johnson and W. Jeffrey Sawyers (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on January 7, 2014 and incorporated herein by reference)
10.24+	Form of Option Agreement (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on January 7, 2014 and incorporated herein by reference)
10.25	Agreement by and among the Company, Lighter Than Air Systems Corp., Felicia Hess and Kevin Hess, dated December 31, 2013 (filed as an Exhibit to the Company’s Current Report on Form 8-K, as filed with the SEC on January 7, 2014 and incorporated herein by reference)
10.26+***	Form of Non-Qualified Stock Option dated February 24, 2014
21.1***	List of the Company’s Subsidiaries as of December 31, 2014
23.1***	Consent of Independent Registered Public Accounting Firm
24.1***	Power of Attorney (contained on Signature Page hereto)
31.1***	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2***	Certification of the Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1***	Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2***	Certification of the Principal Financial and Accounting Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document**
101.SCH*	XBRL Taxonomy Extension Schema Document**
101.CAL*	XBRL Taxonomy Calculation Linkbase Document**
101.PRE*	XBRL Taxonomy Presentation Linkbase Document**
101.LAB*	XBRL Taxonomy Label Linkbase Document**
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document**

*           Filed herewith.

+           Indicates management contract relating to compensatory plans or arrangements

**         Pursuant to Rule 406T of Regulation S-T, these interactive data files shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

*** Previously filed or furnished, as applicable, with the Original Filing.

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8. Warrants to Purchase Common Stock (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013
Class of Warrant or Right Outstanding, Weighted Average Exercise Price [Roll Forward ]
Outstanding at December 31, 2012	$ 0.234
Warrants Granted	$ 0.21
Warrants Expired	$ 0.256
Outstanding at December 31, 2013	$ 0.21
Class A Warrants [Member] | Derivative Financial Instruments Liabilities [Member]
Class of Warrant or Right Outstanding [Roll Forward ]
Outstanding at December 31, 2012	8,327,462
Warrants Granted	0
Warrants Expired	(8,327,462)
Outstanding at December 31, 2013	0
Class B Warrants [Member] | Derivative Financial Instruments Liabilities [Member]
Class of Warrant or Right Outstanding [Roll Forward ]
Outstanding at December 31, 2012	8,327,462
Warrants Granted	0
Warrants Expired	(8,327,462)
Outstanding at December 31, 2013	0
Warrants Purchase Rights [Member]
Class of Warrant or Right Outstanding [Roll Forward ]
Outstanding at December 31, 2012	20,033,021
Warrants Granted	972,381
Warrants Expired	(2,377,167)
Outstanding at December 31, 2013	18,628,235

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3. Acquisitions (Detail) (USD $)			12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Lighter Than Air Systems Corp Initial Allocation	Dec. 31, 2013 Lighter Than Air Systems Corp Allocation Adjustment	Dec. 31, 2013 Lighter Than Air Systems Corp Amended Allocation
Business Acquisition [Line Items]
Current assets			$ 703,220	$ 7,195	$ 710,415
Property and equipment			1,357	2,556	3,913
Goodwill	807,824	0	479,585	328,239	807,824
Due to selling shareholder			0	(350,000)	(350,000)
Current liabilities assumed			(261,662)	12,010	(249,652)
Total Purchase Price			$ 922,500	$ 0	$ 922,500

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6. OTHER ACCRUED LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2013

Unsecured short term promissory notes

Accrued Liabilities

	December 31, 2013		December 31, 2012
Payroll liabilities	$	1,908,171	$	1,494,883
Professional fees		10,000		10,000
Accrued legal claims payable		354,684		334,540
Accrued cash true-up from conversion		353,873		176,831
Accrued interest on debenture		31,133		18,243
GTC acquisition payable		75,000		75,000
Other		80,092		22,588
OTHER ACCRUED LIABILITIES	$	2,812,953	$	2,132,085

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10. Deferred Tax Assets and Liabilities (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Net operating loss carry-forwards	$ 18,245,910	$ 17,749,701
Change in deferred tax asset due to operating loss carryforward	496,209
Valuation allowance	(18,245,910)	(17,749,701)
Change in Valuation allowance	(496,209)
Net deferred tax asset	0	0
Change in net deferred tax asset	$ 0

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7. Notes Payable (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
DisclosureNotesPayableAbstract
Unsecured promissory notes	$ 5,997,030	$ 5,997,030
Unsecured short-term promissory notes	150,000	0
Convertible debenture	267,000	0
Accrued interest	3,087,053	2,654,350
NOTES PAYABLE	$ 9,501,083	$ 8,651,380

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3. ACQUISITIONS

12 Months Ended

Dec. 31, 2013

Business Combination, Description [Abstract]

ACQUISITIONS

On March 28, 2013, the Company consummated a Stock Purchase Agreement (the “Agreement”) by and among the Company, Lighter Than Air Systems Corp. (“LTAS”), Felicia Hess (the “Shareholder”) and Kevin Hess (“KHess”) pursuant to which the Company acquired 100% of the outstanding shares of capital stock of LTAS, thereby making LTAS a wholly-owned subsidiary of the Company.

The purchase price paid by the Company for LTAS consisted of $250,000 in cash payable on or before the date that is 30 days after the closing of the acquisition (the “Closing”), 25,000,000 shares of the Company’s common stock valued at the acquisition date based on the market price of $0.0269 per share, and an earn-out based on varying percentages of the gross revenues based on the level of revenue from contracts with an identified group of potential customers.  No value was ascribed to the earn-out because future revenues, if any, cannot be reliably predicted. Pursuant to the Agreement and an Escrow Agreement, 7,500,000 shares of common stock out of the 25,000,000 shares issued by the Company have been placed in escrow for one year to satisfy possible indemnification claims of the Company.  Felicia Hess, the President of LTAS, has entered into an employment agreement to continue in her role as President of LTAS. The Agreement also includes restrictions on the sale of the Company’s securities issued as the purchase price by the Shareholder for a one-year period following the Closing.

The Shareholder has the right pursuant to the Agreement to nominate one member of the Company’s Board of Directors, and as a result, the size of the Company’s Board of Directors has been increased and Felicia Hess has been appointed as a Class I director as of March 28, 2013.  Since Ms. Hess would not be an “independent” director pursuant to the rules of the Securities and Exchange Commission, it is not expected that she will be appointed to any committees.

In connection with the Closing, LTAS, the Shareholder and the Company also entered into an Option Agreement dated March 28, 2013 pursuant to which the Shareholder was granted an exclusive option to purchase the shares of LTAS held by WSGI on the occurrence of (i) a WSGI bankruptcy event, or (ii) a decrease in the daily volume of WSGI’s common stock to below 50,000 shares for 30 consecutive days, occurring within 18 months of the Closing at a purchase price equal to the fair market value of the LTAS stock at the time of such triggering event, as determined by an independent valuation firm.

The common stock of the Company issued as purchase price pursuant to the Agreement was issued as restricted securities under an exemption provided by Section 4(2) of the Securities Act of 1933, as amended. The Agreement, however, provides the Shareholder with certain piggyback registration rights.

LTAS provides critical aerial and land-based surveillance and communications solutions to government and commercial customers. LTAS systems are designed and developed in-house utilizing proprietary technologies and processes that result in compact, rapidly deployable aerostat solutions and mast-based ISR systems. The LTAS systems have been proven to fulfill critical requirements of the military and law enforcement in the U.S. and internationally.

On December 31, 2013, the Company entered into a First Amendment to Agreement (the “First Amendment”) by and among the Company, Lighter Than Air Systems Corp. (“LTAS”), Felicia Hess (the “Shareholder”) and Kevin Hess (“KHess”), which amended and restated various terms and conditions of the Agreement and revised the purchase price from 25 million shares plus $250,000 cash payment to 45 million shares and no cash payment due the selling shareholder and deleted the earn-out payment provisions in their entirety.

The Company’s Consolidated Balance Sheet at December 31, 2013 includes the accounts of LTAS amended and restated pursuant to the First Amendment to the Agreement. The operating results of LTAS since the acquisition date of March 28, 2013 are reflected in the Company’s Consolidated Statements of Operations.

