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Document and Entity Information - shares
9 Months Ended
Sep. 30, 2017
Nov. 14, 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 Sep. 30, 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 Q3  
Document Fiscal Year Focus 2017  
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Current Assets    
Cash and cash equivalents $ 11,061
Accounts receivable, net of allowance for bad debts of $102,140 and $102,140 86,914 84,499
Deposits, prepaid expenses, and other current assets 11,383 9,348
Total Current Assets 109,358 93,847
Long-Term Deposits 6,550 6,550
Property and Equipment, net of accumulated depreciation of $588,446 and $586,787 9,144 10,823
Patents and Proprietary Technology, net of accumulated amortization of $915,724 and $876,037 58,321 96,358
Goodwill 4,896,917 4,896,917
Total Assets 5,080,290 5,104,495
Current Liabilities    
Accounts payable 212,946 172,602
Accounts payable - related party 1,420
Accrued liabilities 1,008,986 741,778
Due to related parties 54,513
Convertible notes payable, net 1,420,173 1,184,660
Convertible notes payable to related party, net 37,523 20,000
Derivative liabilities 126,630 76,295
Total current liabilities 2,860,771 2,196,755
Long-term Liabilities    
Convertible notes payable to related party, net 9,792
Total Liabilities 2,870,563 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 78,363 outstanding 78,363 78,363
Additional paid-in capital 29,067,104 29,052,188
Accumulated deficit (26,935,740) (26,222,811)
Total Stockholders' Equity 2,209,727 2,907,740
Total Liabilities and Stockholders' Equity $ 5,080,290 $ 5,104,495
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Accounts receivable, allowance for bad debts $ 102,140 $ 102,140
Property and Equipment, accumulated depreciation 588,446 586,787
Patents and Proprietary Technology, accumulated amortization $ 915,724 $ 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 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Income Statement [Abstract]        
Design, Contract and Testing Revenue $ 40,622 $ 104,364 $ 256,323 $ 232,569
Operating Costs and Expenses        
Amortization of patents and proprietary proprietary technology 9,154 18,423 39,687 64,510
Cost of revenue 8,503 13,859 43,144 16,369
Administrative and marketing expense 160,769 171,888 515,620 525,245
Research and development expense 79,975 81,715 244,484 241,055
Total Operating Costs and Expenses 258,401 285,885 842,935 847,179
Net Operating Loss (217,779) (181,521) (586,612) (614,610)
Other Income and Expenses        
Interest expense (73,197) (266,180) (238,537) (720,777)
Interest income 12 1,916 35 5,746
Gain on derivative 63,006 112,185
Net Other Income (Expense) (10,179) (264,264) (126,317) (715,031)
Net Loss $ (227,958) $ (445,785) $ (712,929) $ (1,329,641)
Basic and Diluted Loss per Common Share $ (0.00) $ (0.01) $ (0.01) $ (0.02)
Basic and Diluted Weighted-Average Common Shares Outstanding 78,363,464 71,712,536 78,363,464 71,656,107
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Cash Flows from Operating Activities:    
Net loss $ (712,929) $ (1,329,641)
Adjustments to reconcile net loss to net cash used in operating activities:    
Stock subscription for compensation 1,000
Stock-based compensation expense 14,916 25,295
Amortization of patents and proprietary technology 39,687 64,510
Amortization of discount on note payable 22,049 641,865
Depreciation 1,679
Change in fair value of derivative liabilities (112,185)
Interest expense recognized for derivative liabilities 63,298
Changes in operating assets and liabilities:    
Accounts receivable (2,415) (124,775)
Deposits and prepaid expenses (2,034) 2,613
Accounts payable 40,344 29,253
Accounts payable - related parties (1,420) 2,159
Accrued liabilities 336,342 273,121
Net Cash Used in Operating Activities (312,668) (414,600)
Cash Flows from Investing Activities:    
Purchase of proprietary technology (1,650)
Note receivable interest income (5,711)
Net Cash Used in Investing Activities (1,650) (5,711)
Cash Flows from Financing Activities:    
Repayment of bank overdrafts (14,621)
Proceeds from borrowings under convertible note payable - related party 47,000
Repayment of borrowings under convertible note payable - related party (7,000) 20,000
Proceeds from borrowings under convertible note payable 300,000 380,000
Net Cash Provided by Financing Activities 325,379 400,000
Net Change in Cash and Cash Equivalents 11,061 (20,311)
Cash and Cash Equivalents at Beginning of Period 22,706
Cash and Cash Equivalents at End of Period 11,061 2,395
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 99,221 124,340
Stock issued for subscription payable 10,958
Assumption of liabilities by related parties $ 54,513
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Sep. 30, 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 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 September 30, 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, development engineering and production 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 September 30, 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. 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.  


