Document and Entity Information
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Document and Entity Information
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9 Months Ended | |
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Jul. 31, 2014
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Sep. 10, 2014
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| Document And Entity Information | ||
| Entity Registrant Name | MICRO IMAGING TECHNOLOGY, INC. | |
| Entity Central Index Key | 0000808015 | |
| Document Type | 10-Q | |
| Document Period End Date | Jul. 31, 2014 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --10-31 | |
| Entity Filer Category | Smaller Reporting Company | |
| Entity Common Stock, Shares Outstanding | 9,014,498 | |
| Document Fiscal Period Focus | Q3 | |
| Document Fiscal Year Focus | 2014 |
Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet (Parenthetical)
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Condensed Consolidated Balance Sheet (Parenthetical) (USD $)
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Jul. 31, 2014
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Oct. 31, 2013
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| Statement of Financial Position [Abstract] | ||
| Notes payable, unamortized discount, current | $ 0 | $ 844 |
| Convertible notes payable, unamortized discount, current | $ 8,446 | $ 60,050 |
| Redeemable convertible preferred stock, par value | $ 0.01 | $ 0.01 |
| Redeemable convertible preferred stock, shares authorized | 5,200 | 5,200 |
| Redeemable convertible preferred stock, shares issued | 5,200 | 5,200 |
| Redeemable convertible preferred stock, shares outstanding | 5,200 | 5,200 |
| Common stock, par value | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 25,000,000 | 25,000,000 |
| Common stock, shares issued | 7,670,814 | 5,153,027 |
| Common stock, shares outstanding | 7,670,814 | 5,153,027 |
Condensed Consolidated Statements of Operations (Unaudited)
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Condensed Consolidated Statements of Operations (Unaudited) (USD $)
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3 Months Ended | 9 Months Ended | ||
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Jul. 31, 2014
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Jul. 31, 2013
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Jul. 31, 2014
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Jul. 31, 2013
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| Operating costs and expenses: | ||||
| Research and development | $ 85,223 | $ 102,851 | $ 339,457 | $ 351,230 |
| Sales, general and administrative | 69,870 | 121,475 | 441,294 | 458,692 |
| Total operating expenses | 155,093 | 224,326 | 780,751 | 809,922 |
| Loss from operations | (155,093) | (224,326) | (780,751) | (809,922) |
| Other income (expense): | ||||
| Interest income | 13 | |||
| Interest expense | (30,747) | (16,038) | (194,843) | (28,053) |
| Gain on derivative instruments | 4,326 | 2,311 | 24,012 | 2,311 |
| Gain on anti-dilution provision | 3,327 | 21,957 | ||
| Other income (expense), net | (2,616) | (2,616) | ||
| Total other income (expense), net | (23,094) | (16,343) | (148,874) | (28,345) |
| Loss from operations: | ||||
| Before provision for income tax | (178,187) | (240,669) | (929,625) | (838,267) |
| Provision for income tax | (1,600) | (1,600) | ||
| Net loss | (178,187) | (240,669) | (931,225) | (839,867) |
| Net loss attributable to: | ||||
| Non-controlling interest | (19,869) | (28,648) | (91,464) | (111,700) |
| Micro Imaging Technology, Inc. stockholders | (158,318) | (212,021) | (839,761) | (728,167) |
| Net loss | $ (178,187) | $ (240,669) | $ (931,225) | $ (839,867) |
| Net loss per share, basic and diluted | $ (0.03) | $ (0.05) | $ (0.13) | $ (0.17) |
| Shares used in computing net loss per share, basic and diluted | 6,730,049 | 4,995,291 | 6,907,606 | 4,828,493 |
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nature of Our Business and Continuance of Operations
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Nature of Our Business and Continuance of Operations
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9 Months Ended | ||
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Jul. 31, 2014
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| Accounting Policies [Abstract] | |||
| Nature of Our Business and Continuance of Operations |
These unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern which contemplated the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Since inception, the Company has incurred substantial losses and there is substantial doubt that the Company will generate sufficient revenues in the foreseeable future to meet its operating cash requirements. Accordingly, the Company’s ability to continue operations depends on its success in obtaining additional capital in an amount sufficient to meet its cash needs. This raises substantial doubt about its ability to continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty.
Our independent registered public accounting firm has included an explanatory paragraph in its report on the financial statements for the year ended October 31, 2013 which raises substantial doubt about our ability to continue as a going concern.
Micro Imaging Technology, Inc. (the “Company”), a California corporation, is a holding company whose operations are conducted through its Nevada subsidiary, Micro Imaging Technology (“MIT”). As of July 31, 2014, the Company owned eighty point seven percent (80.7%) of the issued and outstanding stock of MIT.
The losses incurred to date which are applicable to the minority stockholders of the Company’s consolidated subsidiary, MIT, exceed the value of the equity held by the minority stockholders. Such losses have been allocated to the Company as the majority stockholder and are included in the net loss and accumulated deficit in the condensed consolidated financial statements for the nine months ended July 31, 2014. Any future profits reported by our subsidiary will be allocated to the Company until the minority’s share of losses previously absorbed by the Company have been recovered.
In 1997, the Company began marketing a small, point-of-use water treatment product aimed at the high purity segment of commercial and industrial water treatment markets. In February 2000, the Company formed Electropure EDI, Inc. (EDI), a wholly-owned Nevada subsidiary, through which all manufacturing and sales of its proprietary water treatment products were then conducted. In October 2005, the Company sold the assets of the EDI subsidiary and discontinued operations.
The Company acquired, in October 1997, an exclusive license to the patent and intellectual property rights involving laser light scattering techniques to be utilized in the detection and monitoring of toxicants in drinking water. In February 2000, the Company formed Micro Imaging Technology (MIT), a majority-owned Nevada subsidiary, to conduct research and development based upon advancements developed and patented from the licensed technology. The technology being developed is a non-biologically based system utilizing both proprietary hardware and software to rapidly (near real time) determine the specific specie of an unknown microbe present in a fluid with a high degree of statistical probability (“MIT system”). It will analyze a sample presented to it and compare its characteristics to a library of known microbe characteristics on file. At present, it is the Company’s only operation.
Effective with the sale of its EDI operation in October 2005, the Company’s planned principal operation, the further development and marketing of its remaining technology, has not produced any significant revenue and, as such, the Company, beginning with the fiscal year starting November 1, 2005, is considered a development stage enterprise.
Micro Imaging Technology, Inc. (Company) is a business whose planned principal operations are the design, engineering and manufacturing the MIT 1000 System, an optically-based, software driven system that can detect and identify pathogenic bacteria in rapid time. The Company is currently conducting research activities to operationalize patented technology that the Company owns and to develop certain software Identifiers in order to market its MIT 1000 system for the identification of various pathogens such as Listeria, E. Coli, Staphylococcus Enteritidis (Staph) and Salmonella.
Since April 2006, the Company has leased a 4,100 sq. ft. facility in San Clemente, California, which houses all of its employees and research and development activities. The Company is also in the process of raising additional capital from loans and/or the sale of equity to support the continuation of its development activities to begin marketing the MIT 1000 system as soon as possible.
The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize its current technology before another company develops similar technology and software. |
Basis of Presentation
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Basis of Presentation
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9 Months Ended | ||
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Jul. 31, 2014
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| Basis Of Presentation | |||
| Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting solely of normal recurring adjustments which management believes are necessary for a fair presentation of the Company’s financial position at July 31, 2014 and results of operations for the periods presented.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.
Results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with our audited financial statements and footnotes as of and for the year ended October 31, 2013, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 13, 2014.
