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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2017
May 15, 2017
Document And Entity Information    
Entity Registrant Name FLEXPOINT SENSOR SYSTEMS INC  
Entity Central Index Key 0000925660  
Document Type 10-Q  
Document Period End Date Mar. 31, 2017  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   78,363,464
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2017  
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Current Assets    
Cash and cash equivalents $ 998
Accounts receivable, net of allowance for bad debts of $102,140 and $102,140 67,919 84,499
Deposits and prepaid expenses 9,359 9,348
Total Current Assets 78,276 93,847
Long-Term Deposits 6,550 6,550
Property and Equipment, net of accumulated depreciation of $587,327 and $586,787 10,263 10,823
Patents and Proprietary Technology, net of accumulated amortization of $894,460 and $876,037 77,934 96,358
Goodwill 4,896,917 4,896,917
Total Assets 5,069,940 5,104,495
Current Liabilities    
Accounts payable 179,278 172,602
Accounts payable - related party 1,420
Accrued liabilities 831,336 741,778
Convertible notes payable 1,304,660 1,184,660
Convertible notes payable to related party 20,000 20,000
Derivative liabilities 115,269 76,295
Total Liabilities 2,450,543 2,196,755
Stockholders' Equity    
Preferred stock - $0.001 par value; 1,000,000 shares authorized; no shares issued or outstanding
Common stock - $0.001 par value; 100,000,000 shares authorized; 78,363,464 shares and 78,363,464 shares issued and outstanding 78,363 78,363
Additional paid-in capital 29,055,342 29,052,188
Accumulated deficit (26,514,308) (26,222,811)
Total Stockholders' Equity 2,619,397 2,907,740
Total Liabilities and Stockholders' Equity $ 5,069,940 $ 5,104,495
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Accounts receivable, allowance for bad debts $ 102,140 $ 102,140
Property and Equipment, accumulated depreciation 587,327 586,787
Patents and Proprietary Technology, accumulated amortization $ 894,460 $ 876,037
Preferred stock, par value per share $ 0.001 $ 0.001
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value per share $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 78,363,464 78,363,464
Common stock, shares outstanding 78,363,464 78,363,464
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Income Statement [Abstract]    
Design, Contract and Testing Revenue $ 61,065 $ 35,165
Operating Costs and Expenses    
Amortization of patents and proprietary technology 18,423 23,741
Cost of revenue 4,136 1,344
Administrative and marketing expense 164,726 177,420
Research and development expense 79,366 80,059
Total Operating Costs and Expenses 266,651 282,564
Other Income and Expenses    
Interest expense (101,610) (223,891)
Interest income 12 1,915
Gain (loss) on change in fair value of derivative liabilities 15,687
Net Other Income (Expense) (85,911) (221,976)
Net Loss $ (291,497) $ (469,375)
Basic and Diluted Loss per Common Share $ (0.00) $ (0.01)
Basic and Diluted Weighted Average Common Shares Outstanding 78,363,464 71,627,114
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Cash Flows from Operating Activities:    
Net loss $ (291,497) $ (469,375)
Adjustments to reconcile net loss to net cash used in operating activities:    
Stock subscription for compensation 1,000
Stock-based compensation expense 3,154 8,401
Amortization of patents and proprietary technology 18,423 23,741
Amortization of discount on note payable 198,275
Depreciation 560
Gain/(loss) on change in fair value of derivative liabilities (15,687)
Interest expense recognized for derivative liabilities 54,661
Changes in operating assets and liabilities:    
Accounts receivable 16,580 (12,470)
Deposits and prepaid expenses 2,637
Accounts payable 6,668 7,992
Accounts payable - related parties (1,420) 2,713
Accrued liabilities 104,176 99,074
Net Cash Used in Operating Activities (104,381) (138,012)
Cash Flows from Investing Activities:    
Note receivable interest income (1,915)
Net Cash Used in Investing Activities (1,915)
Cash Flows from Financing Activities:    
Repayments of bank overdrafts (14,621)
Proceeds from borrowings under convertible note payable 120,000 150,000
Net Cash Provided by Financing Activities 105,379 150,000
Net Change in Cash and Cash Equivalents 998 10,073
Cash and Cash Equivalents at Beginning of Period 22,706
Cash and Cash Equivalents at End of Period 998 32,779
Supplemental Cash Flow Information:    
Cash paid for income taxes
Cash paid for interest
Supplemental Disclosure on Noncash Investing and Financing Activities    
Recognition of discounts on convertible notes payable $ 51,000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3 Months Ended
Mar. 31, 2017
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Condensed Consolidated Interim Financial Statements – The accompanying unaudited condensed consolidated financial statements include the accounts of Flexpoint Sensor Systems, Inc. and its former subsidiaries (the “Company”). These financial statements are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. Therefore, these statements should be read in conjunction with the most recent annual consolidated financial statements of Flexpoint Sensor Systems, Inc. and subsidiaries for the year ended December 31, 2016 included in the Company’s Form 10-K filed with the Securities and Exchange Commission on April 18, 2017. In particular, the Company’s significant accounting principles were presented as Note 1 to the Consolidated Financial Statements in that report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.