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 September 30, 2017 and 2016, the Company recognized expense for stock-based compensation of $14,916 and $25,295, 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 September 30, 2017 and September 30, 2016, there were outstanding common share equivalents (options and convertible notes payable) which amounted to 30,903,567 and 24,459,697, 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 nine-month period ended September 30, 2017, a customer who manufacturers gloves containing our sensors represented 18% of sales and represented 16% 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 August 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815).”  The new standard amends the hedge accounting recognition and presentation requirements in ASC 815.  This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.  The Company is currently evaluating the timing of adopting the new guidance as well as the impact it may have on its consolidated financial statements.


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.

GOING CONCERN
9 Months Ended
Sep. 30, 2017
GOING CONCERN[Abstract]  
GOING CONCERN

NOTE 2 – GOING CONCERN


The Company continues to accumulate significant operating losses and has an accumulated deficit of $26,935,740 at September 30, 2017.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.  The Company has relied on raising additional capital through the issuance of convertible notes payable; however, there is no assurance that additional funding will be available on acceptable terms, if at all.

DERIVATIVE INSTRUMENTS
9 Months Ended
Sep. 30, 2017
DERIVATIVE INSTRUMENTS [Abstract]  
DERIVATIVE INSTRUMENTS

NOTE 3 – DERIVATIVE INSTRUMENTS


The derivative liability as of September 30, 2017, in the amount of $126,630 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 September 30, 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

 

 

 

 

162,520

 

Change in fair value of derivative liabilities

 

 

 

 

(112,185)

 

Conversions of derivative liabilities into equity instruments

 

 

 

 

-

 

Balance, September 30, 2017

 

 

 

 

126,630

 

 

During the year ended 2016 and the period ended September 30, 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 September 30, 2017, the Company marked to market the fair value of the derivatives and determined a fair value of $126,630. The Company recorded a gain from change in fair value of derivatives of $112,185 for the nine month period ended September 30, 2017. During the nine months ended September 30, 2017, the Company recorded additional interest expense of $63,298 and debt discounts of $99,221 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 81.33% to 118.34%, (3) weighted average risk-free interest rate of 1.06% to 1.31% (4) expected life of 0.25 to 1.25 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 September 30, 2017, liabilities measured at fair value on a recurring basis are summarized as follows:


 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

Derivative Liabilities

 

 

-

 

 

 

-

 

 

 

126,630

 

 

 

126,630

Total

 

$

-

 

 

$

-

 

 

$

126,630

 

 

$

126,630


Convertible Notes Payable


During 2015 the Company secured additional financing to cover its ongoing operations in the amount of $590,000 by issuing various convertible notes bearing 10% annual interest (15% default interest), secured by business assets and carrying exercise prices ranging between $0.025 and $0.07 per share. Additionally, during 2015 the Company issued $51,000 for a non-convertible note payable bearing 10% annual interest (15% default interest) and secured by the $51,157 note receivable held by the Company (see Note 2). During 2015, all of these notes (both convertible and non-convertible issued in 2014 and 2015) and accrued interest were either converted into common stock or extinguished and consolidated into two remaining convertible notes payable to two investors in principal amounts of $684,660 and $123,797 (with respective maturity dates of December 31, 2016 and November 30, 2016). Both notes are convertible at $0.05 per share, bear 10% annual interest rates (15% default interest) and are secured by business assets. During 2016 the Company approved the conversion of the convertible note payable in the amount of $123,797 into 2.7 million shares of common stock. As of September 30, 2017, the principle balance of the convertible note payable in the amount of $684,660 remains outstanding.


The Company entered into a new promissory note for up to $300,000 from a third party on May 25, 2017.  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 July 31, 2018.  The Company drew $40,000 against that note on June 2, 2017, $40,000 on July 13, 2017, $40,000 on August 14, 2017 and $40,000 on September 22, 2017.   



The Company entered into a 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, 2017; $40,000 on January 31, 2017 $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 was due on December 31, 2015, bears an annual interest rate of 10% annual interest and is secured by business equipment.