Going Concern
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company has not generated revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion. The Company has obtained funds from several stockholders and believes this funding will continue. Management believes the existing stockholders will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core business. |
Concentration of Credit Risk and Other Risks and Uncertainties
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Concentration of Credit Risk and Other Risks and Uncertainties
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Jul. 31, 2014
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| Risks and Uncertainties [Abstract] | |||
| Concentration of Credit Risk and Other Risks and Uncertainties |
Litigation and Claims
Alpine MIT Partners
On May 16, 2012, Alpine MIT Partners, LLC (Plaintiffs) filed a civil action against the Company and its Chairman and Chief Executive Officer, Jeffrey G. Nunez, (collectively, the Company), in the Texas District Court, Travis County. Plaintiffs alleged breach of contract and civil conspiracy, as well as tortious interference with contractual relations and prospective business relations. The lawsuit alleges that the Company breached certain provisions of a March 7, 2012 Securities Purchase Agreement the Company executed with the Plaintiff to sell up to $2.0 million of 7% Senior Secured five-year Convertible Debentures convertible into shares of common stock at a conversion rate of $.003 per share. The purchase and sale of the first $1.0 million Debenture was scheduled to close on or before April 6, 2012 and was subject to, among other things, Alpine closing the necessary equity funding to consummate the transactions. No money was ever received by the Company from Alpine. At a March 7, 2013 hearing, the Texas court upheld the Company’s argument and dismissed the complaint against the Company for lack of jurisdiction.
In August, 2013, Alpine filed an amended Complaint against Jeffrey Nunez in the Texas case alleging tortuous interference and conspiracy to terminate the March 7, 2012 Securities Purchase Agreement.
On January 10, 2013, the Company learned that Plaintiffs had filed a lien against the Company’s patents on May 8, 2012 with the California Secretary of State under the Uniform Commercial Code. On or about January 29, 2013, the Company filed suit against Alpine MIT Partners, LLC in the Orange County, California Superior Court alleging, among other claims, that the UCC filing is unauthorized. The lawsuit also names the managing director and managing member of Alpine as Defendants and alleges that they made false promises, intentional misrepresentations and breached the contract which is the subject of the Texas suit. The Company is seeking damages of $1.6 million. This lawsuit is currently in the discovery phase.
Michael W. Brennan
Concurrent with his April 13, 2012 resignation as Chairman of the Board of Directors and Chief Executive Officer, the Company agreed to repay a total of $160,000 in principal loans, $24,339 in accrued interest and $13,120 in unpaid fees and expenses due Michael Brennan over a 25-month payment schedule commencing May 1, 2012. Due to lack of funds, the Company has not made payments due Mr. Brennan since February 2013, each in the amount of $7,500. As of July 31, 2014, the principal balance due under the agreement amounted to $113,450 and, although Mr. Brennan originally waived interest on the note, the Company has accrued $16,842 in interest on that amount as of July 31, 2014.
On or about October 4, 2013, Mr. Brennan filed a lawsuit in the California Superior Court of Los Angeles for breach of contract for failure to pay monies due him under the above 2012 agreement. The lawsuit seeks $123,509 in principal damages, plus interest, costs and attorney fees. The Company has filed an answer to the complaint and is contesting the amount due Mr. Brennan. This lawsuit is currently in the discovery phase and is scheduled to go to trial in late September 2014.
See also Note 11 – “Subsequent Events.”
Other Litigation
On or about November 12, 2013, a vendor filed suit in the Orange County California Superior Court for non-payment of $9,894 in fees for services rendered. In or around December 2013, the vendor received a default judgment in the case and on January 23, 2014 filed a lien against the Company with the California Secretary of State. An additional $3,125 was subsequently awarded to the vendor for costs and interests. In June 2014, the plaintiff levied the Company’s bank account in the sum of $4,342. The Company is attempting to negotiate a payment schedule with this vendor for the remainder of the amount due.
On June 3, 2014, a vendor filed suit in the Orange County California Superior Court for non-payment of $10,070 in advertising fees. On or around July 11, 2014, the vendor received a default judgment in the case and an additional $1,550 was subsequently awarded to the vendor for costs and interests. The Company anticipates negotiating a payment schedule with this vendor.
We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. Other than the above-described litigation, as of July 31, 2014, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our financial statements.
In accordance with accounting standards regarding loss contingencies, the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for its financial statements not to be misleading. The Company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.
Because litigation outcomes are inherently unpredictable, the Company’s evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of its financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then the Company discloses the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material adverse effect on its financial statements in any given reporting period. However, in the opinion of Management, after consulting with legal counsel, the ultimate liability related to the current outstanding litigation is not expected to have a material adverse effect on its financial statements.
Management is of the opinion that the ultimate resolution of such matters now pending will not have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows. However, the outcome of legal proceedings cannot be predicted with any degree of certainty.
Antidilution Liability
In fiscal 2012, the Company recorded a liability to allow for the possible dilutive impact of equity issuances that alter or effect conversion or exchange rates existing on the various dates of conversion or exercise of securities having adjustable conversion rates. The liability is adjusted to reflect current fair market value at the end of each fiscal period. Due to the decline in the Company’s stock price, we recorded a gain of $42,043 and $21,957 at October 31, 2013 and July 31, 2014, respectively.
Accrued Payroll, Payroll Taxes and Benefits
From April 2010 through March 2012, payments made to two employees were recorded as reductions in accrued and unpaid payroll. In April 2012, the Company reclassified such payments as net payroll payments; calculated and recorded the employer and employee taxes that should have been withheld on such payment. Federal and state payroll tax returns have been filed for the last three quarters of 2010, all of 2011 and the first quarter of 2012. The Company recorded a total of $81,206 and $20,560 in federal and state payroll taxes due, respectively. Estimated federal penalties and interest on the late filings and payments, in the sum of $24,196, have been accrued as of October 31, 2013. On September 20, 2012 and May 14, 2013, the Internal Revenue Service filed a Notice of Federal Tax Lien against the Company assessing $58,858 and $13,605, respectively for unpaid taxes, penalties and interest. The Company is in contact with the Internal Revenue Service to work out a payment schedule for the amounts due.
In November 2013, the Internal Revenue Service assessed a $36,414 penalty against the Company’s Chief Scientist, David Haavig, under the federal Trust Fund Recovery Act because the above payroll taxes were not reported and paid in a timely manner. The Company assumed the liability and has provided payment to the employee for indemnification. The Company’s Chief Financial Officer, Victor Hollander, may also be liable for the federal penalty, and the amount of such penalty, has not yet been determined. In the event that such a penalty is assessed against Mr. Hollander, the Company has determined that it will indemnify him for the related costs. As a result, the Company has recorded an additional $34,632 in interest expense as of July 31, 2014.
Estimated state penalties and interest of $4,316 on the above late filings were accrued. A Notice of Tax Lien for a portion of the taxes due was filed by the State of California on November 9, 2012 in the amount of $8,206, including penalty and interest. In October 2013, the California tax authority levied the Company’s account in the sum of $13,807 with an additional levy of $5,451 in November 2013. On December 17, 2013, the Company entered into an installment agreement with the California tax authority to pay $304 per month commencing January 27, 2014. A total of $1,518 was paid under this arrangement when the Company failed to make required monthly payment in June 2014. On or about July 14, 2014, the State of California levied the Company’s account for an additional $1,132 and the estimated remaining balance of $4,200 remains due to the state.