Nature of Operations – Flexpoint Sensor Systems, Inc. (the Company) is located in Draper, Utah. The Company’s activities to date have included acquiring equipment and enhancing technology, obtaining financing, limited production and seeking long-term manufacturing contracts. The Company’s operations are in designing, engineering, manufacturing and selling sensor technology and equipment using flexible potentiometer technology. Through March 31, 2017 the Company continued to manufacture products and sensors to fill customer orders and provide engineering and design work.


Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.


Cash and Cash Equivalents – Cash and cash equivalents are considered to be cash and highly liquid securities with original maturities of three months or less.


Fair Value MeasurementsThe fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the party’s own credit risk.

 

Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

 

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

 

The carrying value of the Company’s cash, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

 

The Company has classified the inputs used in valuing its derivative liabilities as Level 3 inputs. The Company valued its derivatives using the binomial lattice model. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed below are that of volatility and market price of the underlying common stock of the Company.


Accounts Receivable – Trade accounts receivable are recorded at the time product is shipped or services are provided including any shipping and handling fees. Contracts associated with design and development engineering generally require a deposit of 50% of the quoted price prior to the commencement of work. The deposit is considered deferred income until the entire project is completed and accepted by the customer, at which time the entire contract price is billed to the customer and the deposit applied. The Company has established an allowance for bad debts based on a historical experience and an analysis of risk associated with the account balances.  The balance in the allowance account was $102,140 and $102,140 in the periods ended March 31, 2017 and December 31, 2016, respectively.  


Property and Equipment Property and equipment are stated at cost.  Additions and major improvements are capitalized while maintenance and repairs are charged to operations.  Upon trade-in, sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized. Depreciation is computed using the straight-line method and is recognized over the estimated useful lives of the property and equipment, which range from three to ten years.


Valuation of Long-lived Assets – The carrying values of the Company’s long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the projected discounted cash flows. Under similar analysis no impairment charge was taken during the period ended March 31, 2017 and during the year ended December 31, 2016.  Impairment tests will be conducted on an annual basis and, should they indicate a carrying value in excess of fair value, additional impairment charges may be required.


Intangible Assets – Costs to obtain or develop patents are capitalized and amortized over the remaining life of the patents, and technology rights are amortized over their estimated useful lives. The Company currently has the right to several patents and proprietary technology.  Patents and technology are amortized from the date the Company acquires or is awarded the patent or technology right, over their estimated useful lives, which range from 5 to 15 years.  An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows.  Under similar analysis there was no impairment charge taken during the period ended March 31, 2017 and during the year ended December 31, 2016.


Research and Development – Research and development costs are recognized as an expense during the period incurred, which is until the conceptual formulation, design, and testing of a process is completed and the process has been determined to be commercially viable.


Goodwill – Goodwill represents the excess of the Company’s reorganization value over the fair value of net assets of the Company upon emergence from bankruptcy. Goodwill is not amortized, but is tested for impairment annually, or at interim periods when a triggering event occurs using a fair value approach. According to Accounting Standards Codification (or “ASC”) 350-20 Intangibles – Goodwill and Other, a fair-value-based test is applied at the overall Company level. The test compares the fair value of the Company to the carrying value of its net assets. This test requires various judgments and estimates. The fair value of the Company is allocated to the Company’s assets and liabilities based upon their fair values with the excess fair value allocated to goodwill. An impairment of goodwill is measured as the excess of the carrying amount of goodwill over the determined fair value.


Revenue Recognition – Revenue is recognized when persuasive evidence of an arrangement exists, services have been provided or goods delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. Revenue from the sale of products is recorded at the time of shipment to the customers.  Revenue from research and development engineering contracts is recognized as the services are provided and accepted by the customer.  Revenue from contracts to license technology to others is deferred until all conditions under the contracts are met and then recognized as licensing royalty revenue over the remaining term of the contracts.  The Company does not provide extended warranties or guarantees on its products.


Stock-Based Compensation – The Company recognizes the cost of employee services received in exchange for stock options and awards of equity instruments based on the grant-date fair value of such options and awards, over the period they vest.   All share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense in operations over the requisite service period. For the periods ended March 31, 2017 and 2016, the Company recognized expense for stock-based compensation of $3,154 and $0, respectively.


Basic and Diluted Loss Per Share – Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period.  Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. At March 31, 2017 and March 31, 2016, there were outstanding common share equivalents (options and convertible notes payable) which amounted to 25,942,815 and 21,720,103, respectively, of common stock. These common share equivalents were not included in the computation of diluted loss per share as their effect would have been anti-dilutive, thereby decreasing loss per common share.


Concentrations and Credit Risk - The Company has a few major customers who represent a significant portion of revenue, accounts receivable and notes receivable.  During the three month period ended March 31, 2017, a customer who manufacturers toys represented 64% of sales and represented 27% of accounts receivable.  The Company has a strong ongoing relationship with this customer with scheduled delivery extending through the year and does not believe this concentration poses a significant risk, as their products are based entirely on the Company’s technologies.  