The following table summarizes the original allocation of the LTAS acquisition purchase price, which has been accounted at the fair values of the assets acquired and liabilities assumed under the acquisition method of accounting adjusted pursuant to the First Amendment to the Agreement:

	Original Allocation			Allocation Adjustments			Amended Allocation
Current assets	$	703,220		$	7,195		$	710,415
Property and equipment		1,357			2,556			3,913
Goodwill		479,585			328,239			807,824
Due to selling shareholder		0			(350,000	)		(350,000	)
Current liabilities assumed		(261,662	)		12,010			(249,652	)
Total Purchase Price	$	922,500		$	0		$	922,500

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10. Reconciliation of Income Benefit to Income Tax Benefit (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Income tax benefit computed at federal statutory rate	$ (496,209)	$ (504,428)
Deferred income taxes	496,209	504,428
Income tax expense	$ 0	$ 0

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10. INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of Deferred Tax Assets and Liabilities

	2013			2013 Changes			2012
Deferred tax assets:
Net operating loss carry-forwards	$	18,245,910		$	496,209		$	17,749,701
Valuation allowance		(18,245,910	)		(496,209	)		(17,749,701	)
Net deferred tax asset	$	—		$	—		$	—

Schedule of Effective Income Tax Rate Reconciliation

	2013			2012
Income tax benefit computed at federal statutory rate	$	(496,209	)	$	(504,428	)
Deferred income taxes		496,209			504,428
	$	—		$	—

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9. SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2013

Share-based Compensation [Abstract]

Schedule of stock option activity

	2013					2012
	Shares			Weighted average exercise price		Shares			Weighted average exercise price
Outstanding at beginning of year		68,650,000		$	.046		40,916,667		$	.067
Granted		15,300,000			.023		0			.000
Exchanged for salary conversion		40,355,693			.013		22,316,667			.023
Exchanged for rescinded stock		12,000,000			.009		14,000,000			.015
Exercised		0			.000		0			.000
Forfeited / expired / cancelled		(11,722,222	)		.086		(8,583,334	)		.073
Outstanding at end of year		124,583,471		$	.025		68,650,000		$	.046
Options exercisable at end of year		119,583,471		$	.026		63,358,333		$	.048
Weighted average remaining contractual term	5.60 years					4.55 years

Stock Options Outstanding and Exercisable

	Options Outstanding and Exercisable
Exercise prices	Number outstanding		Weighted average remaining contractual terms (years)		Weighted Average Exercise price
$.0096		12,000,000		7.00		.0096
$.011		400,000		2.87		.011
$.013		40,355,693		6.73		.013
$.015		11,000,000		5.75	$	.015
$.016		250,000		2.17		.016
$.021		250,000		2.37		.021
$.023		22,316,667		5.87		.023
$.0238		12,000,000		6.58		.0238
$.0275		400,000		2.58		.0275
$.045		4,444,444		.34		.045
$.070		1,500,000		.11		.070
$.075		10,250,000		3.25		.075
$.080		1,500,000		.27		.080
$.090		2,916,667		.27		.090
		119,583,471		5.59	$	.026

XML

11. PER SHARE INFORMATION (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Numerator:
Net loss	$ (3,417,205)	$ (3,362,853)
Denominator:
Weighted-average common shares outstanding	632,009,690	420,841,556
Net loss per share:
Basic and diluted	$ (0.01)	$ (0.01)

XML

11. PER SHARE INFORMATION: (Tables)

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Computation of Earnings Per Share Basic and Diluted

	Years Ended December 31,
	2013			2012
Numerator:
Net loss	$	(3,417,205	)	$	(3,362,853	)
Denominator:
Weighted-average common shares outstanding		632,009,690			420,841,556
Net loss per share:
Basic and diluted	$	(0.01	)	$	(0.01	)

XML

1. Estimated Useful Lives of Property and Equipment (Detail)	12 Months Ended
	Dec. 31, 2013
Appliques [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	15 years
Appliques [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	25 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	3 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	12 years
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	3 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	10 years
Equipment Computer Hardware and Software [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	3 years
Equipment Computer Hardware and Software [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	7 years
Transportation vehicles | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	3 years
Transportation vehicles | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful life	6 years

XML

2. DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

2. DISCONTINUED OPERATIONS

In 2007, the Company discontinued operations of its telecom and wireless segments and reported the effects as discontinued operations. 

During the quarter ended June 30, 2012, the Company conducted a detailed analysis of certain of its accounts payable and accrued liabilities including (i) liabilities from discontinued operations of $1,365,929, and (ii) legacy payables and accrued liabilities of $1,787,324.  Accounts payable includes an amount for legal judgments that were excluded from the potential write-off. The remaining analyzed liabilities from discontinued operations and legacy payables and accrued liabilities are no longer enforceable debts of the Company due to the passage of the applicable statutes of limitation and were written-off the books of the Company. These liabilities along with the assets of discontinued operations of $6,406 have resulted in an aggregate gain of $2,331,525, comprised of the gain on the release of restricted assets and derecognition of liabilities of discontinued operations of $544,201 and the gain on the derecognition of legacy payables of $1,787,324.

XML

1. Summary of Significant Accounting Principles (Detail Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
SummaryOfSignificantAccountingPoliciesLineItems [Line Items]
Working capital deficit	$ (16,598,286)
Share based compensation expense	$ 991,893	$ 1,983,008

XML

9. SHARE-BASED COMPENSATION - Schedule of stock option activity (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation [Abstract]
Outstanding at beginning of year	68,650,000	40,916,667
Granted	15,300,000	0
Exchanged for salary conversion	$ 40,355,693	$ 22,316,667
Exchanged for rescinded stock	$ 12,000,000	$ 14,000,000
Exercised	$ 0	$ 0
Forfeited / expired / cancelled	(11,722,222)	(8,583,334)
Outstanding at end of year	124,583,471	68,650,000
Options exercisable at end of year	119,583,471	63,358,333
Weighted average remaining contractual term	5 years 7 months 6 days	4 years 6 months 18 days
Weighted average exercise price
Outstanding at beginning of year	$ 0.046	$ 0.067
Granted	$ 0.023	$ 0
Exchanged for salary conversion	$ 0.013	$ 0.023
Exchanged for rescinded stock	$ 0.009	$ 0.015
Exercised	$ 0	$ 0
Forfeited / expired / cancelled	$ 0.086	$ 0.073
Outstanding at end of year	$ 0.025	$ 0.046
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.026	$ 0.048

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2013	Dec. 31, 2012
CURRENT ASSETS
Cash	$ 118,732	$ 49,343
Accounts receivable, net of allowance for bad debts of $0 and $0	67,736	8,977
Accounts receivable from related party	59,833	48,220
Inventories	75,311	0
Prepaid expenses	40,126	46,134
Deposits	0	50,000
TOTAL CURRENT ASSETS	361,738	202,674
PROPERTY AND EQUIPMENT
Property and equipment, net of accumulated depreciation of $497,233 and $309,670, respectively.	2,271,964	2,452,966
OTHER NONCURRENT ASSETS
Goodwill	807,824	0
Deferred financing costs	22,398	43,074
TOTAL NONCURRENT ASSETS	830,222	43,074
TOTAL ASSETS	3,463,924	2,698,714
CURRENT LIABILITIES
Accounts payable	4,593,647	4,781,075
Accounts payable due related party	50,691	0
Notes payable	9,501,083	8,651,380
Accrued liabilities	2,812,953	2,132,085
Deferred revenues	1,650	7,500
TOTAL CURRENT LIABILITIES	16,960,024	15,859,403
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, $.00001 par value, 1,000,000,000 and 750,000,000 shares authorized, respectively; 681,127,043 and 546,887,530 shares issued, respectively; and 669,127,043 and 546,887,530 outstanding, respectively	6,691	5,469
Additional paid-in capital	138,909,766	135,829,194
Preferred Stock, $.0001 par value, 10,000,000 shares authorized; 0 shares issued and outstanding	0	0
Accumulated deficit	(152,412,557)	(148,995,352)
TOTAL STOCKHOLDERS' DEFICIT	(13,496,100)	(13,160,689)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 3,463,924	$ 2,698,714