Convertible Note Payable Related Party


On September 1, 2017 the Company issued a note for $10,000 to an officer of the Company.  The note bears interest at the rate of 8%, has a conversion feature for restricted common shares at $0.07 per share and a maturity date of December 31, 2018.  The note is secured by all of the Company’s business equipment.


On August 2, 2017 the Company issued a note for $10,000 to an officer of the Company.  The note bears interest at the rate of 8%, has a conversion feature for restricted common shares at $0.07 per share and a maturity date of December 31, 2017.  The note is secured by all of the Company’s business equipment.


On July 12, 2017, an officer of the Company provided $7,000 to the Company under a line of credit.  On September 23, 2017 the Company paid $7,000 to fully retire that obligation.


On April 17, 2017 the Company issued a note for $20,000 to an officer of the Company.  The note bears interest at the rate of 8%, has a conversion feature for restricted common shares at $0.07 per share and a maturity date of December 31, 2018.  The note is secured by all of the Company’s business equipment.


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.

STOCK OPTION PLANS
9 Months Ended
Sep. 30, 2017
STOCK OPTION PLANS [Abstract]  
STOCK OPTION PLANS

NOTE 4 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


During the nine months ended September 30, 2017, the Company recognized a total of $14,916 of stock-based compensation expense, leaving $3,153 in unrecognized expense as of September 30, 2017. During the nine months ended September 30, 2016, the Company recognized $25,295 in stock-based compensation expense. There were 2,185,000 and 2,185,000 employee stock options outstanding at September 30, 2017 and December 31, 2016, respectively.  


A summary of all employee options outstanding and exercisable under the plan as of September 30, 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

             7.91

$               --

Exercisable at the end of Period

1,836,667

 $                 0.17

             7.91

$               --

CAPITAL STOCK
9 Months Ended
Sep. 30, 2017
CAPITAL STOCK [Abstract]  
CAPITAL STOCK

NOTE 5 – CAPITAL STOCK


Preferred Stock – There are 1,000,000 shares of preferred stock with a par value of $0.001 per share authorized.  At September 30, 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 nine months ended September 30, 2017.  

COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2017
COMMITMENTS AND CONTINGENCIES [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 6 - 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 $9,600 per month in 2017.

RELATED PARTY TRANSACTIONS
9 Months Ended
Sep. 30, 2017
RELATED PARTY TRANSACTIONS [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 7 – RELATED PARTY TRANSACTIONS


At September 30, 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.

 

During the period an Officer of the Company and Director of the Company assumed a total of $54,513 in accrued liabilities owed by the Company. The Company recorded the amount assumed as a due to related party on the balance sheet in the amount of $54,513 as of September 30, 2017. The amounts due to both the Officer and Director accrue interest at 8%, have a conversion feature for restricted common shares at $0.07 per share and must be repaid by December 31, 2018. 

SUBSEQUENT EVENTS
9 Months Ended
Sep. 30, 2017
SUBSEQUENT EVENTS [Abstract]  
SUBSEQUENT EVENTS

NOTE 8 - SUBSEQUENT EVENTS


On November 1, 2017 the Company received a short-term loan in the amount of $20,000 from an officer of the Company.  The Company intends to repay the loan when funds are available.  No terms have been established for this loan at the date of this filing.  


On November 9, 2017 the Company authorized the conversion of promissory notes totaling $160,000 and accrued interest in the amount of $40,000 through the issuance of 4,000,000 shares of its restricted common stock.  The conversion rate was $0.05 per share, pursuant to the terms of the convertible note agreements. The stock has not been issued as of the date of this filing.  

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Sep. 30, 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 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 September 30, 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 Measurements

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, development engineering and production 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 September 30, 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. 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.

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 September 30, 2017 and 2016, the Company recognized expense for stock-based compensation of $14,916 and $25,295, 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 September 30, 2017 and September 30, 2016, there were outstanding common share equivalents (options and convertible notes payable) which amounted to 30,903,567 and 24,459,697, 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 nine-month period ended September 30, 2017, a customer who manufacturers gloves containing our sensors represented 18% of sales and represented 16% 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

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 August 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815).”  The new standard amends the hedge accounting recognition and presentation requirements in ASC 815.  This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early adoption is permitted.  The Company is currently evaluating the timing of adopting the new guidance as well as the impact it may have on its consolidated financial statements.