Income Taxes - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards Board Accounting Codification (ASC) 740: Income Taxes.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized


Recent Accounting Pronouncements - In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2017-04, “Intangibles – Goodwill and Other (Topic 350).”  This ASU was issued to simplify the annual goodwill impairment assessment process.  Currently, the first step of the impairment test requires an entity to compare the fair value of the reporting unit with its carrying value, including goodwill.  If, as a result of this analysis, the entity concludes there is an indication of impairment in a reporting unit having goodwill, the entity is required to perform the second step of the impairment analysis, determining the amount of goodwill impairment to be recorded.  The amount is calculated by comparing the implied fair value of the goodwill to its carrying amount.  This exercise requires the entity to allocate the fair value determined in step one to the individual assets and liabilities of the reporting unit.  Any remaining fair value would be the implied fair value of goodwill on the testing date.  ASU 2017-04 eliminates the second step of the impairment analysis.  Accordingly, if the first step of a quantitative goodwill impairment analysis performed after adoption of this ASU indicates that the fair value of a reporting unit is less than its carrying value, the goodwill of that reporting unit would be impaired to the extent of that difference.  The Company must adopt this ASU in 2020, but early adoption is permitted.  However, if there is an indication of potential impairment of goodwill as a result of an annual impairment assessment prior to 2020, the Company will evaluate the impact of ASU 2017-04 and could elect to early adopt this ASU.


In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715).” This ASU was issued to improve the presentation of net periodic pension and other postretirement benefit costs.  The Company must adopt this ASU beginning January 1, 2018.  The Company does not currently have a pension or retirement plan to which it contributes and therefore believes it will not have an impact on its financial statements and statements of operations.


In March 2017, the FASB issued ASU No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Topic 310-20).”  The ASU amends the amortization period for certain purchased callable debt securities held at a premium. The update requires premiums to be amortized over the period to the earliest call date.  The new standard has an effective adoption date of January 1, 2019.  Early adoption is permitted.  The Company is analyzing the impact of this new standard.


The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position and cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.

DERIVATIVE INSTRUMENTS
3 Months Ended
Mar. 31, 2017
DERIVATIVE INSTRUMENTS [Abstract]  
DERIVATIVE INSTRUMENTS

NOTE 2 – DERIVATIVE INSTRUMENTS


The derivative liability as of March 31, 2017, in the amount of $115,269 has a Level 3 fair value classification.

 

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of March 31, 2017 and December 31, 2016:

 

 

 

 

 

Total

 

Balance, December 31, 2015

 

 

 

 

-

 

Recognition of derivative liabilities upon initial valuation

 

 

 

 

40,892

 

Change in fair value of derivative liabilities

 

 

 

 

35,403

 

Conversions of derivative liabilities into equity instruments

 

 

 

 

-

 

Balance, December 31, 2016

 

 

 

 

76,295

 

Recognition of derivative liabilities upon initial valuation

 

 

 

 

54,661

 

Change in fair value of derivative liabilities

 

 

 

 

(15,687)

 

Conversions of derivative liabilities into equity instruments

 

 

 

 

-

 

Balance, March 31, 2017

 

 

 

 

115,269

 

 

During the year ended 2016 and the period ended March 31, 2017, the Company issued convertible promissory notes which are convertible into common stock. Due to the Company’s lack of authorized shares necessary to settle all convertible instruments, in accordance with ASC 815-40-25, the Company determined that the conversion features related to these notes are derivative instruments since we do not have control to increase the number of authorized shares to settle all convertible instruments.  The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of debenture and to fair value as of each subsequent reporting date.

 

At March 31, 2017, the Company marked to market the fair value of the derivatives and determined a fair value of $115,269. The Company recorded a gain from change in fair value of derivatives of $15,687 for the three month period ended March 31, 2017. During the three months ended March 31, 2017, the Company recorded additional interest expense of $54,661 in connection with the recognition of derivative liabilities. The fair value of the embedded derivatives was determined using binomial lattice model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 123.09% to 135.66%, (3) weighted average risk-free interest rate of 0.76% to 0.97% (4) expected life of 0.75 to 0.98 years, and (5) the quoted market price of the Company’s common stock at each valuation date.

 

In accordance ASC 840-15-25, the Company has implemented a sequencing policy with respect to all outstanding convertible instruments. The Company evaluates its contracts based upon earliest issuance date.

  

As of March 31, 2017, liabilities measured at fair value on a recurring basis are summarized as follows:


 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

Derivative Liabilities

 

 

-

 

 

 

-

 

 

 

115,269

 

 

 

115,269

Total

 

$

-

 

 

$

-

 

 

$

115,269

 

 

$

115,269


Convertible Notes Payable


The Company entered into a new convertible promissory note for up to $300,000 from a third party on July 1, 2016. The note has an annual interest rate of 10% and is secured by the Company’s equipment.  The note has a conversion feature for restricted common shares at $0.07 per share and a maturity date of December 31, 2016.  The Company drew $160,000 against that note during 2016 and $40,000 on January 6, $40,000 on January 31, $40,000 on March 7, 2017 and the balance of $20,000 on April 28, 2017.


On August 8, 2011, the Company entered into a convertible note payable with a former Company Director for $40,000. This note is due on December 31, 2015, bears an annual interest rate of 10% annual interest (15% default interest) and is secured by business equipment.


Convertible Note Payable Related Party


On July 1, 2016 and September 22, 2016, the Company issued two promissory notes for $10,000 each to an officer of the Company.  The notes bear interest at the rate of 10%, have a conversion feature for restricted common shares at $0.07 per share and a maturity date of December 31, 2016.