XML

12. COMMITMENTS (Details Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Commitments Details Narrative
Rent expense	$ 119,139	$ 120,727
Current future minimum rental payments	$ 37,625

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
OPERATING ACTIVITIES:
Net loss	$ (3,417,205)	$ (3,362,853)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	184,915	183,000
Fair value of share-based compensation	664,596	1,879,813
Change in fair value of derivative liabilities	(363)	(125,057)
Net gain on release of restricted assets and derecognition of liabilities of discontinued operations	0	(544,201)
Gain on derecognition of legacy payables	0	(1,787,324)
Loss on conversion of convertible debt	233,382	1,304,712
Gain on settlement of LTAS selling shareholder debt	(58,000)	0
Loan interest capitalized to debt	432,703	420,078
Shares issued as inducement to loan	34,400	0
Amortization of deferred financing costs	20,676	18,952
Change in operating assets and liabilities:
Accounts receivable	120,447	(8,977)
Accounts receivable from related party	(11,613)	(27,334)
Inventories	154,387	4,500
Prepaid expenses	8,974	56,015
Deposits	50,000	(50,000)
Accounts payable	186,333	535,051
Accounts payable due related party	(57,003)	0
Accrued liabilities	1,100,065	804,622
Deferred revenues	(5,850)	(197,160)
NET CASH USED IN OPERATING ACTIVITIES	(359,156)	(896,163)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition, net of cash acquired	158,545	0
NET CASH PROVIDED BY INVESTING ACTIVITIES	158,545	0
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock	120,000	0
Notes payable	150,000	0
Proceeds from convertible debt, net of deferred financing costs	0	354,974
Proceeds from purchases under the Equity Investment Agreement	0	585,000
NET CASH PROVIDED BY FINANCING ACTIVITIES	270,000	939,974
NET CHANGE IN CASH	69,389	43,811
CASH – BEGINNING OF YEAR	49,343	5,532
CASH – END OF YEAR	118,732	49,343
SUPPLEMENTAL INFORMATION:
Interest paid	0	0
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Reclassification of long-term convertible notes payable to current notes payable	267,000	0
Common stock issued for LTAS acquisition	672,500	0
Common stock issued for settlement of LTAS selling shareholder debt	192,000	0
Common stock issued in exchange for convertible debt	76,339	1,692,871
Common stock issued as payments for services	367,250	458,979
Common stock issued for accrued settlements	339,126	269,325
Common stock issued as payments for accrued salaries and directors’ fees	100,000	103,200
Fair value of vested options issued for accrued salary conversions	$ 524,624	$ 0

XML

5. Property and Equipment (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 2,769,197	$ 2,762,636
Less: accumulated depreciation	(497,233)	(309,670)
Property and equipment, net	2,271,964	2,452,966
Appliques [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	2,755,732	2,755,732
Office Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 134,654	$ 6,904

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Tables)

12 Months Ended

Dec. 31, 2013

Summary Of Significant Accounting Principles

Estimated Useful Lives of Property and Equipment

The estimated useful lives of property and equipment are generally as follows:

·	Appliqués and ground stations	15 – 25 years
·	Machinery and equipment	3 – 12 years
·	Office furniture and fixtures	3 – 10 years
·	Computer hardware and software	3 – 7 years
·	Transportation vehicles	3 – 6 years

XML

6. Other Accrued liabilities (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Earnings Per Share Basic and Diluted Numerator [Abstract]
Payroll liabilities	$ 1,908,171	$ 1,494,883
Professional fees	10,000	10,000
Accrued legal claims payable	354,684	334,540
Accrued cash true-up from conversion	353,873	176,831
Accrued interest on debenture	31,133	18,243
GTC acquisition payable	75,000	75,000
Other	80,092	22,588
OTHER ACCRUED LIABILITIES	$ 2,812,953	$ 2,132,085

XML

5. PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property and Equipment

	December 31, 2013		December 31, 2012
Appliqués	$	2,755,732	$	2,755,732
Office furniture and fixtures		13,4654		6,904
		2,769,197		2,762,636
Less: accumulated depreciation		(497,233)		(309,670)
	$	2,271,964	$	2,452,966

XML

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

12 Months Ended

Dec. 31, 2013

Summary Of Significant Accounting Principles

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

DESCRIPTION OF BUSINESS

World Surveillance Group Inc. (the “Company”) designs, develops, markets, and sells, autonomous lighter-than-air (LTA) aerostats and unmanned aerial systems (UAS) capable of carrying payloads that provide semi-persistent intelligence, surveillance and reconnaissance (ISR), security and/or wireless communications from air to ground solutions at low and mid altitudes.  The Company’s business focuses primarily on the design and development of innovative aerostats and UAS that provide situational awareness and other communications capabilities via the integration of wireless capabilities and customer payloads. The Company’s aerostats and airships, when integrated with cameras, electronics systems and other high technology payloads, are designed for use by government-related and commercial entities that require real-time ISR or communications support for military, homeland defense, border control, drug interdiction, natural disaster relief, maritime and environmental missions. 

The Company’s wholly owned subsidiary Global Telesat Corp. (GTC), provides mobile voice and data communications services globally via satellite to the U.S. government, defense industry and commercial users. GTC specializes in services related to the Globalstar satellite constellation, including satellite telecommunications voice airtime, tracking devices and services, and ground station construction.  GTC has an e-commerce mobile satellite solutions portal and is an authorized reseller of satellite telecommunications equipment and services offered by other leading satellite network providers such as Inmarsat, Iridium, Globalstar and Thuraya. GTC also has a new subscription based online tracking portal called GTCTrack, designed to attract new satellite and GSM tracking customers by offering an easy-to-use interface and compatibility with a wide range of devices. GTC’s equipment is installed in various ground stations across Africa, Asia, Australia, Europe and South America.

The Company’s wholly owned subsidiary Lighter Than Air Systems Corp. (LTAS), provides critical aerial and land-based surveillance and communications solutions to government and commercial customers. LTAS systems are designed and developed in-house utilizing proprietary technologies and processes that result in compact, rapidly deployable aerostat solutions and mast-based ISR systems. The LTAS systems have been proven to fulfill critical requirements of the military and law enforcement in the U.S. and internationally.

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying consolidated financial statements of World Surveillance Group Inc. and its subsidiaries were  prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company exercises control and, where applicable entities for which the Company has a controlling financial interest or is the primary beneficiary.

All material intercompany accounts and transactions are eliminated in consolidation.

The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s consolidated financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain 2012 amounts have been reclassified to conform to the 2013 presentation.

GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. However, as reflected in the accompanying consolidated financial statements, the Company incurred a loss from operations of $2,733,084 and negative cash flows from operations of $359,156 for the year ended December 31, 2013. The Company had a working capital deficit of $16,598,286 and total stockholders’ deficit of $13,496,100 at December 31, 2013. The Company had an accumulated deficit of $152,412,557 at December 31, 2013.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to raise additional funds either through investments or by generating revenue from the sale of the Company’s products to continue its business operations and implement its strategic plan, which includes, among other things, continued development of its aerostats and UAS, the pursuit or continued development of strategic relationships and expansion of the Company’s subsidiaries’ businesses. The Company’s business plan, which if successfully implemented, will allow it to sell its products for a profit, which in turn will reduce the Company’s dependence on raising additional funds from outside sources. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company anticipates a net loss to continue for at least the next several quarters if not for all of the year 2014.