Accrued Payroll and Benefits consist of the above payroll taxes, salaries, wages, and vacation benefits earned by employees, but not disbursed as of July 31, 2014 and includes payroll earned, but unpaid to various employees between January 16, 2013 and July 31, 2014. Accrued Payroll also includes the above estimated penalties and interest due on such unpaid payroll taxes. Liability for vacation benefits is accrued when earned monthly and reduced when taken. At the end of each fiscal period, the balance in the accrued vacation benefits liability account is adjusted to reflect current pay rates. Annual leave earned but not taken is considered an unfunded liability since this leave will be funded from future appropriations when it is actually taken by employees. |
Inventory
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Inventory
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Jul. 31, 2014
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| Inventory Disclosure [Abstract] | |||
| Inventory |
Inventory is stated at the lower of cost or market and comprised entirely of finished goods. Cost is determined on a first-in, first-out (FIFO) basis. The Company’s management monitors inventory for excess and obsolete items and makes necessary valuation corrections when such adjustments are required. |
Property and Equipment
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Property and Equipment
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Jul. 31, 2014
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| Property, Plant and Equipment [Abstract] | |||
| Property and Equipment |
Property and equipment are recorded at cost and are depreciated using the straight-line method over an expected useful life of 3 or 5 years. The leasehold improvements made to the Company’s leased facility are being depreciated over an expected useful life of 5 years. Expenditures for normal maintenance and repairs are charged to operations. The cost and related accumulated depreciation of assets are removed from the accounts upon retirement or other disposition, and the resulting profit or loss is reflected in the Statement of Operations. Renewals and betterments that materially extend the life of the assets are capitalized.
The production tooling for the Company’s revised MIT 1000 has been capitalized and the $14,000 cost is being amortized over an estimated useful life of 3 years.
The Company capitalized $35,313 in fiscal 2013 in the development of proprietary software for the MIT 1000 rapid microbial identification system. The cost of the software is being amortized on a straight-line basis over 3 years. |
Summary of Significant Accounting Policies
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Summary of Significant Accounting Policies
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Jul. 31, 2014
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies |
The accounting policies followed are as set forth in Note 1 of the Notes to Financial Statements in the Company’s 2013 Annual Report on Form 10-K. The Company has not experienced any material change in its critical accounting policies since November 1, 2013. The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments regarding uncertainties that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, the Company evaluates its estimates, which are based upon historical experience and on other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The Company considers the following accounting policies to be most critical in their potential effect on its financial position or results of operations.
New Accounting Pronouncements
During the period ended July 31, 2014, there were several new accounting pronouncements issued by the Financial Accounting Standards Board (FASB). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements. Set forth below are the more significant pronouncements.
On June 10, 2014, the FASB issued Accounting Standards Update [ASU] 2014-10, entitled Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The guidance in ASU 2014-10 removes all incremental financial reporting requirements from GAAP for development-stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the company’s current activities.
The accounting standards update also removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity—which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. ASU 2014-10 is effective for the first annual period beginning after December 15, 2014 the presentation and disclosure requirements in Topic 915 will no longer be required. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has adopted ASU effective for the nine months ended July 31, 2014 and believes that it has not had a material impact on our financial statements.
From time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
Earnings Per Share
Basic earnings per share are based on the weighted average number of shares outstanding for a period. Diluted earnings per share are based upon the weighted average number of shares and potentially dilutive common shares outstanding. Potential common shares outstanding principally include convertible notes payable and stock options under our stock plan. Since the Company has incurred losses, the effect of any common stock equivalent would be anti-dilutive.
Stock Based Compensation
Stock-based compensation costs for stock options issued to employees is measured at the grant date, based on the fair value of the award using the Black Scholes Option Pricing Model, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).
The Company recognized share-based compensation expense of $260,282 for options granted to various employees and consultants in November 2013, $80,348 of which is included in research and development expense and $179,934 is recorded as sales, general and administrative expense.
On November 19, 2013, the Board of Directors adopted the 2014 Employee Benefit Plan which is authorized to grant up to 525,000 shares of common stock or options to purchase common stock to eligible employees, directors, officers, consultants or advisors. Eligibility and vesting, in the case of options, is determined by the Board of Directors. On November 19, 2013, the Company issued three-year options to purchase 100,000 shares of common stock which vested immediately under the Plan to the Company’s President, Jeffrey Nunez, for services rendered at an exercise price of $0.50 per share at a fair market value of $67,447. Additional three-year options to purchase 300,000 shares of common stock, in the aggregate, were issued to Mr. Nunez and three other employees of the Company on November 19, 2013 at an exercise price of $1.00 per share, for an aggregate value of $192,835.
The following table summarizes information about options granted under the Company’s equity compensation plans through July 31, 2014 and otherwise to employees, directors and consultants of the Company. Generally, options vest on an annual pro rata basis over various periods of time and are exercisable, upon proper notice, in whole or in part at any time upon vesting. Typically, options granted have contractual lives ranging from two to ten years and, in the case of an employee, vested options terminate 90 days after an employee leaves the Company. All of the options granted on November 19, 2013 vested in their entirety at the time of issuance. Of such options, 50,000 terminated in March 2014 and 25,000 terminated in June 2014 due to voluntary terminations by two employees.
Summary information about the Company’s options outstanding at July 31, 2014 is set forth in the table below. Options outstanding at July 31, 2014 expire between January and November 2016.
As of July 31, 2014, all outstanding options had fully vested and there was no estimated unrecognized compensation from unvested stock options.
The following table summarizes the information relating to warrants granted to non-employees as of October 31, 2013 and changes during the nine months ended July 31, 2014:
Summary information about the Company’s warrants outstanding at July 31, 2014 is set forth in the table below. Warrants outstanding at July 31, 2014 expire between May 2014 and June 2016.
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Convertible Debentures
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Convertible Debentures
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Jul. 31, 2014
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| Convertible Notes Payable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Debentures |
Series 1 Notes
Under the provisions of ASC 815-40-15, “Derivatives and Hedging-Contracts in Entity’s Own Equity-Scope and Scope Exceptions,” a number of our outstanding Convertible notes are not considered indexed to our stock, as a result of an anti-dilution protection provision in these notes. The application of ASC 815-40-15, effective August 1, 2011, resulted in our accounting for these notes as derivative instruments, and they are recognized as liabilities in our consolidated balance sheets.
Between August 16, 2010 and February 21, 2012, the Company entered into a Securities Purchase Agreement with an unaffiliated lender in connection with the issuance of eleven (11) separate 8% convertible notes in various principal amounts, aggregating $387,500. As of September 14, 2012, the lender had converted all of the $387,500 in principal notes, plus $45,000 and $15,500 in principal penalties and accrued interest, respectively, on such notes and received a total of 663,219 shares of common stock upon the conversions at prices ranging from $0.20 to $1.95 per share.
Between July 18, 2013 and January 9, 2014, the Company entered into three new Securities Purchase Agreements with the lender, for total proceeds of $117,500, and paid a total of $7,500 out of the proceeds of the notes to lender for legal fees and expenses related to the referenced agreements. The notes mature between April 22, 2014 and October 13, 2014 and are convertible into shares of common stock at a discount of 39% of the average of the lowest three closing bid prices of the common stock during the ten trading days prior to the conversion date. The Series I Notes contain a provision requiring an adjustment to the conversion price of the note in the event the Company issues or sells any shares of common stock, or securities convertible into or exercisable for common stock, at a price per share lower than such conversion price. Accordingly, the Series I Notes are accounted for as a derivative liability, measured at fair value, with changes in fair value recognized as gain or loss for each reporting period thereafter. The notes were recorded at fair value, using the Binomial valuation model, and a derivative liability of $26,314 has been recorded for the fiscal period ended July 31, 2014. This liability will be revalued each reporting period and gains and losses will be recognized in the statement of operations under “Other Income (Expense)”.