Since the fair value of the common stock at the date of the July 1, 2016 advance was $0.07, no BCF was recorded.


The fair value of the common stock at the date of the September 22, 2016 advance from an officer was $0.08, establishing an intrinsic value of $0.01, which created a BCF of $1,286.  The BCF was recorded as a debt discount and is being amortized over the life of the note.  The debt discount remaining as of March 31, 2017 was $0.

STOCK OPTION PLANS
3 Months Ended
Mar. 31, 2017
STOCK OPTION PLANS [Abstract]  
STOCK OPTION PLANS

NOTE 3 STOCK OPTION PLANS


On August 25, 2005, the Board of Directors of the Company approved and adopted the 2005 Stock Incentive Plan (the Plan). The Plan became effective upon its adoption by the Board and will continue in effect for ten years, unless terminated.  This plan was approved by the stockholders of the Company at their annual meeting of shareholders on November 22, 2005. Under the Plan, the exercise price for all options issued will not be less than the average quoted closing market price of the Company’s trading common stock for the thirty day period immediately preceding the grant date plus a premium of ten percent.  The maximum aggregate number of shares that may be awarded under the plan is 2,500,000 shares.  The Company continues to utilize the Black-Scholes option-pricing model for calculating the fair value of the options granted as defined by ASC Topic 718, which is an acceptable valuation approach under ASC 718. This model requires the input of subjective assumptions, including the expected price volatility of the underlying stock.


On August 24, 2015, the Board of Directors approved the issuance of options to purchase 2,185,000 shares of the Company’s common stock.  Of the total issued, 1,960,000 options were issued to replace options held by directors and employees which were to expire and 225,000 options were issued to new employees.  Of the options issued, 640,000 have an option price of $0.14 per share, 500,000 have an option price of $0.15 per share, 995,000 have an option price of $0.20 per share, and 50,000 have an option price of $0.25 per share.  Options issued as replacement shall have immediate vesting terms. Options which are not replacements shall vest over a two year four month period in equal installments on the last day of 2015, 2016 and 2017, respectively.  We relied on an exemption from the registration requirements provided by Section 4(a)(2) of the Securities Act.


Projected data related to the expected volatility and expected life of stock options is based upon historical and other information, and notably, the Company's common stock has limited trading history. Changes in these subjective assumptions can materially affect the fair value of the estimate, and therefore, the existing valuation models do not provide a precise measure of the fair value of the Company's employee stock options.  Between August 25, 2005 and December 31, 2015, the Company granted options to employees to purchase an aggregate 3,096,000 shares of common stock at exercise prices ranging from $0.14 to $2.07 per share.  The options vest over three years and expire 10 years from the date of grant.  The Company used the following assumptions in estimating the fair value of the options granted:


·

Market value at the time of issuance – Range of $0.14 to 2.07

·

Expected term – Range of 3.7 years to 10.0 years

·

Risk-free interest rate – Range of 1.60% to 4.93%

·

Dividend yield – 0%

·

Expected volatility – 200% to 424%

·

Weighted-average fair value - $0.16 to $2.07


As of the three months ended March 31, 2017, the Company recognized a total of $3,154 of stock-based compensation expense, leaving $15,024 in unrecognized expense as of March 31, 2017. During the three months ended March 31, 2016, the Company recognized $8,401 in stock-based compensation expense. There were 2,185,000 and 2,185,000 employee stock options outstanding at March 31, 2017 and December 31, 2016, respectively.  


A summary of all employee options outstanding and exercisable under the plan as of March 31, 2017, and changes during the three months then ended is set forth below:


Options

Shares

Weighted Average Exercise Price

Weighted Average Remaining Contractual  Life (Years)

Aggregate Intrinsic Value

 

 

 

 

 

Outstanding at the beginning of period

         2,185,000

 $                0.16

             8.66

 $              --  

   Granted

-- 

--

                   --   

                 --  

   Expired

                     -- 

                             --

                   --   

                 --  

   Forfeited

-- 

--

                   --   

                --  

Outstanding at the end of Period

       2,185,000

 $                 0.17

             8.41

$              --  

Exercisable at the end of Period

1,836,667

 $                 0.17

             8.41

    $              --  

CAPITAL STOCK
3 Months Ended
Mar. 31, 2017
CAPITAL STOCK [Abstract]  
CAPITAL STOCK

NOTE 4 – CAPITAL STOCK


Preferred Stock – There are 1,000,000 shares of preferred stock with a par value of $0.001 per share authorized.  At March 31, 2017 and December 31, 2016, there were no shares of preferred stock issued or outstanding.


Common Stock – There are 100,000,000 shares of common stock with a par value of $0.001 per share authorized.  No shares of stock were issued during the three months ended March 31, 2017.

COMMITMENTS AND CONTINGENCIES
3 Months Ended
Mar. 31, 2017
COMMITMENTS AND CONTINGENCIES [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 5 - COMMITMENTS AND CONTINGENCIES


The Company currently occupies a manufacturing facility in Draper, Utah. The lease on the facility expired on December 31, 2014, at which time the Company entered into a three year extension which will expire on December 31, 2017.  Either party may terminate the lease upon 90 day written notice.  Under the terms of the lease the Company paid $8,950 per month in 2015 (the same rate as in 2014), $9,300 per month in 2016 and will pay $9,600 per month in 2017.