Additional cash will be needed to support our ongoing operations until such time that operations provide sufficient cash flow to cover expenditures.  We are currently pursuing both short and long-term financing options from private investors as well as through institutional investors.  We are also working to commercialize our aerostats, Argus One airship, and subsidiaries’ products to begin generating revenues from customers.  We are already generating revenue from our aerostats, mast-based products and GTC products.  The costs associated with our strategic plan are variable and contingent on our ability to raise capital or begin generating revenue from customer contracts, but we expect to need funding of approximately $3 million over the next 12 months. We are currently in litigation with La Jolla Cove Investors and do not expect any future financing under those agreements. We continue to have discussions with various entities relating to funding, but there can be no assurance that such funding will be received in the amounts required, on a timely basis, or at all.  While we believe we will be able to continue to raise capital from various funding sources in such amounts sufficient to sustain operations at our current levels through at least December 31, 2014, if we are not able to do so and if we are not able to generate revenue through the sale of our products, we would likely need to modify our strategy or cut back or terminate some of our operations. If we are able to raise additional funds through the issuance of equity securities, substantial dilution to existing shareholders may result.  However, if our plans are not achieved and/or if significant unanticipated events occur or if we are unable to obtain the necessary additional funding on favorable terms or at all, we will likely have to modify our business plan and reduce, delay or discontinue some or all of our operations to continue as a going concern or seek a buyer for all or a portion of our assets. As of the date hereof, we continue to raise capital to sustain our current operations.

REVENUE RECOGNITION

The Company recognizes revenue when all four of the following criteria are met: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred and title has transferred or services have been rendered; 3) our price to the buyer is fixed or determinable; and 4) collectability is reasonably assured. The Company records unearned contract revenues and subscription fees as deferred revenues and their associated costs of sales as prepaid expenses. Deferred revenue from contracts and their related costs are recognized upon completion and fulfillment of the contractual obligation using the completed contract method. During 2012, the Company recognized $200,000 in contract revenue, previous recorded as deferred revenue. Deferred revenues from subscription fees and their related costs are amortized over the subscription term.

INCOME TAXES

The Company accounts for income taxes using the asset and liability approach. Under this approach, deferred income taxes are recognized based on the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities, as measured by current enacted tax rates. Valuation allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized.

U.S. GAAP requires that, in applying the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more likely than not to occur.  Under this criterion the most likely resolution of an uncertain tax position should be analyzed based on technical merits and on the outcome that will likely be sustained under examination. There were no adjustments related to uncertain tax positions recognized during the years ended December 31, 2013 and 2012, respectively.

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments include cash, accounts payable, notes payable. The carrying values for the current financial assets and liabilities approximate fair value due to their short maturity.

BASIC AND DILUTED NET LOSS PER COMMON SHARE

Basic and diluted net loss per common share has been computed by dividing the net loss by the weighted average number of shares of common stock outstanding during each period. Whenever losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would result in a diluted loss per share less than the basic loss per share and therefore would be anti-dilutive. Whenever net income is reported, the weighted average number of common shares outstanding will include common stock equivalents that are in-the-money. If all outstanding options, warrants and convertible shares were converted or exercised as of December 31, 2013, the shares outstanding would be 802,338,749.

PROPERTY AND EQUIPMENT

Property and equipment are carried at historical cost less accumulated depreciation.  Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized.  Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service.  When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations.  Repairs and maintenance are expensed as incurred.

The estimated useful lives of property and equipment are generally as follows:

·	Appliqués and ground stations	15 – 25 years
·	Machinery and equipment	3 – 12 years
·	Office furniture and fixtures	3 – 10 years
·	Computer hardware and software	3 – 7 years
·	Transportation vehicles	3 – 6 years

LONG LIVED ASSETS

The Company evaluates the fair value of long-lived assets on an annual basis or whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable.  Accordingly, any impairment of value is recognized when the carrying amount of a long-lived asset exceeds its fair value. The Company’s evaluations have not indicated any impairment of fair values.

SHARE-BASED COMPENSATION

The Company offers share-based compensation programs to its officers, directors and employees that consist of employee stock options, common stock and restricted stock awards. Common stock and restricted stock awards are issued at the closing price of the Company’s common stock on the date of grant. The Company recognizes compensation expense ratably over the vesting periods for restricted stock awards using the grant date fair value of the stock awarded. The Black-Scholes option pricing model is used to value stock options, and compensation expense is recognized ratably over the requisite service vesting period. Stock options typically have contractual terms of three to seven years.  Share-based compensation for employees and non-employees is reflected in the appropriate functional expense category, primarily general and administrative, and research and development. Share-based compensation incurred during the years ended December 31, 2013 and 2012 was $991,893 and $1,983,008, respectively.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Statement of Financial Position [Abstract]
Property and equipment, accumulated depreciation	$ 497,233	$ 309,670
Common stock, par value	$ 0.00001	$ 0.00001
Common stock, shares authorized	1,000,000,000	750,000,000
Common stock, shares issued	681,127,043	546,887,530
Common stock, shares outstanding	669,127,043	546,887,530

XML

11. PER SHARE INFORMATION:

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

PER SHARE INFORMATION:

Basic earnings per share (“Basic EPS”) of common stock is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding.  Diluted earnings per share of common stock (“Diluted EPS”) is computed by dividing the net loss by the weighted-average number of shares of common stock, and dilutive common stock equivalents and convertible securities then outstanding. U.S. GAAP requires the presentation of both Basic EPS and Diluted EPS on the face of the Company’s Condensed Consolidated Statements of Operations. There were no dilutive common stock equivalents at December 31, 2013 and 2012.

	Years Ended December 31,
	2013			2012
Numerator:
Net loss	$	(3,417,205	)	$	(3,362,853	)
Denominator:
Weighted-average common shares outstanding		632,009,690			420,841,556
Net loss per share:
Basic and diluted	$	(0.01	)	$	(0.01	)

XML

Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Mar. 21, 2014	Jun. 30, 2013
DocumentAndEntityInformationAbstract
Entity Registrant Name	World Surveillance Group Inc.
Entity Central Index Key	0000919742
Current Fiscal Year End Date	--12-31
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Trading Symbol	WSGI
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		706,057,033
Public Float			$ 7,626,700
Is Entity's Reporting Status Current?	Yes
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No

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12. COMMITMENTS

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

12. COMMITMENTS

Agreements

The Company has entered into several agreements and memorandums of understanding during 2013 and 2012 and through the date of this Annual Report on Form 10-K, none of which require the recording of any assets, liabilities, revenues or expenses.

Lease Commitments

The Company’s headquarters are located at the Kennedy Space Center, FL on State Road 405, Building M6-306A, Room 1400. The Company intends to renew its annual lease agreement. Currently, the Company is paying office rent on a month-to-month basis for $1,607 per month plus state sales tax. In November 2013, the Company renewed an annual lease agreement for GTC office space at $3,500 per month. LTAS does not have a contractual rental allocation agreement with related party, APC, who is under a lease agreement with the landlord. The Company is also obligated under other monthly rental agreements for additional facilities and office furniture.

Rent expense for 2013 and 2012 was $119,139 and $120,727, respectively.

The estimated future minimum rental payments on non-cancelable operating leases at December 31, 2013 consist of $37,625 due during the year ended December 31, 2014.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
REVENUES
Contract revenues	$ 0	$ 200,000
Sales	1,857,635	891,844
Cost of sales	1,299,061	819,643
Gross profit	558,574	72,201
NET REVENUES	558,574	272,201
COSTS AND EXPENSES:
General and administrative	2,445,325	3,359,924
Professional fees	640,418	1,060,164
Depreciation and amortization	184,915	183,000
Research and development	0	210,700
Acquisition-related expenses	21,000	0
TOTAL EXPENSES	3,291,658	4,813,788
LOSS FROM OPERATIONS	(2,733,084)	(4,541,587)
OTHER INCOME (EXPENSE)
Net gain from release of restricted assets and derecognition of liabilities of discontinued operations	0	544,201
Gain on derecognition of legacy payables	0	1,787,324
Loss from conversion debt	(233,381)	(816,703)
Gain on settlement of shareholder debt	58,000	0
Change in fair value of derivative liabilities	363	125,057
Interest expense, net	(509,103)	(461,145)
OTHER INCOME (EXPENSE)	(684,121)	1,178,734
NET LOSS	$ (3,417,205)	$ (3,362,853)
NET LOSS PER SHARE:
Basic and Diluted	$ (0.01)	$ (0.01)
WEIGHTED AVERAGE SHARES:
Basic and Diluted	632,009,690	420,841,556