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)
9 Months Ended
Sep. 30, 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 September 30, 2017 and December 31, 2016:

 

8



 

 

 

 

 

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

 

 

 

 

162,520

 

Change in fair value of derivative liabilities

 

 

 

 

(112,185)

 

Conversions of derivative liabilities into equity instruments

 

 

 

 

-

 

Balance, September 30, 2017

 

 

 

 

126,630

Schedule of Liabilities Measured at Fair Value on Recurring Basis

As of September 30, 2017, liabilities measured at fair value on a recurring basis are summarized as follows:


 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

Derivative Liabilities

 

 

-

 

 

 

-

 

 

 

126,630

 

 

 

126,630

Total

 

$

-

 

 

$

-

 

 

$

126,630

 

 

$

126,630

STOCK OPTION PLANS (Tables)
9 Months Ended
Sep. 30, 2017
STOCK OPTION PLANS [Abstract]  
Schedule of Stock Option Activity

A summary of all employee options outstanding and exercisable under the plan as of September 30, 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

             7.91

$               --

Exercisable at the end of Period

1,836,667

 $                 0.17

             7.91

$               --

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Nature Of Business [Line Items]      
Accounts receivable, allowance for bad debts $ 102,140   $ 102,140
Stock-based compensation expense $ 14,916 $ 25,295  
Anti-dilutive securities excluded from computation of earnings per share amount 30,903,567 24,459,697  
Sales [Member] | Customer One [Member]      
Nature Of Business [Line Items]      
Risk percentage 18.00%    
Accounts Receivable [Member] | Customer One [Member]      
Nature Of Business [Line Items]      
Risk percentage 16.00%    
Minimum [Member]      
Nature Of Business [Line Items]      
Property and equipment, useful lives P3Y    
Intangible assets, useful lives 5 years    
Maximum [Member]      
Nature Of Business [Line Items]      
Property and equipment, useful lives P10Y    
Intangible assets, useful lives 15 years    
GOING CONCERN (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Going Concern Details    
Accumulated deficit $ (26,935,740) $ (26,222,811)
DERIVATIVE INSTRUMENTS (Narrative) (Details) - USD ($)
1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 01, 2017
Aug. 02, 2017
Apr. 17, 2017
Aug. 08, 2011
Sep. 30, 2016
Jul. 31, 2016
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Sep. 23, 2017
Jul. 12, 2017
Derivative liabilities             $ 126,630   $ 126,630          
Loss on change in fair value of derivative liabilities             63,006 112,185        
Interest expense in connection with recognition of derivative liabilities                 63,298          
Proceeds from borrowings under convertible note payable                 300,000 380,000        
Convertible notes payable, balance             9,792   9,792        
Discount balance             99,221   99,221          
Convertible Notes Payable [Member]                            
Debt instrument, face amount             $ 300,000   $ 300,000     $ 590,000    
Debt instrument, issuance date                 Jul. 01, 2016          
Debt instrument, maturity date                 Dec. 31, 2016     Dec. 31, 2016    
Debt instrument, interest rate             10.00%   10.00%   10.00% 10.00%    
Debt instrument, default rate                       15.00%    
Convertible notes payable, principal amount outstanding             $ 684,660   $ 684,660          
Accrued interest                       $ 684,660    
Fair value of common stock advance                     $ 123,797      
Debt instrument, conversion price             $ 0.07   $ 0.07     $ 0.05    
Conversion of stock                     2,700,000      
Convertible Notes Payable [Member] | Director [Member]                            
Debt instrument, face amount       $ 40,000                    
Debt instrument, maturity date       Dec. 31, 2015                    
Debt instrument, interest rate       10.00%                    
Convertible Notes Payable [Member] | Minimum [Member]                            
Exercise price                       0.025    
Convertible Notes Payable [Member] | Maximum [Member]                            
Exercise 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             $ 20,000   20,000          
Convertible Notes Payable to Related Party [Member] | Officer [Member]                            
Debt instrument, face amount $ 10,000 $ 10,000 $ 20,000   $ 10,000 $ 10,000   $ 10,000   $ 10,000        
Debt instrument, issuance date         Sep. 22, 2016 Jul. 01, 2016                
Debt instrument, maturity date Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2018   Dec. 31, 2016 Dec. 31, 2016                
Debt instrument, interest rate 8.00% 8.00% 8.00%   10.00% 10.00%   10.00%   10.00%        
Debt instrument, conversion price $ 0.07 $ 0.07 $ 0.07   $ 0.07 $ 0.07   $ 0.07   $ 0.07        
Line of credit                           $ 7,000
Notes payables                         $ 7,000  
New Convertible Notes Payable [Member]                            
Debt instrument, face amount             $ 300,000   $ 300,000          