RELATED PARTY TRANSACTIONS
3 Months Ended
Mar. 31, 2017
RELATED PARTY TRANSACTIONS [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 6 – RELATED PARTY TRANSACTIONS


At March 31, 2017 and December 31, 2016, the Company had accounts payable of $0 and $1,420 to its Chief Executive Office for reimbursement of various operating expenses paid by him in the course of business.

SUBSEQUENT EVENTS
3 Months Ended
Mar. 31, 2017
SUBSEQUENT EVENTS [Abstract]  
SUBSEQUENT EVENTS

NOTE 7- SUBSEQUENT EVENTS


On April 17, 2017, the Company issued a convertible note in the amount of $20,000 to its Chief Executive Officer.  The proceeds of the note were used to fund operating expenses.  The note has an annual interest rate of 10% and has a conversion feature for restricted common shares at $0.07 per share.


On April 28, 2017 the Company drew $20,000 against a convertible promissory note for up to $300,000 from a third party, the proceeds of which will be used to fund operating expenses. The note has an annual interest rate of 10% and is secured by the Company’s equipment. The note has a conversion feature for restricted common shares at $.07 per share.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Mar. 31, 2017
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]  
Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Financial Statements – The accompanying unaudited condensed consolidated financial statements include the accounts of Flexpoint Sensor Systems, Inc. and its former subsidiaries (the “Company”). These financial statements are condensed and, therefore, do not include all disclosures normally required by accounting principles generally accepted in the United States of America. Therefore, these statements should be read in conjunction with the most recent annual consolidated financial statements of Flexpoint Sensor Systems, Inc. and subsidiaries for the year ended December 31, 2016 included in the Company’s Form 10-K filed with the Securities and Exchange Commission on April 18, 2017. In particular, the Company’s significant accounting principles were presented as Note 1 to the Consolidated Financial Statements in that report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed consolidated financial statements are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.

Nature of Operations

Nature of Operations – Flexpoint Sensor Systems, Inc. (the Company) is located in Draper, Utah. The Company’s activities to date have included acquiring equipment and enhancing technology, obtaining financing, limited production and seeking long-term manufacturing contracts. The Company’s operations are in designing, engineering, manufacturing and selling sensor technology and equipment using flexible potentiometer technology. Through March 31, 2017 the Company continued to manufacture products and sensors to fill customer orders and provide engineering and design work.

Use of Estimates

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.

Cash and Cash Equivalents.

Cash and Cash Equivalents – Cash and cash equivalents are considered to be cash and highly liquid securities with original maturities of three months or less.

Fair Value of Financial Instruments

Fair Value MeasurementsThe fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the party’s own credit risk.

 

Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

 

Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

 

The carrying value of the Company’s cash, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

 

The Company has classified the inputs used in valuing its derivative liabilities as Level 3 inputs. The Company valued its derivatives using the binomial lattice model. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed below are that of volatility and market price of the underlying common stock of the Company.

Accounts Receivable

Accounts Receivable – Trade accounts receivable are recorded at the time product is shipped or services are provided including any shipping and handling fees. Contracts associated with design and development engineering generally require a deposit of 50% of the quoted price prior to the commencement of work. The deposit is considered deferred income until the entire project is completed and accepted by the customer, at which time the entire contract price is billed to the customer and the deposit applied. The Company has established an allowance for bad debts based on a historical experience and an analysis of risk associated with the account balances.  The balance in the allowance account was $102,140 and $102,140 in the periods ended March 31, 2017 and December 31, 2016, respectively.

Property and Equipment.

Property and Equipment Property and equipment are stated at cost.  Additions and major improvements are capitalized while maintenance and repairs are charged to operations.  Upon trade-in, sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized. Depreciation is computed using the straight-line method and is recognized over the estimated useful lives of the property and equipment, which range from three to ten years.

Valuation of Long-lived Assets

Valuation of Long-lived Assets – The carrying values of the Company’s long-lived assets are reviewed for impairment annually and whenever events or changes in circumstances indicate that they may not be recoverable. When projections indicate that the carrying value of the long-lived asset is not recoverable, the carrying value is reduced by the estimated excess of the carrying value over the projected discounted cash flows. Under similar analysis no impairment charge was taken during the period ended March 31, 2017 and during the year ended December 31, 2016.  Impairment tests will be conducted on an annual basis and, should they indicate a carrying value in excess of fair value, additional impairment charges may be required.

Intangible Assets

Intangible Assets – Costs to obtain or develop patents are capitalized and amortized over the remaining life of the patents, and technology rights are amortized over their estimated useful lives. The Company currently has the right to several patents and proprietary technology.  Patents and technology are amortized from the date the Company acquires or is awarded the patent or technology right, over their estimated useful lives, which range from 5 to 15 years.  An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows.  Under similar analysis there was no impairment charge taken during the period ended March 31, 2017 and during the year ended December 31, 2016.

Research and Development

Research and Development – Research and development costs are recognized as an expense during the period incurred, which is until the conceptual formulation, design, and testing of a process is completed and the process has been determined to be commercially viable.