XML

6. OTHER ACCRUED LIABILITIES

12 Months Ended

Dec. 31, 2013

Unsecured short term promissory notes

OTHER ACCRUED LIABILITIES

Accrued liabilities consisted of the following:

	December 31, 2013		December 31, 2012
Payroll liabilities	$	1,908,171	$	1,494,883
Professional fees		10,000		10,000
Accrued legal claims payable		354,684		334,540
Accrued cash true-up from conversion		353,873		176,831
Accrued interest on debenture		31,133		18,243
GTC acquisition payable		75,000		75,000
Other		80,092		22,588
OTHER ACCRUED LIABILITIES	$	2,812,953	$	2,132,085

XML

5. PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	December 31, 2013		December 31, 2012
Appliqués	$	2,755,732	$	2,755,732
Office furniture and fixtures		13,4654		6,904
		2,769,197		2,762,636
Less: accumulated depreciation		(497,233)		(309,670)
	$	2,271,964	$	2,452,966

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3. ACQUISITIONS (Tables)

12 Months Ended

Dec. 31, 2013

Business Combination, Description [Abstract]

Summary of Original and Revised Allocation Acquisition Purchase Price

	Original Allocation			Allocation Adjustments			Amended Allocation
Current assets	$	703,220		$	7,195		$	710,415
Property and equipment		1,357			2,556			3,913
Goodwill		479,585			328,239			807,824
Due to selling shareholder		0			(350,000	)		(350,000	)
Current liabilities assumed		(261,662	)		12,010			(249,652	)
Total Purchase Price	$	922,500		$	0		$	922,500

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13. LITIGATION AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

Stock Issued During Period Shares Director Stock Award

LITIGATION AND CONTINGENCIES

In the ordinary conduct of business, the Company is subject to periodic lawsuits, investigations and litigation claims, which the Company accrues for where appropriate and can be reasonably estimated. The Company cannot predict with certainty the ultimate resolution of such lawsuits, investigations and claims asserted against it.  At December 31, 2012, the Company had the following material contingencies:

Brio Capital

Brio Capital, the holder of a warrant, filed an action against us on February 25, 2011 in the New York Supreme Court, County of New York, for the issuance of approximately 6.2 million shares of common stock upon the exercise of certain warrants. The Court granted a non-final Summary Judgment Order on a portion of the action in favor of Brio in December 2011 requiring us, among other things, to issue 6.2 million shares of common stock. We have issued the shares required by the Court order. We also entered into a settlement agreement to pay $57,661 in legal fees as required by the Court order, which has been satisfied. We reached a settlement with Brio resolving all remaining matters. Under the terms of the settlement, we are required to issue a number of shares of common stock in twelve (12) monthly installments equal to $31,250 divided by the average of the closing bid prices of our common stock for the last three (3) trading days of the month immediately preceding the month in which the shares are due to be issued. Pursuant to the Court’s Section 3(a) (10) approval, the shares of common stock issued to Brio shall be freely tradable upon issuance. All shares issued are subject to a leak-out provision contained in the settlement agreement.

The DeCarlo Group

A lawsuit was filed by the DeCarlo Group on November 24, 2010 in Miami-Dade County Courthouse for over $400,000 claimed in connection with CFO and accounting services allegedly rendered to the Company.  It is our position that we were overcharged in connection with the services rendered and that no amounts are due. DeCarlo has now filed a second amended complaint that we have responded to and intend to otherwise defend ourselves vigorously in this matter, but the outcome of the action cannot be predicted.

La Jolla Cove Investors, Inc.

On July 25, 2013, we filed a lawsuit against La Jolla Cove Investors, Inc. in the United States District Court for the Northern District of California relating to the finance documents entered into by us and La Jolla in January 2012. In the lawsuit, we allege breach of contract and other causes of action. We are seeking injunctive relief in addition to unspecified monetary damages as well as other relief. La Jolla has made counterclaims against us and is defending against our complaint.  We intend to otherwise pursue this matter vigorously, but the outcome of the action cannot be predicted.

IRS

During 2010 and 2009, we, under our former name Sanswire Corp., incurred and reported to the Internal Revenue Service (“IRS”) payroll tax liabilities (and deposited the appropriate withholding amounts) during the normal course of business at each payroll cycle.  We reported payroll tax liabilities for all the tax periods in 2007 and 2008, however, we failed to deposit the appropriate withholding amounts for those periods. We recognized this issue and, accordingly, contacted the IRS to make arrangements to pay any taxes due. One such matter has been resolved with the IRS, and we currently estimate the amount involved in the second matter to be approximately $200,000.  We may be subject to additional penalties and interest from the IRS in connection with these payroll tax matters. We are engaged in discussions and continue to cooperate with the IRS to resolve this matter.

The Company provides indemnification, to the extent permitted by law, to its officers, directors, employees and agents for liabilities arising from certain events or occurrences while the officer, director, employee, or agent is or was serving at our request in such capacity.

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9. SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2013

Share-based Compensation [Abstract]

SHARE-BASED COMPENSATION

The Company makes share-based compensation awards to its directors, officers, employees and consultants that consist of common stock, restricted stock and stock options. All common stock and restricted stock awards are subject to the securities law restrictions of Rule 144 as promulgated under the Securities Act of 1933, as amended.

Common Stock

The Company recognizes the cost of the common stock issued to directors, officers, and employees as compensation expense at the closing market price on the grant date. All common stock awards are fully vested on the date of grant, therefore no unrecognized compensation expense is associated with these awards. During 2013, the Company issued 7,692,308 common shares totaling $100,000 for salary conversions against accrued salaries; and issued 900,000 common shares for director fees totaling $13,890. Director fees and compensation expenses are included in general and administrative expense.

Restricted Stock

Awards of restricted stock are independent of stock option grants and are generally subject to forfeiture if employment terminates prior to vesting. Prior to vesting, ownership of the restricted stock cannot be transferred. The restricted stock has the same voting rights as the common stock. The Company recognizes fair value of restricted stock awards based upon the stock’s closing market price on the grant date as compensation according to the terms of award’s vesting schedule; i.e. ratably over the vesting period or upon attainment of specific performance-based goals and objectives. During 2013, the Company awarded 20 million common shares with a vested total of $85,968 as retention bonuses, of which 12 million were rescinded and exchanged for fully-vested stock options on December 31, 2013. Share-based compensation is included in general and administration expense. At December 31, 2013, there remains approximately $118,650 in unrecognized compensation relating to performance-based restricted stock awards.

Stock Options

The Company has issued stock options at exercise prices equal to the Company’s common stock market price on the date of grant with contractual terms of three to seven years. Historically, the stock options were fully vested and expensed as compensation on the grant date. During 2010, the Company began issuing stock options with vesting schedules and such stock options are generally subject to forfeiture if employment terminates prior to vesting. On December 31 2013, certain officers and employees rescinded 12 million shares of previously awarded restricted shares for fully-vested stock options on a one-for-one basis valued at $216,000. Also during 2013, the Company issued 40,355,693 stock options in lieu of accrued salaries for $524,624; awarded 14 million options for retention bonuses totaling $285,600; issued 900,000 options for director’s fees totaling $23,412 and; had previously issued options vest totaling $30,685.  Total share-based compensation attributable to vested option agreements of $339,697 is included in general and administrative. At December 31, 2013, there was approximately $80,700 in unrecognized compensation expense.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options. The principal assumptions utilized in valuing stock options include the expected stock price volatility (based on the most recent historical period equal to the expected life of the option); the expected option life (an estimate based on historical experience); the expected dividend yield; and the risk-free interest rate (an estimate based upon on the yields of Treasury constant maturities equal to the expected life of the option).