Debt instrument, issuance date                 May 25, 2017          
Debt instrument, maturity date                 Jul. 31, 2018          
Debt instrument, interest rate             10.00%   10.00%          
Debt instrument, conversion price             $ 0.07   $ 0.07          
New Convertible Notes Payable [Member] | June 2 [Member]                            
Proceeds from borrowings under convertible note payable                 $ 40,000          
New Convertible Notes Payable [Member] | July 13 [Member]                            
Proceeds from borrowings under convertible note payable                 40,000          
New Convertible Notes Payable [Member] | August 14 [Member]                            
Proceeds from borrowings under convertible note payable                 40,000          
New Convertible Notes Payable [Member] | September 22 [Member]                            
Proceeds from borrowings under convertible note payable                 $ 40,000          
Derivative Classification [Member]                            
Dividend yield                 0.00%          
Derivative Classification [Member] | Minimum [Member]                            
Expected volatility                 81.33%          
Risk-free interest rate                 1.06%          
Expected life                 2 months 30 days          
Derivative Classification [Member] | Maximum [Member]                            
Expected volatility                 118.34%          
Risk-free interest rate                 1.31%          
Expected life                 1 year 2 months 30 days          
Non Convertible Notes Payable [Member]                            
Debt instrument, face amount                       $ 51,000    
Debt instrument, maturity date                       Nov. 30, 2016    
Debt instrument, interest rate                       10.00%    
Debt instrument, default rate                       15.00%    
Accrued interest                       $ 123,797    
Debt instrument, conversion price                       $ 0.05    
Notes receivable                       $ 51,157    
DERIVATIVE INSTRUMENTS (Schedule of Changes in Level 3 Financial Liabilities) (Details) - Derivative Financial Instruments, Liabilities [Member] - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Balance $ 76,295
Recognition of derivative liabilities upon initial valuation 162,520 40,892
Change in fair value of derivative liabilities (112,185) 35,403
Conversions of derivative liabilities into equity instruments
Balance $ 126,630 $ 76,295
DERIVATIVE INSTRUMENTS (Schedule of Liabilities Measured at Fair Value on Recurring Basis) (Details) - Fair Value, Measurements, Recurring [Member]
Sep. 30, 2017
USD ($)
Liabilities, fair value $ 126,630
Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value 126,630
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 126,630
Level 3 [Member] | Derivative Financial Instruments, Liabilities [Member]  
Liabilities, fair value $ 126,630
STOCK OPTION PLANS (Narrative) (Details) - USD ($)
9 Months Ended 136 Months Ended
Aug. 24, 2015
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
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   $ 14,916 $ 25,295    
Options outstanding   2,185,000   2,185,000  
Unrecognized compensation cost related to employee stock options   $ 3,153      
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 2 years 4 months     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)
9 Months Ended
Sep. 30, 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
Outstanding at the end of Period 7 years 10 months 28 days
Exercisable at the end of Period 7 years 10 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
Sep. 30, 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)
9 Months Ended
Sep. 30, 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 ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Related Party Transaction [Line Items]      
Accounts payable - related party   $ 1,420
Assumption of liabilities by related parties 54,513  
Due to related parties 54,513  
Chief Executive Officer [Member]      
Related Party Transaction [Line Items]      
Accounts payable - related party $ 0   $ 1,420
Officer and Director [Member]      
Related Party Transaction [Line Items]      
Debt instrument, interest rate 8.00%    
Debt instrument, conversion price $ 0.07    
Debt instrument, maturity date Dec. 31, 2018    
SUBSEQUENT EVENTS (Details) - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2015
Nov. 09, 2017
Oct. 30, 2017
Dec. 31, 2016
Proceeds from borrowings under convertible note payable $ 300,000 $ 380,000        
Convertible Notes Payable [Member]            
Annual interest rate 10.00%   10.00%     10.00%
Conversion price $ 0.07   $ 0.05      
Maturity date Dec. 31, 2016   Dec. 31, 2016      
Debt instrument, face amount $ 300,000   $ 590,000      
Accrued interest     $ 684,660      
Subsequent Event [Member] | Convertible Notes Payable [Member]            
Conversion price       $ 0.05    
Debt instrument, face amount       $ 160,000    
Accrued interest       $ 40,000    
Share issued       4,000,000    
Subsequent Event [Member] | Convertible Notes Payable [Member] | Officer [Member]            
Debt instrument, face amount         $ 20,000