Goodwill

Goodwill – Goodwill represents the excess of the Company’s reorganization value over the fair value of net assets of the Company upon emergence from bankruptcy. Goodwill is not amortized, but is tested for impairment annually, or at interim periods when a triggering event occurs using a fair value approach. According to Accounting Standards Codification (or “ASC”) 350-20 Intangibles – Goodwill and Other, a fair-value-based test is applied at the overall Company level. The test compares the fair value of the Company to the carrying value of its net assets. This test requires various judgments and estimates. The fair value of the Company is allocated to the Company’s assets and liabilities based upon their fair values with the excess fair value allocated to goodwill. An impairment of goodwill is measured as the excess of the carrying amount of goodwill over the determined fair value.

Revenue Recognition

Revenue Recognition – Revenue is recognized when persuasive evidence of an arrangement exists, services have been provided or goods delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. Revenue from the sale of products is recorded at the time of shipment to the customers.  Revenue from research and development engineering contracts is recognized as the services are provided and accepted by the customer.  Revenue from contracts to license technology to others is deferred until all conditions under the contracts are met and then recognized as licensing royalty revenue over the remaining term of the contracts.  The Company does not provide extended warranties or guarantees on its products.

Stock-Based Compensation

Stock-Based Compensation – The Company recognizes the cost of employee services received in exchange for stock options and awards of equity instruments based on the grant-date fair value of such options and awards, over the period they vest.   All share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense in operations over the requisite service period. For the periods ended March 31, 2017 and 2016, the Company recognized expense for stock-based compensation of $3,154 and $0, respectively.

Basic and Diluted Loss Per Share

Basic and Diluted Loss Per Share – Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period.  Diluted loss per share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common shares outstanding during the period. At March 31, 2017 and March 31, 2016, there were outstanding common share equivalents (options and convertible notes payable) which amounted to 25,942,815 and 21,720,103, respectively, of common stock. These common share equivalents were not included in the computation of diluted loss per share as their effect would have been anti-dilutive, thereby decreasing loss per common share.

Concentrations and Credit Risk

Concentrations and Credit Risk - The Company has a few major customers who represent a significant portion of revenue, accounts receivable and notes receivable.  During the three month period ended March 31, 2017, a customer who manufacturers toys represented 64% of sales and represented 27% of accounts receivable.  The Company has a strong ongoing relationship with this customer with scheduled delivery extending through the year and does not believe this concentration poses a significant risk, as their products are based entirely on the Company’s technologies.  

Income Tax

Income Taxes - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards Board Accounting Codification (ASC) 740: Income Taxes.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized

Recent Accounting Pronouncements

Recent Accounting Pronouncements - In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2017-04, “Intangibles – Goodwill and Other (Topic 350).”  This ASU was issued to simplify the annual goodwill impairment assessment process.  Currently, the first step of the impairment test requires an entity to compare the fair value of the reporting unit with its carrying value, including goodwill.  If, as a result of this analysis, the entity concludes there is an indication of impairment in a reporting unit having goodwill, the entity is required to perform the second step of the impairment analysis, determining the amount of goodwill impairment to be recorded.  The amount is calculated by comparing the implied fair value of the goodwill to its carrying amount.  This exercise requires the entity to allocate the fair value determined in step one to the individual assets and liabilities of the reporting unit.  Any remaining fair value would be the implied fair value of goodwill on the testing date.  ASU 2017-04 eliminates the second step of the impairment analysis.  Accordingly, if the first step of a quantitative goodwill impairment analysis performed after adoption of this ASU indicates that the fair value of a reporting unit is less than its carrying value, the goodwill of that reporting unit would be impaired to the extent of that difference.  The Company must adopt this ASU in 2020, but early adoption is permitted.  However, if there is an indication of potential impairment of goodwill as a result of an annual impairment assessment prior to 2020, the Company will evaluate the impact of ASU 2017-04 and could elect to early adopt this ASU.


In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715).” This ASU was issued to improve the presentation of net periodic pension and other postretirement benefit costs.  The Company must adopt this ASU beginning January 1, 2018.  The Company does not currently have a pension or retirement plan to which it contributes and therefore believes it will not have an impact on its financial statements and statements of operations.


In March 2017, the FASB issued ASU No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Topic 310-20).”  The ASU amends the amortization period for certain purchased callable debt securities held at a premium. The update requires premiums to be amortized over the period to the earliest call date.  The new standard has an effective adoption date of January 1, 2019.  Early adoption is permitted.  The Company is analyzing the impact of this new standard.


The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position and cash flows.  Based on that review, the Company believes that none of these pronouncements will have a significant effect on its current or future earnings or operations.