The following table summarizes the stock option activity for the years ended December 31,

	2013					2012
	Shares			Weighted average exercise price		Shares			Weighted average exercise price
Outstanding at beginning of year		68,650,000		$	.046		40,916,667		$	.067
Granted		15,300,000			.023		0			.000
Exchanged for salary conversion		40,355,693			.013		22,316,667			.023
Exchanged for rescinded stock		12,000,000			.009		14,000,000			.015
Exercised		0			.000		0			.000
Forfeited / expired / cancelled		(11,722,222	)		.086		(8,583,334	)		.073
Outstanding at end of year		124,583,471		$	.025		68,650,000		$	.046
Options exercisable at end of year		119,583,471		$	.026		63,358,333		$	.048
Weighted average remaining contractual term	5.60 years					4.55 years

The following table summarizes information about stock options outstanding and exercisable at December 31, 2013:

	Options Outstanding and Exercisable
Exercise prices	Number outstanding		Weighted average remaining contractual terms (years)		Weighted Average Exercise price
$.0096		12,000,000		7.00		.0096
$.011		400,000		2.87		.011
$.013		40,355,693		6.73		.013
$.015		11,000,000		5.75	$	.015
$.016		250,000		2.17		.016
$.021		250,000		2.37		.021
$.023		22,316,667		5.87		.023
$.0238		12,000,000		6.58		.0238
$.0275		400,000		2.58		.0275
$.045		4,444,444		.34		.045
$.070		1,500,000		.11		.070
$.075		10,250,000		3.25		.075
$.080		1,500,000		.27		.080
$.090		2,916,667		.27		.090
		119,583,471		5.59	$	.026

The aggregate intrinsic value of the 119,583,471 options outstanding and exercisable at December 31, 2013 was $0. The aggregate intrinsic value for the options is calculated as the difference between the prices of the underlying awards and quoted price of the Company’s common stock for the options that were in-the-money at December 31, 2013.  

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7. NOTES PAYABLE

12 Months Ended

Dec. 31, 2013

Notes Payable [Abstract]

NOTES PAYABLE

Notes payable is comprised of the following:

	December 31, 2013		December 31, 2012
Unsecured promissory notes	$	5,997,030	$	5,997,030
Unsecured short-term promissory notes		150,000		0
Convertible debenture		267,000		0
Accrued interest		3,087,053		2,654,350
NOTES PAYABLE	$	9,501,083	$	8,651,380

At December 31, 2013 and 2012, notes payable included two unsecured promissory notes aggregating $5,997,030 with no stated interest rate or terms of repayment.  The Company has accrued interest at 7% per annum on both notes since their inception and includes the notes in current liabilities.

On February 1, 2013, the Company issued a $100,000 75-day unsecured 10% promissory note to an individual investor for funds received. On March 18, 2013, the Company issued a $50,000 60-day unsecured 12% promissory note to the same investor for funds received. The Company issued 2 million common shares to the investor as an inducement for the loans, which were amortized as financing fees. As of December 31, 2013, the Company is in default has not repaid these notes.

On February 2, 2012, the Company closed on a Securities Purchase Agreement with La Jolla Cove Investors, Inc. a California-based institutional investor (the “Investor”) for an aggregate of $5.5 million. The $500,000 initial tranche was funded at the closing in connection with a Convertible Debenture due in February 2015 and an Equity Investment Agreement (the “EIA”). A portion of the Debenture was converted by the Investor into shares of common stock beginning on May 3, 2012.

The Debenture grants the Investor with a right of first refusal on future financings of the Company subject to certain terms and conditions and contains acceleration provisions requiring 120% of the principal amount, accrued and unpaid interest, to become immediately due and payable on certain events of default described therein.

Pursuant to the EIA, the Investor agreed to invest an additional $5.0 million in monthly tranches beginning on May 3, 2012. The Investor also has the right to purchase an additional $5.0 million of the Company’s common stock at an exercise price of $0.21 per share for a period of three years.

The Company incurred customary closing costs including attorney’s fees, commissions and closing costs of $62,027, which are recorded as deferred financing costs to be amortized as additional interest expense on a straight-line basis over the 3-year term of the Debenture and EIA.

On July 25, 2013, the Company filed a lawsuit against the Investor in the United States District Court for the Northern District of California relating to the finance documents entered into by the Company and the Investor in January 2012. In the lawsuit, the Company alleges breach of contract and other causes of action. The Company has reclassified the convertible notes payable to current notes payable.

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8. DERIVATIVE LIABILITIES

12 Months Ended

Dec. 31, 2013

Derivative Liability [Abstract]

8. DERIVATIVE LIABILITIES

The Company accounts for derivative instruments at fair value. Gains and losses from changes in the fair value of derivatives are recognized in interest expense. The Company’s derivative instruments consist of stock warrants that contained anti-dilution provisions that were issued with certain debt and equity financings. During 2013, all financial instruments that gave rise to the derivative liabilities have expired.

Warrants

In the past, the Company entered into financing agreements for convertible promissory notes and stock purchase agreements, which included Class A and Class B warrants. Both Class A and Class B warrants contained anti-dilution rights and are considered to be derivative liabilities under U.S. GAAP. During 2010 and 2011, the Company entered into new stock purchase agreements and issued an aggregate of 9,677,167 warrants under the 2010 and 2011 stock purchase agreements. Warrants issued under the 2010 and 2011 stock purchase agreements have no anti-dilution rights and are not considered to be derivative liabilities. All warrants have 3-year terms and are exercisable for a purchase price of $0.21 per share or, in the case of Class B warrants, $0.315 per share.

The following table summarizes certain information about the Company’s warrants to purchase common stock.

	Derivative Liabilities
	Warrants			Warrants			Warrants		Weighted
	Class A			Class B			& Purchase Rights		Average
Outstanding at December 31, 2012		8,327,462			8,327,462			20,033,021	$	0.234
Warrants Granted		0			0			972,381		0.210
Warrants Expired		(8,327,462	)		(8,327,462	)		(2,377,167)		0.256
Outstanding at December 31, 2013		0			0			18,628,235	$	0.210

The warrants outstanding and exercisable at December 31, 2013 and 2012 had no intrinsic value. All warrants were fully exercisable and there was no unamortized cost to be recognized in future.

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10. INCOME TAXES

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

The Company has federal and state net operating loss (NOL) carryforwards, which can be used to offset future earnings. Accordingly, no provision for income taxes is recorded in these consolidated financial statements. A deferred tax asset for the future benefits of net operating losses and other differences is offset by a 100% valuation allowance due to the uncertainty of the Company's ability to realize future tax benefits from the losses. These net operating losses will expire in the years 2021 through 2031.

Certain income and expenses are recognized in different periods for tax and financial reporting purposes. The items that give rise to these temporary differences at the Company consist of its NOL carryforwards and the related valuation allowances.  The resulting deferred tax assets and liabilities consist of the tax effects (computed at 15%) of the temporary differences and are listed below:

	2013			2013 Changes			2012
Deferred tax assets:
Net operating loss carry-forwards	$	18,245,910		$	496,209		$	17,749,701
Valuation allowance		(18,245,910	)		(496,209	)		(17,749,701	)
Net deferred tax asset	$	—		$	—		$	—

A reconciliation of income benefit provided at the federal statutory rate of 15% to income tax benefit is as follows:

	2013			2012
Income tax benefit computed at federal statutory rate	$	(496,209	)	$	(504,428	)
Deferred income taxes		496,209			504,428
	$	—		$	—

At the end of 2013, the Company also had net operating loss carry-forwards of its predecessor, related to its reincorporation and reorganization under the Internal Revenue Code, available to offset future taxable income.  These NOL carryforwards total approximately $81,429,083 and expire at various dates through 2022.

The Company operated in multiple tax jurisdictions within the United States of America.  Although management does not believe that the Company is currently under examination in any major tax jurisdiction in which it operates other than for the issues with the IRS as described in Note 15, the Company remains subject to examination in all of those tax jurisdictions until the applicable statute of limitations expire.  As of December 31, 2013, 2008 and subsequent tax years remain subject to examination by the Internal Revenue Service (“IRS”) and in the Company’s major state tax jurisdictions.  The Company does not expect to have a material change to unrecognized tax positions within the next twelve months.