In July 2014, the lender notified the Company that it had defaulted on the terms of its outstanding notes for failure to pay the remaining $6,900 principal balance due on a note that had matured as of June 20, 2014. The terms of the notes provided that the lender receive a 50% increase in the principal balance of any outstanding notes at the time of any such default. Consequently, the lender penalized the Company $3,450 on the remaining balance of that particular note and agreed to waive the penalty on a $32,500 principal note outstanding at that time.
Pursuant to the terms of the Series I Notes, the Company initially instructed its stock transfer agent to reserve 2,400,000 shares of the Company’s common stock to be issued if the notes are converted. Between January 27, 2014 and July 31, 2014, the lender converted $84,190 of such notes, plus $1,700 in accrued interest, and received a total of 1,950,454 shares of common stock at conversion prices ranging from $0.079 to $0.018 per share. The balance of 449,546 shares was reserved as of July 31, 2014. On August 19, 2014, the Company instructed its transfer agent to reserve an additional 2,000,000 shares of common stock to cover future conversions of notes. Shares held in reserve are not considered as issued and outstanding. If the remaining Series I Notes had been converted as of July 31, 2014, the Company would have issued a total of 3,242,598 shares of common stock the value of which would exceed, by $33,892 the principal balance due on the notes.
The lender converted an additional $14,945 in Series I Notes in August 2014. See Note 11 – “Subsequent Events.”
Fair value of financial instruments
The accounting standards regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash and other current assets and liabilities to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization.
The fair value framework establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:
The carrying amounts of our financial instruments, including cash, accounts payable and accrued expenses approximate fair value because of their generally short maturities.
The Company measured the fair value of the Series 1 Note by using the Binomial Valuation model. As of July 31, 2014, the assumptions used to measure fair value of the liability embedded in our outstanding Series I Note included an exercise price of $0.0183 per share, a common share price of $0.03, a discount rate of 0.02% or 0.03%, and a volatility of 141% or 183%.
The anti-dilution liability is calculated by an approximate number of shares multiplied by the quoted market price of the Company’s common stock at the measurement date.
The following table sets forth, by level within the fair value hierarchy, our financial instrument liabilities as of July 31, 2014 (See also Note 7 – Convertible Debentures – “Series 1 Notes”):
The following table sets forth a summary of changes in the fair value of our Level 3 financial instrument liability for the fiscal year ended October 31, 2013 and for the nine month period ended July 31, 2014:
Other Convertible Notes
On November 10, 2010, the Company entered into a convertible note for $64,868 with a stockholder. The Note matured on May 31, 2012 and bears interest at the rate of ten percent (10%) per annum. The Note is convertible into shares of common stock at a forty two percent (42%) discount to the average of the lowest three (3) closing bid prices of the common stock during the ten (10) trading days prior to the conversion date. The note holder may convert any or all of the unpaid principal note prior to the maturity date. The Company calculated the intrinsic value of the conversion feature to be $46,973 as of the date of issuance of the debentures using the same criteria as noted above, which amount was fully amortized as of 2012. The Company has expensed $24,152 in accrued interest on the note as of July 31, 2014. If the note had been converted as of July 31, 2014, the Company would have issued a total of 4,172,186 shares of common stock the value of which would exceed, by $46,973 the principal balance due on the note. The Company is currently negotiating with the lender to settle or renegotiate the Note.
At July 31, 2014 and October 31, 2013, without taking into effect any unamortized discounts, convertible debentures and Series 1 notes consisted of the following:
Of the above notes, $69,128 was past due as of July 31, 2014. The Company’s outstanding notes mature as follows for the year ending October 31:
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Notes Payable
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Notes Payable
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Jul. 31, 2014
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| Notes Payable |
At July 31, 2014 and October 31, 2013, without taking into effect any unamortized discounts, notes payable to an officer and to stockholders consisted of the following:
Of the above notes payable, $113,450 is the subject of a lawsuit brought against the Company by former officer and director, Michael Brennan. The Company is currently negotiating with the holders of $52,000 of the above notes to either extend the maturity date or convert the notes into shares of common stock. The Company’s outstanding notes mature as follows for the years ending:
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Employee Retirement Plan
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Employee Retirement Plan
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Jul. 31, 2014
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| Compensation and Retirement Disclosure [Abstract] | |||
| Employee Retirement Plan |
Commencing on January 1, 2005, the Company sponsored a Simple IRA retirement plan which covers substantially all qualified full-time employees. Participation in the plan is voluntary and employer contributions are determined on an annual basis. Employer contributions would be made at the rate of three percent (3%) of the employees’ base annual wages. However, the Company has made no contributions to the IRA plan since January 2010. |
Securities Transactions
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Securities Transactions
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Jul. 31, 2014
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| Securities Financing Transactions [Abstract] | |||
| Securities Transactions |
Common Stock Issued in Private Placement Transactions
Between November 8, 2013 and December 13, 2013, the Company entered into Subscription Agreements with a major stockholder to purchase a total of 40,000 shares of the Company’s common stock at $0.50 per share, for a total of $20,000. As additional consideration, the purchaser was granted six-month options to purchase an additional 20,000 shares of common stock at $1.00 per share. These warrants expired by their terms as of June 13, 2014. On June 30, 2014, this same stockholder purchased an additional 333,333 shares of common stock at $0.03 per share for proceeds to the Company of $10,000. No warrants were issued pursuant to this latest subscription.
On November 13, 2013, the Company’s Chief Scientist, David Haavig, purchased 100,000 shares of common stock for $0.50 per share, or $50,000.
Between December 19, 2013 and May 12, 2014, a major stockholder purchased 70,000 shares of common stock for proceeds of $35,000, or $0.50 per share. He received six-month warrants to purchase an additional 35,000 shares of common stock at $1.00 per share as part of the purchase transactions. In May 2014, 10,000 of such warrants expired by their terms.
On April 7 and April 15, 2014, an unaffiliated stockholder purchased 20,000 and 4,000 shares of common stock, respectively, for $0.50 per share, or total proceeds of $12,000. The stockholder also received a warrant to purchase 12,000 shares of common stock at $1.00 per share.
Common Stock Issued in Cancellation of Debt
Between January 27, 2014 and July 23, 2014, the Company issued 1,950,454 shares of common stock to a lender upon conversion of $84,190 in convertible notes, plus $1,700 in accrued interest thereon, at prices ranging from $0.018 to $0.22 per share. |
Subsequent Events
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Subsequent Events
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Jul. 31, 2014
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| Subsequent Events [Abstract] | |||
| Subsequent Events |
Between August 8 and August 28, 2014, a member of the Board of Directors loaned the Company $16,000. The loans bear interest at 6% per annum and are payable on demand.
On August 20, 2014, the Company filed a Complaint in the United States District Court for the Central District of California in Los Angeles, California against former Director and President, Michael W. Brennan, for alleged violations of state and federal securities laws dealing with the sale of the Company’s common stock. The suit alleges that Mr. Brennan breached his fiduciary duty to the Company by failing to report certain sales of the Company’s securities and gained profits from such stock sales that were required to be paid to the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The suit seeks to recover compensatory damages and all profits improperly realized by Mr. Brennan together with costs and attorneys’ fees.
Between August 4 and September 4, 2014, the Company issued a total of 1,093,684 shares of common stock to a lender upon conversion of an aggregate of $14,945 in convertible notes at prices ranging from $0.012 and $0.015 per share.
On August 25, 2014, the Company’s landlord filed a complaint for unlawful detainer in the Superior Court of Orange County, California for unpaid rent in the sum of $7,790. As of September 10, 2014, the Company had paid the delinquent rent to the landlord, along with legal fees and late payment penalties assessed.