DERIVATIVE INSTRUMENTS (Tables)
3 Months Ended
Mar. 31, 2017
Derivative Instruments Tables  
Schedule of Changes in Level 3 Financial Liabilities

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of March 31, 2017 and December 31, 2016:

 

 

 

 

 

Total

 

Balance, December 31, 2015

 

 

 

 

-

 

Recognition of derivative liabilities upon initial valuation

 

 

 

 

40,892

 

Change in fair value of derivative liabilities

 

 

 

 

35,403

 

Conversions of derivative liabilities into equity instruments

 

 

 

 

-

 

Balance, December 31, 2016

 

 

 

 

76,295

 

Recognition of derivative liabilities upon initial valuation

 

 

 

 

54,661

 

Change in fair value of derivative liabilities

 

 

 

 

(15,687)

 

Conversions of derivative liabilities into equity instruments

 

 

 

 

-

 

Balance, March 31, 2017

 

 

 

 

115,269

 

Schedule of Liabilities Measured at Fair Value on Recurring Basis

As of March 31, 2017, liabilities measured at fair value on a recurring basis are summarized as follows:


 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

Derivative Liabilities

 

 

-

 

 

 

-

 

 

 

115,269

 

 

 

115,269

Total

 

$

-

 

 

$

-

 

 

$

115,269

 

 

$

115,269

STOCK OPTION PLANS (Tables)
3 Months Ended
Mar. 31, 2017
STOCK OPTION PLANS [Abstract]  
Schedule of Stock Option Activity

A summary of all employee options outstanding and exercisable under the plan as of March 31, 2017, and changes during the three months then ended is set forth below:


Options

Shares

Weighted Average Exercise Price

Weighted Average Remaining Contractual  Life (Years)

Aggregate Intrinsic Value

 

 

 

 

 