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4. Related Party Transactions (Detail Narrative) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
DisclosureRelatedPartyTransactionsAdditionalInformationAbstract
Accounts receivable from related party	$ 59,833	$ 48,220
Revenue from related parties	$ 478,582	$ 632,992
Revenue from related parties percentage	75.00%	71.00%
Percentage of handling fees		10.00%

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1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (Policies)

12 Months Ended

Dec. 31, 2013

Summary Of Significant Accounting Principles

DESCRIPTION OF BUSINESS

World Surveillance Group Inc. (the “Company”) designs, develops, markets, and sells, autonomous lighter-than-air (LTA) aerostats and unmanned aerial systems (UAS) capable of carrying payloads that provide semi-persistent intelligence, surveillance and reconnaissance (ISR), security and/or wireless communications from air to ground solutions at low and mid altitudes.  The Company’s business focuses primarily on the design and development of innovative aerostats and UAS that provide situational awareness and other communications capabilities via the integration of wireless capabilities and customer payloads. The Company’s aerostats and airships, when integrated with cameras, electronics systems and other high technology payloads, are designed for use by government-related and commercial entities that require real-time ISR or communications support for military, homeland defense, border control, drug interdiction, natural disaster relief, maritime and environmental missions. 

The Company’s wholly owned subsidiary Global Telesat Corp. (GTC), provides mobile voice and data communications services globally via satellite to the U.S. government, defense industry and commercial users. GTC specializes in services related to the Globalstar satellite constellation, including satellite telecommunications voice airtime, tracking devices and services, and ground station construction.  GTC has an e-commerce mobile satellite solutions portal and is an authorized reseller of satellite telecommunications equipment and services offered by other leading satellite network providers such as Inmarsat, Iridium, Globalstar and Thuraya. GTC also has a new subscription based online tracking portal called GTCTrack, designed to attract new satellite and GSM tracking customers by offering an easy-to-use interface and compatibility with a wide range of devices. GTC’s equipment is installed in various ground stations across Africa, Asia, Australia, Europe and South America.

The Company’s wholly owned subsidiary Lighter Than Air Systems Corp. (LTAS), provides critical aerial and land-based surveillance and communications solutions to government and commercial customers. LTAS systems are designed and developed in-house utilizing proprietary technologies and processes that result in compact, rapidly deployable aerostat solutions and mast-based ISR systems. The LTAS systems have been proven to fulfill critical requirements of the military and law enforcement in the U.S. and internationally.

BASIS OF PRESENTATION

The accompanying consolidated financial statements of World Surveillance Group Inc. and its subsidiaries were  prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company exercises control and, where applicable entities for which the Company has a controlling financial interest or is the primary beneficiary.

All material intercompany accounts and transactions are eliminated in consolidation.

The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s consolidated financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain 2012 amounts have been reclassified to conform to the 2013 presentation.

GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. However, as reflected in the accompanying consolidated financial statements, the Company incurred a loss from operations of $2,733,084 and negative cash flows from operations of $359,156 for the year ended December 31, 2013. The Company had a working capital deficit of $16,598,286 and total stockholders’ deficit of $13,496,100 at December 31, 2013. The Company had an accumulated deficit of $152,412,557 at December 31, 2013.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to raise additional funds either through investments or by generating revenue from the sale of the Company’s products to continue its business operations and implement its strategic plan, which includes, among other things, continued development of its aerostats and UAS, the pursuit or continued development of strategic relationships and expansion of the Company’s subsidiaries’ businesses. The Company’s business plan, which if successfully implemented, will allow it to sell its products for a profit, which in turn will reduce the Company’s dependence on raising additional funds from outside sources. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company anticipates a net loss to continue for at least the next several quarters if not for all of the year 2014.

Additional cash will be needed to support our ongoing operations until such time that operations provide sufficient cash flow to cover expenditures.  We are currently pursuing both short and long-term financing options from private investors as well as through institutional investors.  We are also working to commercialize our aerostats, Argus One airship, and subsidiaries’ products to begin generating revenues from customers.  We are already generating revenue from our aerostats, mast-based products and GTC products.  The costs associated with our strategic plan are variable and contingent on our ability to raise capital or begin generating revenue from customer contracts, but we expect to need funding of approximately $3 million over the next 12 months. We are currently in litigation with La Jolla Cove Investors and do not expect any future financing under those agreements. We continue to have discussions with various entities relating to funding, but there can be no assurance that such funding will be received in the amounts required, on a timely basis, or at all.  While we believe we will be able to continue to raise capital from various funding sources in such amounts sufficient to sustain operations at our current levels through at least December 31, 2014, if we are not able to do so and if we are not able to generate revenue through the sale of our products, we would likely need to modify our strategy or cut back or terminate some of our operations. If we are able to raise additional funds through the issuance of equity securities, substantial dilution to existing shareholders may result.  However, if our plans are not achieved and/or if significant unanticipated events occur or if we are unable to obtain the necessary additional funding on favorable terms or at all, we will likely have to modify our business plan and reduce, delay or discontinue some or all of our operations to continue as a going concern or seek a buyer for all or a portion of our assets. As of the date hereof, we continue to raise capital to sustain our current operations.

REVENUE RECOGNITION

The Company recognizes revenue when all four of the following criteria are met: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred and title has transferred or services have been rendered; 3) our price to the buyer is fixed or determinable; and 4) collectability is reasonably assured. The Company records unearned contract revenues and subscription fees as deferred revenues and their associated costs of sales as prepaid expenses. Deferred revenue from contracts and their related costs are recognized upon completion and fulfillment of the contractual obligation using the completed contract method. During 2012, the Company recognized $200,000 in contract revenue, previous recorded as deferred revenue. Deferred revenues from subscription fees and their related costs are amortized over the subscription term.

INCOME TAXES

The Company accounts for income taxes using the asset and liability approach. Under this approach, deferred income taxes are recognized based on the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities, as measured by current enacted tax rates. Valuation allowances are recorded to reduce the deferred tax assets to an amount that will more likely than not be realized.

U.S. GAAP requires that, in applying the liability method, the financial statement effects of an uncertain tax position be recognized based on the outcome that is more likely than not to occur.  Under this criterion the most likely resolution of an uncertain tax position should be analyzed based on technical merits and on the outcome that will likely be sustained under examination. There were no adjustments related to uncertain tax positions recognized during the years ended December 31, 2013 and 2012, respectively.

FAIR VALUE MEASUREMENTS

The Company’s financial instruments include cash, accounts payable, notes payable. The carrying values for the current financial assets and liabilities approximate fair value due to their short maturity.

BASIC AND DILUTED NET LOSS PER COMMON SHARE

Basic and diluted net loss per common share has been computed by dividing the net loss by the weighted average number of shares of common stock outstanding during each period. Whenever losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would result in a diluted loss per share less than the basic loss per share and therefore would be anti-dilutive. Whenever net income is reported, the weighted average number of common shares outstanding will include common stock equivalents that are in-the-money. If all outstanding options, warrants and convertible shares were converted or exercised as of December 31, 2013, the shares outstanding would be 802,338,749.

PROPERTY AND EQUIPMENT

Property and equipment are carried at historical cost less accumulated depreciation.  Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized.  Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service.  When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations.  Repairs and maintenance are expensed as incurred.

The estimated useful lives of property and equipment are generally as follows:

·	Appliqués and ground stations	15 – 25 years
·	Machinery and equipment	3 – 12 years
·	Office furniture and fixtures	3 – 10 years
·	Computer hardware and software	3 – 7 years
·	Transportation vehicles	3 – 6 years

LONG LIVED ASSETS

The Company evaluates the fair value of long-lived assets on an annual basis or whenever events or changes in circumstances indicate that its carrying amounts may not be recoverable.  Accordingly, any impairment of value is recognized when the carrying amount of a long-lived asset exceeds its fair value. The Company’s evaluations have not indicated any impairment of fair values.

SHARE-BASED COMPENSATION

The Company offers share-based compensation programs to its officers, directors and employees that consist of employee stock options, common stock and restricted stock awards. Common stock and restricted stock awards are issued at the closing price of the Company’s common stock on the date of grant. The Company recognizes compensation expense ratably over the vesting periods for restricted stock awards using the grant date fair value of the stock awarded. The Black-Scholes option pricing model is used to value stock options, and compensation expense is recognized ratably over the requisite service vesting period. Stock options typically have contractual terms of three to seven years.  Share-based compensation for employees and non-employees is reflected in the appropriate functional expense category, primarily general and administrative, and research and development. Share-based compensation incurred during the years ended December 31, 2013 and 2012 was $991,893 and $1,983,008, respectively.