Between August 27 and August 29, 2014, an unaffiliated stockholder purchased 250,000 shares of common stock for $0.04 per share, or total proceeds of $10,000. |
Summary of Significant Accounting Policies (Policies)
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Summary of Significant Accounting Policies (Policies)
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Jul. 31, 2014
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| New Accounting Pronouncements |
New Accounting Pronouncements
During the period ended July 31, 2014, there were several new accounting pronouncements issued by the Financial Accounting Standards Board (FASB). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements. Set forth below are the more significant pronouncements.
On June 10, 2014, the FASB issued Accounting Standards Update [ASU] 2014-10, entitled Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The guidance in ASU 2014-10 removes all incremental financial reporting requirements from GAAP for development-stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the company’s current activities.
The accounting standards update also removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity—which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. ASU 2014-10 is effective for the first annual period beginning after December 15, 2014 the presentation and disclosure requirements in Topic 915 will no longer be required. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has adopted ASU effective for the nine months ended July 31, 2014 and believes that it has not had a material impact on our financial statements.
From time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented. |
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| Earnings Per Share |
Earnings Per Share
Basic earnings per share are based on the weighted average number of shares outstanding for a period. Diluted earnings per share are based upon the weighted average number of shares and potentially dilutive common shares outstanding. Potential common shares outstanding principally include convertible notes payable and stock options under our stock plan. Since the Company has incurred losses, the effect of any common stock equivalent would be anti-dilutive. |
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| Stock Based Compensation |
Stock Based Compensation
Stock-based compensation costs for stock options issued to employees is measured at the grant date, based on the fair value of the award using the Black Scholes Option Pricing Model, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).
The Company recognized share-based compensation expense of $260,282 for options granted to various employees and consultants in November 2013, $80,348 of which is included in research and development expense and $179,934 is recorded as sales, general and administrative expense.
On November 19, 2013, the Board of Directors adopted the 2014 Employee Benefit Plan which is authorized to grant up to 525,000 shares of common stock or options to purchase common stock to eligible employees, directors, officers, consultants or advisors. Eligibility and vesting, in the case of options, is determined by the Board of Directors. On November 19, 2013, the Company issued three-year options to purchase 100,000 shares of common stock which vested immediately under the Plan to the Company’s President, Jeffrey Nunez, for services rendered at an exercise price of $0.50 per share at a fair market value of $67,447. Additional three-year options to purchase 300,000 shares of common stock, in the aggregate, were issued to Mr. Nunez and three other employees of the Company on November 19, 2013 at an exercise price of $1.00 per share, for an aggregate value of $192,835.
The following table summarizes information about options granted under the Company’s equity compensation plans through July 31, 2014 and otherwise to employees, directors and consultants of the Company. Generally, options vest on an annual pro rata basis over various periods of time and are exercisable, upon proper notice, in whole or in part at any time upon vesting. Typically, options granted have contractual lives ranging from two to ten years and, in the case of an employee, vested options terminate 90 days after an employee leaves the Company. All of the options granted on November 19, 2013 vested in their entirety at the time of issuance. Of such options, 50,000 terminated in March 2014 and 25,000 terminated in June 2014 due to voluntary terminations by two employees.
Summary information about the Company’s options outstanding at July 31, 2014 is set forth in the table below. Options outstanding at July 31, 2014 expire between January and November 2016.
As of July 31, 2014, all outstanding options had fully vested and there was no estimated unrecognized compensation from unvested stock options.
The following table summarizes the information relating to warrants granted to non-employees as of October 31, 2013 and changes during the nine months ended July 31, 2014:
Summary information about the Company’s warrants outstanding at July 31, 2014 is set forth in the table below. Warrants outstanding at July 31, 2014 expire between May 2014 and June 2016.
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Summary of Significant Accounting Policies (Tables)
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Summary of Significant Accounting Policies (Tables)
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Jul. 31, 2014
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| Summary Of Significant Accounting Policies Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Stock Options Granted |
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| Summary of Stock Options Outstanding |
Summary information about the Company’s options outstanding at July 31, 2014 is set forth in the table below. Options outstanding at July 31, 2014 expire between January and November 2016.
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| Schedule of Warrants Granted to Non-Employees |
The following table summarizes the information relating to warrants granted to non-employees as of October 31, 2013 and changes during the nine months ended July 31, 2014:
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| Schedule of Warrants Outstanding |
Summary information about the Company’s warrants outstanding at July 31, 2014 is set forth in the table below. Warrants outstanding at July 31, 2014 expire between May 2014 and June 2016.
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Convertible Debentures (Tables)
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Convertible Debentures (Tables) (Convertible Debentures [Member])
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Jul. 31, 2014
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Convertible Debentures [Member]
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| Schedule of Fair Value of Financial Instruments Liabilities |
The following table sets forth, by level within the fair value hierarchy, our financial instrument liabilities as of July 31, 2014 (See also Note 7 – Convertible Debentures – “Series 1 Notes”):