Outstanding at the beginning of period

         2,185,000

 $                0.16

             8.66

 $              --  

   Granted

-- 

--

                   --   

                 --  

   Expired

                     -- 

                             --

                   --   

                 --  

   Forfeited

-- 

--

                   --   

                --  

Outstanding at the end of Period

       2,185,000

 $                 0.17

             8.41

$              --  

Exercisable at the end of Period

1,836,667

 $                 0.17

             8.41

    $              --  

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Nature Of Business [Line Items]      
Accounts receivable, allowance for bad debts $ 102,140   $ 102,140
Stock-based compensation expense $ 3,154 $ 8,401  
Anti-dilutive securities excluded from computation of earnings per share amount 25,942,815 21,720,103  
Sales [Member] | Customer One [Member]      
Nature Of Business [Line Items]      
Risk percentage 64.00%    
Accounts Receivable [Member] | Customer One [Member]      
Nature Of Business [Line Items]      
Risk percentage 27.00%    
Minimum [Member]      
Nature Of Business [Line Items]      
Intangible assets, useful lives 5 years    
Maximum [Member]      
Nature Of Business [Line Items]      
Intangible assets, useful lives 15 years    
DERIVATIVE INSTRUMENTS (Narrative) (Details) - USD ($)
1 Months Ended 3 Months Ended
Sep. 30, 2016
Jul. 31, 2016
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Sep. 22, 2016
Derivative liabilities     $ 115,269      
Loss on change in fair value of derivative liabilities     15,687    
Interest expense in connection with recognition of derivative liabilities     $ 54,661      
Debt instrument, issuance date     Jul. 01, 2016      
Proceeds from borrowings under convertible note payable     $ 120,000 $ 150,000    
Discount balance     $ 0      
Convertible Notes Payable to Related Party [Member]            
Debt instrument, conversion price     $ 0.07      
Convertible Notes Payable to Related Party [Member] | Officer [Member]            
Debt instrument, face amount $ 10,000 $ 10,000        
Debt instrument, issuance date Sep. 22, 2016 Jul. 01, 2016        
Debt instrument, maturity date Dec. 31, 2016 Dec. 31, 2016        
Debt instrument, interest rate 10.00% 10.00%        
Intrinsic value $ 0.01          
Beneficial conversion feature $ 1,286          
Debt instrument, conversion price $ 0.07 $ 0.07       $ 0.08
Convertible Notes Payable [Member]            
Debt instrument, face amount     $ 300,000      
Debt instrument, maturity date     Dec. 31, 2016      
Debt instrument, interest rate     10.00%   10.00%  
Debt instrument, default rate         15.00%  
Debt instrument, conversion price     $ 0.07      
Convertible Notes Payable [Member] | 2016 [Member]            
Proceeds from borrowings under convertible note payable     $ 160,000      
Convertible Notes Payable [Member] | January 6 [Member]            
Proceeds from borrowings under convertible note payable     40,000      
Convertible Notes Payable [Member] | January 31 [Member]            
Proceeds from borrowings under convertible note payable     40,000      
Convertible Notes Payable [Member] | March 7 [Member]            
Proceeds from borrowings under convertible note payable     40,000      
Convertible Notes Payable [Member] | April 28 [Member]            
Convertible notes payable, balance     $ 40,000      
Derivative Classification [Member]            
Dividend yield     0.00%      
Derivative Classification [Member] | Minimum [Member]            
Expected volatility     123.09%      
Risk-free interest rate     0.76%      
Expected life     9 months      
Derivative Classification [Member] | Maximum [Member]            
Expected volatility     135.66%      
Risk-free interest rate     0.97%      
Expected life     11 months 23 days      
DERIVATIVE INSTRUMENTS (Schedule of Changes in Level 3 Financial Liabilities) (Details) - Derivative Financial Instruments, Liabilities [Member] - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Balance $ 76,295
Recognition of derivative liabilities upon initial valuation 54,661 40,892
Change in fair value of derivative liabilities (15,687) 35,403
Conversions of derivative liabilities into equity instruments
Balance $ 115,269 $ 76,295
DERIVATIVE INSTRUMENTS (Schedule of Liabilities Measured at Fair Value on Recurring Basis) (Details) - Fair Value, Measurements, Recurring [Member]
Mar. 31, 2017
USD ($)
Liabilities, fair value $ 115,269
Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value 115,269
Level 1 [Member]  
Liabilities, fair value
Level 1 [Member] | Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value
Level 2 [Member]  
Liabilities, fair value
Level 2 [Member] | Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value
Level 3 [Member]  
Liabilities, fair value 115,269
Level 3 [Member] | Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value $ 115,269
STOCK OPTION PLANS (Narrative) (Details) - USD ($)
3 Months Ended 124 Months Ended
Aug. 24, 2015
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2015
Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Options granted during period        
Option pricing assumptions          
Weighted-average fair value of options granted        
Stock-based compensation expense   $ 3,154 $ 8,401    
Options outstanding   2,185,000     2,185,000
Unrecognized compensation cost related to employee stock options   $ 15,024      
2005 Stock Incentive Plan [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Effective term   10 years      
Shares authorized   2,500,000      
2005 Stock Incentive Plan [Member] | Stock Options [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Issuance of options for purchase of common shares 2,185,000        
Options granted during period       3,096,000  
Exercise price of stock options granted, minimum       $ 0.14  
Exercise price of stock options granted, maximum       $ 2.07  
Option vesting period       3 years  
Option expiration period       10 years  
Option pricing assumptions          
Dividend yield       0.00%  
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Director [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Issuance of options for purchase of common shares 1,960,000        
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Employee [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Issuance of options for purchase of common shares 225,000        
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Exercise Price Range One [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Issuance of options for purchase of common shares 640,000        
Exercise price of stock options granted $ 0.14        
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Exercise Price Range Two [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Issuance of options for purchase of common shares 500,000        
Exercise price of stock options granted $ 0.15        
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Exercise Price Range Three [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Issuance of options for purchase of common shares 995,000        
Exercise price of stock options granted $ 0.20        
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Exercise Price Range Four [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Issuance of options for purchase of common shares 50,000        
Exercise price of stock options granted $ 0.25        
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Minimum [Member]          
Option pricing assumptions          
Market value per share at time of issuance       $ 0.14  
Expected term       3 years 8 months 12 days  
Risk-free interest rate       1.60%  
Expected volatility       200.00%  
Weighted-average fair value of options granted       $ 0.16  
2005 Stock Incentive Plan [Member] | Stock Options [Member] | Maximum [Member]          
Option pricing assumptions          
Market value per share at time of issuance       $ 2.07  
Expected term       10 years  
Risk-free interest rate       4.93%  
Expected volatility       424.00%  
Weighted-average fair value of options granted       $ 2.07  
STOCK OPTION PLANS (Schedule of Stock Option Activity) (Details)
3 Months Ended
Mar. 31, 2017
USD ($)
$ / shares
shares
Shares  
Outstanding at the beginning of period | shares 2,185,000
Granted | shares
Expired | shares
Forfeited | shares
Outstanding at the end of Period | shares 2,185,000
Exercisable at the end of the Period | shares 1,836,667
Weighted Average Exercise Price  
Outstanding at the beginning of period | $ / shares $ 0.16
Granted | $ / shares
Expired | $ / shares
Forfeited | $ / shares
Outstanding at the end of Period | $ / shares 0.17
Exercisable at the end of Period | $ / shares $ 0.17
Weighted Average Remaining Contractual Life (Years)  
Outstanding at the beginning of period 8 years 7 months 28 days
Granted 0 years
Expired 0 years
Forfeited 0 years
Outstanding at the end of Period 8 years 4 months 28 days
Exercisable at the end of Period 8 years 4 months 28 days
Outstanding at the beginning of period | $
Granted | $
Expired | $
Forfeited | $
Outstanding at the end of Period | $
Exercisable at the end of the Period | $
CAPITAL STOCK (Details) - $ / shares
Mar. 31, 2017
Dec. 31, 2016
CAPITAL STOCK [Abstract]    
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, par value per share $ 0.001 $ 0.001
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, shares authorized 100,000,000 100,000,000
Common stock, par value per share $ 0.001 $ 0.001
COMMITMENTS AND CONTINGENCIES (Details)
3 Months Ended
Mar. 31, 2017
USD ($)
COMMITMENTS AND CONTINGENCIES [Abstract]  
Operating lease expiration period Dec. 31, 2017
Lease, monthly payment in 2015 $ 8,950
Lease, monthly payment in 2016 9,300
Lease, monthly payment in 2017 $ 9,600
RELATED PARTY TRANSACTIONS (Details) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Related Party Transaction [Line Items]    
Accounts payable - related party $ 1,420
Chief Executive Officer [Member]    
Related Party Transaction [Line Items]    
Accounts payable - related party $ 0 $ 1,420
SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] - USD ($)
Apr. 28, 2017
Apr. 17, 2017
Third Party [Member]    
Maximum borrowing capacity $ 300,000  
Annual interest rate 10.00%  
Conversion price $ 0.07  
Chief Executive Officer [Member]    
Maximum borrowing capacity   $ 20,000
Annual interest rate   10.00%
Conversion price   $ 0.07
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