Tooling Commitment Deposit, Deferred Costs and Liability

9 Months Ended

Sep. 30, 2014

Compensation Related Costs [Abstract]

Tooling Commitment Deposit, Deferred Costs and Liability

On May 26, 2011, the Company signed a contract with a supplier under which they are required to pay for tooling costs in addition to their regular purchase orders (the "tooling commitment"). Under the terms of the tooling commitment the Company was required to pay for 30% of the contracted tooling costs upon execution (the "tooling commitment deposit") and the remaining 70% over the purchase of 5,000 units over a nine month period (the "tooling commitment liability"). If 5,000 units were not purchased within those nine months, then the remaining amount was due within thirty days.

As of February 27, 2012, the Company had not reached the contracted level of purchases and an informal agreement to extend the period was made; however, by December 31, 2012 the Company had not complied and as a result, the entire amount would have been considered due.

On August 24, 2013, the Company entered into a revised agreement with the supplier that extended the term another twelve months to August 24, 2014. As of September 30, 2014, the Company had still not reached the contracted level of purchases however, a new contract is under negotiation.

The tooling commitment deposit is included in deposits and deferred costs and is capitalized into inventory as units are purchased based on the 5,000 unit commitment. The tooling commitment liability becomes due and is recognized into accounts payable as units are purchased and the corresponding deferred costs are capitalized into inventory, all of which is based on the 5,000 unit commitment.

During 2013, it was determined that based on the actual sales realized in 2013, the Company would likely not be able to meet the 5,000 unit commitment order. Accordingly, the deferred costs related to excess units was recognized as a provision for loss on the tooling commitment of $139,213 in the condensed interim statement of operations and comprehensive (loss).

During 2014, the actual sales realized in 2014 exceeded initial budgeted sales. As such the Company recognized a recovery on the tooling commitment of $48,414. This resulted in a reduction of the initial tooling commitment loss of $139,213 as of December 31, 2013 to $90,799 as of September 30, 2014.

		September 30,			December 31,
		2014			2013
Tooling commitment deposit	$	36,701		$	41,119
Tooling commitment deferred costs		85,490			100,947
		122,191			142,066
Provision for loss on tooling commitment		(90,799	)		(139,213	)
Tooling commitment deposit and deferred costs	$	31,392		$	2,853
Other prepaid deposits and insurance		152,952			20,2333
	$	184,344		$	23,086
Tooling commitment liability	$	90,359		$	105,816