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| Summary of Changes in Fair Value of Level 3 Financial Instrument Liability |
The following table sets forth a summary of changes in the fair value of our Level 3 financial instrument liability for the fiscal year ended October 31, 2013 and for the nine month period ended July 31, 2014:
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|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Convertible Debentures and Series 1 Notes |
At July 31, 2014 and October 31, 2013, without taking into effect any unamortized discounts, convertible debentures and Series 1 notes consisted of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Remaining Outstanding Notes Maturity |
Of the above notes, $69,128 was past due as of July 31, 2014. The Company’s outstanding notes mature as follows for the year ending October 31:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable (Tables)
|
Notes Payable (Tables) (Notes Payable [Member])
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Jul. 31, 2014
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Notes Payable [Member]
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Unamortized Discounts, Notes Payable to Officer and Stockholders |
At July 31, 2014 and October 31, 2013, without taking into effect any unamortized discounts, notes payable to an officer and to stockholders consisted of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Maturities of Notes Payable |
The Company’s outstanding notes mature as follows for the years ending:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Our Business and Continuance of Operations (Details Narrative)
|
Nature of Our Business and Continuance of Operations (Details Narrative)
|
Jul. 31, 2014
|
Apr. 30, 2006
sqft
|
|---|---|---|
| Accounting Policies [Abstract] | ||
| Percentage of interest owned by the company | 80.70% | |
| Lease area | 4,100 |
Concentration of Credit Risk and Other Risks and Uncertainties (Details Narrative)
|
Concentration of Credit Risk and Other Risks and Uncertainties (Details Narrative) (USD $)
|
0 Months Ended | 1 Months Ended | 3 Months Ended | 9 Months Ended | 24 Months Ended | 0 Months Ended | 0 Months Ended | 1 Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Jul. 14, 2014
|
Dec. 17, 2013
|
May 14, 2013
|
Jan. 10, 2013
|
Nov. 09, 2012
|
Sep. 20, 2012
|
Apr. 06, 2012
|
Nov. 30, 2013
|
Jul. 31, 2014
|
Oct. 31, 2013
|
Jul. 31, 2013
|
Jul. 31, 2014
|
Jul. 31, 2013
|
Jul. 31, 2012
|
Jun. 30, 2014
|
May 16, 2012
|
Oct. 04, 2013
Michael W. Brennan [Member]
|
Jul. 31, 2014
Michael W. Brennan [Member]
|
Feb. 02, 2013
Michael W. Brennan [Member]
|
Apr. 12, 2012
Michael W. Brennan [Member]
|
Jul. 11, 2014
Vendor [Member]
|
Jun. 03, 2014
Vendor [Member]
|
Nov. 12, 2013
Vendor [Member]
|
Jun. 30, 2014
Vendor [Member]
|
|
| Senior secure convertible debentures | $ 101,628 | $ 149,868 | $ 101,628 | $ 2,000,000 | ||||||||||||||||||||
| Percentage of seior secured convertible debentures | 7.00% | |||||||||||||||||||||||
| conversion rate | $ 0.003 | |||||||||||||||||||||||
| Purchase and sale of debenture | 1,000,000 | |||||||||||||||||||||||
| Damages paid | 1,600,000 | |||||||||||||||||||||||
| Agreed to repay principle loans | 113,450 | 7,500 | 160,000 | |||||||||||||||||||||
| Accrued interest | 16,842 | 24,339 | ||||||||||||||||||||||
| Unpaid fees and expenses | 13,120 | |||||||||||||||||||||||
| Law suit seeks principal damages, plus interest | 1,132 | 123,509 | 9,894 | |||||||||||||||||||||
| Additional costs and interest | 1,550 | 3,125 | ||||||||||||||||||||||
| Payments for legal settlements | 4,342 | |||||||||||||||||||||||
| Advertising fees | 10,070 | |||||||||||||||||||||||
| Gain on decline of stock price | 3,327 | 42,043 | 21,957 | |||||||||||||||||||||
| Federal payroll tax | 81,206 | |||||||||||||||||||||||
| State payroll tax | 20,560 | |||||||||||||||||||||||
| Estimated penalties and interest on late filings and payments | 24,196 | |||||||||||||||||||||||
| Unpaid taxes, penalties and interest | 13,605 | 58,858 | 4,316 | |||||||||||||||||||||
| Panalty against to chief scientist | 36,414 | |||||||||||||||||||||||
| Interest expense | 34,632 | |||||||||||||||||||||||
| Portion of tax filed by State of California | 8,206 | |||||||||||||||||||||||
| Notification of levy charges | 13,807 | |||||||||||||||||||||||
| Additional Notification of levy charges | 5,451 | |||||||||||||||||||||||
| Payments of agreement amount | 304 | |||||||||||||||||||||||
| Settlement liabilities current | $ 4,200 | $ 1,518 | ||||||||||||||||||||||
Property, Plant and Equipment (Details Narrative)
|
Property, Plant and Equipment (Details Narrative) (USD $)
|
9 Months Ended | 12 Months Ended |
|---|---|---|
|
Jul. 31, 2014
|
Oct. 31, 2013
|
|
| Expected useful life of property and equipment | P3Y | |
| Production tooling cost capitalized, amortized | $ 14,000 | |
| Capitalized development of proprietary software | $ 35,313 | |
|
Leasehold Improvements [Member]
|
||
| Expected useful life of property and equipment | P5Y | |
|
Minimum [Member]
|
||
| Expected useful life of property and equipment | P3Y | |
|
Maximum [Member]
|
||
| Expected useful life of property and equipment | P5Y |
Summary of Significant Accounting Policies (Details Narrative)
|
Summary of Significant Accounting Policies (Details Narrative) (USD $)
|
1 Months Ended | 9 Months Ended | 0 Months Ended | 9 Months Ended | 0 Months Ended | 9 Months Ended | 0 Months Ended | 1 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Jun. 30, 2014
|
Mar. 31, 2014
|
Nov. 30, 2013
|
Jul. 31, 2014
|
Nov. 19, 2013
|
Nov. 19, 2013
Minimum [Member]
|
Jul. 31, 2014
Minimum [Member]
|
Jul. 31, 2014
Minimum [Member]
Warrant [Member]
|
Nov. 19, 2013
Maximum [Member]
|
Jul. 31, 2014
Maximum [Member]
|
Jul. 31, 2014
Maximum [Member]
Warrant [Member]
|
Nov. 19, 2013
Jeffrey Nunez [Member]
|
Nov. 30, 2013
Research and Development Expense [Member]
|
Nov. 30, 2013
Sales, General and Administrative Expense [Member]
|
|
| Share-based compensation expense | $ 260,282 | $ 80,348 | $ 179,934 | |||||||||||
| Employee Benefit Plan, shares authorized | 525,000 | |||||||||||||
| Options issued for purchase of commom stock by vested plan | 100,000 | |||||||||||||
| Options, term | 3 years | |||||||||||||
| Vested option stock exercise price | $ 0.50 | |||||||||||||
| Fair value of vested option stock shares | 67,447 | |||||||||||||
| Additional options issued for purchase of commom stock by vested plan | 300,000 | |||||||||||||
| Option stock issued exercise price, per share | $ 0.88 | $ 1.00 | ||||||||||||
| Fair value of other employee stock shares | 192,835 | |||||||||||||
| Options granted contractual lives | 4 months 24 days | 2 years | 10 years | |||||||||||
| Stock options terminated due to employees departure | 25,000 | 50,000 | 75,000 | |||||||||||
| Expiration date | Jan. 31, 2016 | May 31, 2014 | Nov. 30, 2016 | Jun. 30, 2016 | ||||||||||
| Estimated unrecognized compensation from unvested stock options | $ 0 | |||||||||||||
Summary of Significant Accounting Policies - Summary of Stock Options Granted (Details)