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7. NOTES PAYABLE (Tables)

12 Months Ended

Dec. 31, 2013

Notes Payable [Abstract]

Notes Payable

	December 31, 2013		December 31, 2012
Unsecured promissory notes	$	5,997,030	$	5,997,030
Unsecured short-term promissory notes		150,000		0
Convertible debenture		267,000		0
Accrued interest		3,087,053		2,654,350
NOTES PAYABLE	$	9,501,083	$	8,651,380

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9. Summary of Stock Options Outstanding and Exercisable (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	5 years 7 months 2 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.026	$ 0.048
Exercise Price One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.01
Options outstanding and exercisable at end of year, Shares	12,000,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	7 years
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.0096
Exercise Price Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.01
Options outstanding and exercisable at end of year, Shares	400,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	2 years 10 months 13 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.011
Exercise Price Three [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.01
Options outstanding and exercisable at end of year, Shares	40,355,693
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	6 years 8 months 23 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.013
Exercise Price Four [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.02
Options outstanding and exercisable at end of year, Shares	11,000,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	5 years 9 months
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.015
Exercise Price Five [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.02
Options outstanding and exercisable at end of year, Shares	250,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	2 years 2 months 1 day
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.016
Exercise Price Six [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.02
Options outstanding and exercisable at end of year, Shares	250,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	2 years 4 months 13 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.021
Exercise Price Seven [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.02
Options outstanding and exercisable at end of year, Shares	22,316,667
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	5 years 10 months 13 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.023
Exercise Price Eight [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.02
Options outstanding and exercisable at end of year, Shares	12,000,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	6 years 6 months 29 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.0238
Exercise Price Nine [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.03
Options outstanding and exercisable at end of year, Shares	400,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	2 years 6 months 29 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.0275
Exercisepriceten [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.05
Options outstanding and exercisable at end of year, Shares	4,444,444
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	4 months 2 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.045
Exercise price eleven [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.07
Options outstanding and exercisable at end of year, Shares	1,500,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	1 month 10 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.07
Exercise price twelve [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.08
Options outstanding and exercisable at end of year, Shares	10,250,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	3 years 3 months
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.075
Exercise price thirteen [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.08
Options outstanding and exercisable at end of year, Shares	1,500,000
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	3 months 7 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.08
Exercise price fourteen [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding and Exercisable ,Exercise prices	$ 0.09
Options outstanding and exercisable at end of year, Shares	2,916,667
Options Outstanding and Exercisable, Weighted average remaining contractual terms (years)	3 months 7 days
Options Outstanding and Exercisable, weighted Average Exercise price	$ 0.09

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (USD $)	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Total
Beginning Balance at Dec. 31, 2011	$ 4,269	$ 131,426,211	$ (145,632,499)	$ (14,202,019)
Beginning Balance (in shares) at Dec. 31, 2011	426,884,160
Shares issued as inducement for loans				0
Shares issued for legal settlement (in shares)	16,715,543
Shares issued for legal settlement	167	269,158	0	269,325
Shares issued to services (in shares)	13,140,325
Shares issued to services	131	458,848	0	458,979
Shares issued for directors’ compensation (in shares)	12,700,000
Shares issued for directors’ compensation	127	586,793	0	586,920
Shares issued for compensation and accrued salaries (in shares)	12,978,261
Shares issued for compensation and accrued salaries	130	396,170	0	396,300
Shares issued for convertible debt conversion (in shares)	81,785,908
Shares issued for convertible debt conversion	818	1,692,053	0	1,692,871
Fair value of vested restricted shares issued for compensation (in shares)	5,000,000
Fair value of vested restricted shares issued for compensation	50	58,929	0	58,979
Vested restricted shares previously issued as performance-based compensation (in shares)	0
Vested restricted shares previously issued as performance-based compensation	0	342,370	0	342,370
Common and restricted shares rescinded and exchanged for fully-vested options (in shares)	(22,316,667)
Common and restricted shares rescinded and exchanged for fully-vested options	(223)	223	0	0
Fair value of vested options issued as share-based compensation (in shares)	0
Fair value of vested options issued as share-based compensation	0	598,439	0	598,439
Net loss			(3,362,853)	(3,362,853)
Ending Balance at Dec. 31, 2012	5,469	135,829,194	(148,995,352)	(13,160,689)
Ending Balance (in shares) at Dec. 31, 2012	546,887,530
Shares issued as inducement for loans				34,400
Shares issued for legal settlement (in shares)	24,741,372
Shares issued for legal settlement	247	338,879	0	339,126
Shares issued for LTAS selling shareholder debt (in shares)	20,000,000
Shares issued for LTAS selling shareholder debt	200	191,800	0	192,000
Shares issued for directors’ compensation (in shares)	900,000
Shares issued for directors’ compensation	9	13,881	0	13,890
Shares issued for convertible debt (in shares)	2,933,333
Shares issued for convertible debt	29	76,310	0	76,339
Fair value of vested restricted shares issued as retention bonuses (in shares)	16,000,000
Fair value of vested restricted shares issued as retention bonuses	160	9,152	0
Fair value of vested restricted shares issued for compensation (in shares)	20,000,000
Fair value of vested restricted shares issued for compensation	200	85,768	0	85,968
Fair value of vested options issued as share-based compensation and director’s fees (in shares)	0
Fair value of vested options issued as share-based compensation and director’s fees	0	339,697	0	339,697
Fair value of vested options issued for salary conversion	0	524,624	0	524,624
Common and restricted shares rescinded and exchanged for fully-vested options (in shares)	(12,000,000)
Common and restricted shares rescinded and exchanged for fully-vested options	(120)	216,120	0	216,000
Net loss	0	0	(3,417,205)	(3,417,205)
Ending Balance at Dec. 31, 2013	$ 6,691	$ 138,909,766	$ (152,412,557)	$ (13,496,100)
Ending Balance (in shares) at Dec. 31, 2013	669,127,043

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4. RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

The accounts receivable from related party at December 31, 2013 and 2012, includes trade receivables from Global Telesat Communications, Ltd. (“GTCL”) of $59,833 and $48,220, respectively. GTCL is a related party based in the United Kingdom and controlled by a current officer of GTC. Total sales to GTCL for the years ended December 31, 2013 and 2012 were $478,582 and $632,992, respectively, and account for 75% and 71% of GTC’s total sales for the respective periods. GTC began charging a 10% handling fee on all orders from GTCL in 2012.

The accounts payable due to related party at December 31, 2013, includes allocated rent charges, aerostat envelopes, and labor charges due Aerial Products Corp (“APC”) of $50,691. APC is a related party, controlled by a current employee of the Company. APC shares the manufacturing facilities with LTAS and provides aerostat envelopes and manufacturing labor to LTAS. Total charges from APC to LTAS during the period ended December 31, 2013 were $28,589.

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8. DERIVATIVE LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2013

Derivative Liability [Abstract]

Warrant to Purchase Common Stock

	Derivative Liabilities
	Warrants			Warrants			Warrants		Weighted
	Class A			Class B			& Purchase Rights		Average
Outstanding at December 31, 2012		8,327,462			8,327,462			20,033,021	$	0.234
Warrants Granted		0			0			972,381		0.210
Warrants Expired		(8,327,462	)		(8,327,462	)		(2,377,167)		0.256
Outstanding at December 31, 2013		0			0			18,628,235	$	0.210

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7. Notes Payable (Detail Narrative) (USD $)	Dec. 31, 2013	Dec. 31, 2012
DisclosureNotesPayableAdditionalInformationAbstract
Unsecured promissory notes included in notes payable total	$ 5,997,030	$ 5,997,030

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14. SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

The Company has evaluated subsequent events from the balance sheet date and determined there were no subsequent events requiring disclosure.