Summary of Significant Accounting Policies - Schedule of Stock Options Outstanding (Details)
Summary of Significant Accounting Policies - Schedule of Warrants Granted to Non-employees (Details)
Summary of Significant Accounting Policies - Schedule of Warrants Outstanding (Details)
|
Summary of Significant Accounting Policies - Schedule of Warrants Outstanding (Details) (Warrant [Member], USD $)
|
9 Months Ended | |
|---|---|---|
|
Jul. 31, 2014
|
Oct. 31, 2013
|
|
| Warrants Outstanding | 227,000 | 240,000 |
| Weighted Average Remaining Contractual Life | 1 year 10 months 24 days | |
| Warrants Exersable | 227,000 | |
|
Range One [Member]
|
||
| Range of Exercise Prices, Lower limit | $ 0.50 | |
| Range of Exercise Prices, Upper limit | $ 1.00 | |
| Warrants Outstanding | 227,000 | |
| Weighted Average Remaining Contractual Life | 1 year 4 months 24 days | |
| Weighted Average Exercise Price | $ 0.89 | |
| Warrants Exersable | 227,000 | |
| Weighted Average Exercise Price | $ 0.89 |
Convertible Debentures (Details Narrative)
|
Convertible Debentures (Details Narrative) (USD $)
|
0 Months Ended | 6 Months Ended | 9 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | 9 Months Ended | 9 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 14, 2012
|
Nov. 10, 2010
|
Jan. 09, 2014
|
Jul. 31, 2014
|
Apr. 23, 2014
|
Oct. 31, 2013
|
May 16, 2012
|
Feb. 21, 2012
|
Apr. 23, 2014
Series I Notes [Member]
|
Jul. 31, 2014
Series I Notes [Member]
|
Jul. 31, 2014
Series I Notes [Member]
|
Jul. 31, 2014
Series I Notes [Member]
August 2014 [Member]
|
Jul. 31, 2014
Series I Notes [Member]
August 19, 2014 [Member]
|
Jul. 31, 2014
Other Convertible Notes [Member]
|
Sep. 14, 2012
Minimum [Member]
|
Jul. 31, 2014
Minimum [Member]
Series I Notes [Member]
|
Apr. 23, 2014
Minimum [Member]
Series I Notes [Member]
|
Sep. 14, 2012
Maximum [Member]
|
Jul. 31, 2014
Maximum [Member]
Series I Notes [Member]
|
Apr. 23, 2014
Maximum [Member]
Series I Notes [Member]
|
|
| Percentage of convertible notes interest rate | 10.00% | 50.00% | 8.00% | |||||||||||||||||
| Aggregate principal amount of convertible notes | $ 387,500 | |||||||||||||||||||
| Principal amount of debt | 387,500 | 101,628 | 149,868 | |||||||||||||||||
| Principal penalties | 45,000 | 32,500 | ||||||||||||||||||
| Accrued interest | 15,500 | |||||||||||||||||||
| Shares of common stock on conversion | 663,219 | |||||||||||||||||||
| Conversion price per share | $ 0.003 | $ 0.20 | $ 0.018 | $ 1.95 | $ 0.22 | |||||||||||||||
| Proceeds from issuance of debt | 117,500 | |||||||||||||||||||
| Payment for legal expenses | 7,500 | |||||||||||||||||||
| Notes, maturity date, start | Apr. 22, 2014 | |||||||||||||||||||
| Notes, maturity date, end | Oct. 13, 2014 | |||||||||||||||||||
| Percentage of discount on price of common stock | 42.00% | 39.00% | ||||||||||||||||||
| Derivative liabilities | 26,314 | 75,557 | ||||||||||||||||||
| Debt instrument outstanding amount | 6,900 | |||||||||||||||||||
| Debt instruments maturity date | Jun. 20, 2014 | |||||||||||||||||||
| Number of stock reserve by transfer agent | 2,400,000 | |||||||||||||||||||
| Converted debt value into common stock | 84,190 | 84,190 | 14,945 | 46,973 | ||||||||||||||||
| Number of converted common stock | 1,950,454 | 1,950,454 | ||||||||||||||||||
| Number of shares for reserve | 449,546 | 449,546 | ||||||||||||||||||
| Common shares reserved for issuance of convertible notes | 4,172,186 | 3,242,598 | 2,000,000 | |||||||||||||||||
| Value exceeds the principal balance | 46,973 | 33,892 | ||||||||||||||||||
| Exercise price of share | $ 0.0183 | $ 0.0183 | ||||||||||||||||||
| Common share price | $ 0.03 | $ 0.03 | ||||||||||||||||||
| Discount rate | 0.02% | 0.03% | ||||||||||||||||||
| Volatility rate | 141.00% | 183.00% | ||||||||||||||||||
| Borrowed from related parties | 64,868 | 69,128 | ||||||||||||||||||
| Accrued interest | $ 24,152 | $ 1,700 | ||||||||||||||||||
Convertible Debentures - Schedule of Fair Value of Financial Instruments Liabilities (Details)
|
Convertible Debentures - Schedule of Fair Value of Financial Instruments Liabilities (Details) (USD $)
|
Jul. 31, 2014
|
|---|---|
| Anti-dilution liability | $ 1,401 |
| Derivative liability | 26,314 |
| Total | 27,715 |
|
Quoted Prices in Active Markets For Identical Assets (Level 1) [Member]
|
|
| Anti-dilution liability | 1,401 |
| Derivative liability | |
| Total | 1,401 |
|
Significant Other Observable Inputs (Level 2) [Member]
|
|
| Anti-dilution liability | |
| Derivative liability | |
| Total | |
|
Significant Unobservable Inputs (Level 3) [Member]
|
|
| Anti-dilution liability | |
| Derivative liability | 26,314 |
| Total | $ 26,314 |
Convertible Debentures - Summary of Changes in Fair Value of Level 3 Financial Instrument Liability (Details)
|
Convertible Debentures - Summary of Changes in Fair Value of Level 3 Financial Instrument Liability (Details) (Significant Unobservable Inputs (Level 3) [Member], USD $)
|
9 Months Ended |
|---|---|
|
Jul. 31, 2014
|
|
|
Significant Unobservable Inputs (Level 3) [Member]
|
|
| Balance October 31, 2013 | $ 75,557 |
| Additions | 31,615 |
| Net gain included in earnings | (24,012) |
| Settlements | (56,846) |
| Balance July 31, 2014 | $ 26,314 |
Convertible Debentures - Summary of Convertible Debentures and Series 1 Notes (Details)
|
Convertible Debentures - Summary of Convertible Debentures and Series 1 Notes (Details) (USD $)
|
Jul. 31, 2014
|
Oct. 31, 2013
|
Sep. 14, 2012
|
May 16, 2012
|
|---|---|---|---|---|
| Convertible notes payable | $ 101,628 | $ 149,868 | $ 387,500 | |
| Less current maturities | 101,628 | 149,868 | 2,000,000 | |
| Long-term portion of Convertible and Series 1 notes payable | ||||
|
Series 1 Note, Principal and Interest at 8% Maturing on October13, 2014 [Member]
|
||||
| Convertible notes payable | 36,760 | 85,000 | ||
|
Convertible Note Payable at 10% Due on May 31, 2012 [Member]
|
||||
| Convertible notes payable | $ 64,868 | $ 64,868 |
Convertible Debentures - Summary of Convertible Debentures and Series 1 Notes (Details) (Parenthetical)
|
Convertible Debentures - Summary of Convertible Debentures and Series 1 Notes (Details) (Parenthetical)
|
9 Months Ended | 9 Months Ended | 12 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|---|---|
|
Jul. 31, 2014
|
Feb. 21, 2012
|
Nov. 10, 2010
|
Jul. 31, 2014
Series 1 Note, Principal and Interest at 8% Maturing on October13, 2014 [Member]
|
Oct. 31, 2013
Series 1 Note, Principal and Interest at 8% Maturing on October13, 2014 [Member]
|
Jul. 31, 2014
Convertible Note Payable at 10% Due on May 31, 2012 [Member]
|
Oct. 31, 2013
Convertible Note Payable at 10% Due on May 31, 2012 [Member]
|
|
| Convertible notes payable, interest rate | 50.00% | 8.00% | 10.00% | 8.00% | 8.00% | 10.00% | 10.00% |
| Convertible notes payable, maturity date | Jun. 20, 2014 | Oct. 13, 2014 | Oct. 13, 2014 | May 31, 2012 | May 31, 2012 |
Convertible Debentures - Schedule of Remaining Outstanding Notes Maturity (Details)
|
Convertible Debentures - Schedule of Remaining Outstanding Notes Maturity (Details) (USD $)
|
Jul. 31, 2014
|
|---|---|
| 2014 | $ 298,172 |
| Thereafter | |
|
Convertible Debentures [Member]
|
|
| 2014 | 101,628 |
| Thereafter | |
| Total | $ 101,628 |
Notes Payable (Details Narrative)
|
Notes Payable (Details Narrative) (USD $)
|
Jul. 31, 2014
|
Oct. 31, 2013
|
|---|---|---|
| Notes payable gross | $ 298,172 | $ 201,450 |
|
Officer And Director [Member]
|
||
| Notes payable gross | 113,450 | |
|
Various Stockholders [Member]
|
||
| Notes payable gross | $ 52,000 |
Notes Payable - Schedule of Unamortized Discounts, Notes Payable to Officer and Stockholders (Details)
|
Notes Payable - Schedule of Unamortized Discounts, Notes Payable to Officer and Stockholders (Details) (USD $)
|
Jul. 31, 2014
|
Oct. 31, 2013
|
|---|---|---|
| Notes payable gross | $ 298,172 | $ 201,450 |
| Less current maturities | 298,172 | 201,450 |
| Long-term portion of notes payable | ||
|
Unsecured, Interest-Free Convertible Notes Payable To Former Officer/Director Of The Company; Principal Due On Payment Schedule Through May 2014 [Member]
|
||
| Notes payable gross | 113,450 | 113,450 |
|
Unsecured Convertible Note Payable to Various Stockholders; Principal and Interest At 6% due Between December 9, 2010 and March 31, 2013 [Member]
|
||
| Notes payable gross | 52,000 | 52,000 |
|
Unsecured Notes Payable To Officers/Directors Of The Company; Principal And Interest At 6% Due On Demand [Member]
|
||
| Notes payable gross | $ 132,722 | $ 36,000 |
Notes Payable - Schedule of Unamortized Discounts, Notes Payable to Officer and Stockholders (Details) (Parenthetical)
|
Notes Payable - Schedule of Unamortized Discounts, Notes Payable to Officer and Stockholders (Details) (Parenthetical)
|
6 Months Ended | 9 Months Ended | 0 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
Jan. 09, 2014
|
Jul. 31, 2014
|
Feb. 21, 2012
|
Nov. 10, 2010
|
Jul. 31, 2014
Unsecured, Interest-Free Convertible Notes Payable To Former Officer/Director Of The Company; Principal Due On Payment Schedule Through May 2014 [Member]
|
Oct. 31, 2013
Unsecured, Interest-Free Convertible Notes Payable To Former Officer/Director Of The Company; Principal Due On Payment Schedule Through May 2014 [Member]
|
Jul. 31, 2014
Unsecured Convertible Note Payable to Various Stockholders; Principal and Interest At 6% due Between December 9, 2010 and March 31, 2013 [Member]
|
Oct. 31, 2013
Unsecured Convertible Note Payable to Various Stockholders; Principal and Interest At 6% due Between December 9, 2010 and March 31, 2013 [Member]
|
Jul. 31, 2014
Unsecured Notes Payable To Officers/Directors Of The Company; Principal And Interest At 6% Due On Demand [Member]
|
Oct. 31, 2013
Unsecured Notes Payable To Officers/Directors Of The Company; Principal And Interest At 6% Due On Demand [Member]
|
|
| Maturity date | Jun. 20, 2014 | May 31, 2014 | May 31, 2014 | |||||||
| Maturity date range, start | Apr. 22, 2014 | Dec. 09, 2010 | Dec. 09, 2010 | |||||||
| Maturity date range, end | Oct. 13, 2014 | Mar. 31, 2013 | Mar. 31, 2013 | |||||||
| Debt instrument interest rate | 50.00% | 8.00% | 10.00% | 6.00% | 6.00% | 6.00% | 6.00% | |||
Notes Payable - Schedule of Maturities of Notes Payable (Details)
|
Notes Payable - Schedule of Maturities of Notes Payable (Details) (USD $)
|
Jul. 31, 2014
|
Oct. 31, 2013
|
|---|---|---|
| Debt Disclosure [Abstract] | ||
| 2014 | $ 298,172 | |
| Thereafter | ||
| Total | $ 298,172 | $ 201,450 |
Employee Retirement Plan (Details Narrative)
|
Employee Retirement Plan (Details Narrative)
|
9 Months Ended |
|---|---|
|
Jul. 31, 2014
|
|
| Compensation and Retirement Disclosure [Abstract] | |
| Percentage of employer contribution | 3.00% |
Securities Transactions (Details Narrative)
|
Securities Transactions (Details Narrative) (USD $)
|
9 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | 0 Months Ended | 1 Months Ended | 5 Months Ended | 0 Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Jul. 31, 2014
|
Jul. 31, 2013
|
Apr. 23, 2014
|
May 16, 2012
|
Sep. 14, 2012
Minimum [Member]
|
Sep. 14, 2012
Maximum [Member]
|
Apr. 23, 2014
Series I Notes [Member]
|
Jul. 31, 2014
Series I Notes [Member]
|
Apr. 23, 2014
Series I Notes [Member]
Minimum [Member]
|
Apr. 23, 2014
Series I Notes [Member]
Maximum [Member]
|
Jul. 31, 2014
Warrant [Member]
|
Jun. 30, 2014
Major Stockholder [Member]
|
May 31, 2014
Major Stockholder [Member]
|
Dec. 13, 2013
Major Stockholder [Member]
|
May 12, 2014
Major Stockholder [Member]
|
Nov. 13, 2013
Chief Scientist [Member]
|
Apr. 15, 2014
Unaffiliated Stockholder [Member]
|
Apr. 07, 2014
Unaffiliated Stockholder [Member]
|
Apr. 15, 2014
Unaffiliated Stockholder [Member]
Warrant [Member]
|
Apr. 07, 2014
Unaffiliated Stockholder [Member]
Warrant [Member]
|
|
| Common stock issued during period, shares | 40,000 | 70,000 | 100,000 | 4,000 | 20,000 | |||||||||||||||
| Common stock issued during period | $ 20,000 | $ 35,000 | $ 50,000 | $ 12,000 | $ 12,000 | |||||||||||||||
| Common stock price per share | $ 0.50 | $ 0.50 | $ 0.50 | $ 0.50 | $ 0.50 | $ 1.00 | $ 1.00 | |||||||||||||
| Number of additional stock issued during period | 333,333 | 20,000 | 35,000 | |||||||||||||||||
| Warrants expiration date | Jun. 30, 2014 | |||||||||||||||||||
| Number of additional stock issued per share | $ 0.03 | $ 1.00 | $ 1.00 | |||||||||||||||||
| Proceeds from issuance of common stock | 127,000 | 360,000 | 10,000 | |||||||||||||||||
| Warrants expirations | (80,000) | 10,000 | ||||||||||||||||||
| Warrant issued to purchase number of common stock, shares | 12,000 | 12,000 | ||||||||||||||||||
| Number of converted common stock | 1,950,454 | 1,950,454 | ||||||||||||||||||
| Converted debt value into common stock | 84,190 | 84,190 | ||||||||||||||||||
| Accrued interest | $ 24,152 | $ 1,700 | ||||||||||||||||||
| Conversion price per share | $ 0.003 | $ 0.20 | $ 1.95 | $ 0.018 | $ 0.22 | |||||||||||||||
Subsequent Events (Details Narrative)
|
Subsequent Events (Details Narrative) (USD $)
|
9 Months Ended | 0 Months Ended | 1 Months Ended | 0 Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Jul. 31, 2014
|
Jul. 31, 2013
|
May 16, 2012
|
Feb. 21, 2012
|
Nov. 10, 2010
|
Sep. 14, 2012
Minimum [Member]
|
Sep. 14, 2012
Maximum [Member]
|
Apr. 15, 2014
Unaffiliated Stockholder [Member]
|
Apr. 07, 2014
Unaffiliated Stockholder [Member]
|
Aug. 25, 2014
Subsequent Event [Member]
|
Sep. 04, 2014
Subsequent Event [Member]
|
Jun. 09, 2014
Subsequent Event [Member]
Minimum [Member]
|
Jun. 09, 2014
Subsequent Event [Member]
Maximum [Member]
|
Aug. 28, 2014
Subsequent Event [Member]
Board Of Directors Chairman [Member]
|
Aug. 29, 2014
Subsequent Event [Member]
Unaffiliated Stockholder [Member]
|
|
| Due to Board of Directors for loans payable on demand | $ 16,000 | ||||||||||||||
| Debt instrument interest rate | 50.00% | 8.00% | 10.00% | 6.00% | |||||||||||
| Common shares price per share | $ 0.50 | $ 0.50 | $ 0.04 | ||||||||||||
| Stock converted into notes, Shares | 1,093,684 | ||||||||||||||
| Stock converted into notes | 14,945 | ||||||||||||||
| Conversion price per share | $ 0.003 | $ 0.20 | $ 1.95 | $ 0.012 | $ 0.015 | ||||||||||
| Unpaid rent | 7,790 | ||||||||||||||
| Common stock issued during period, shares | 4,000 | 20,000 | 250,000 | ||||||||||||
| Proceeds from issuance of common stock | $ 127,000 | $ 360,000 | $ 10,000 | ||||||||||||