Amended Annual Report (10-k/a)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1 to

FORM 10-K

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

For the fiscal year ended December 31, 2015

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 0-29185

QS ENERGY, INC.

(Exact name of registrant as specified in its charter)

Nevada	52-2088326
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

735 State Street, Suite 500

Santa Barbara, California 93101

(Address, including zip code, of principal executive offices)

(805)-845-3561

(Registrant’s telephone number, including area code)

Save the World Air, Inc.

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act: None.

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 par value.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

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

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

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates (excluding voting shares held by officers and directors) as of June 30, 2015, was $61,579,449.

The number of shares of the Registrant’s Common Stock outstanding as of March 4, 2016, was 186,251,577

DOCUMENTS INCORPORATED BY REFERENCE - None

Transitional Small Business Disclosure Format (Check one)

Yes o No x

EXPLANATORY NOTE

This Amendment No. 1 to the Annual Report on Form 10-K is being filed solely to furnish the Interactive Data files as Exhibit 101, in accordance with Rule 405 of Regulation S-T. No other changes have been made to the Form 10-K, as originally filed on March 15, 2016.

PART IV

Item 15. Exhibits, Financial Statement Schedules


31.1*		Certification of Chief Executive Officer of Annual Report Pursuant to Rule 13(a)—15(e) or Rule 15(d)—15(e).
31.2*		Certification of Chief Financial Officer of Annual Report Pursuant to 18 U.S.C. Section 1350.
32.1*		Certification of Chief Executive Officer and Chief Financial Officer of Annual Report pursuant to Rule 13(a)—15(e) or Rule 15(d)—15(e).

101.INS		XBRL Instance Document
101.SCH		XBRL Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.DEF		XBRL Definition Linkbase Document
101.LAB		XBRL Label Linkbase Document
101.PRE		XBRL Presentation Linkbase Document

*		Filed herewith.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, hereunto duly authorize.

	QS Energy, Inc.

Date: March 15, 2016	By:	/s/ Greggory Bigger
		Greggory Bigger
		Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Greggory Bigger as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

NAME	TITLE	DATE

/s/ Greggory Bigger	Chief Executive Officer and Chairman of the Board of Directors	March 15, 2016
Greggory Bigger

/s/ Charles R. Blum	Director	March 15, 2016
Charles R. Blum

/s/ Donald Dickson	Director	March 15, 2016
Donald Dickson

/s/ Nathan Shelton	Director	March 15, 2016
Nathan Shelton

/s/ Mark Stubbs	Director	March 15, 2016
Mark Stubbs

/s/ Thomas Bundros	Director	March 15, 2016
Thomas Bundros

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

AND RULES 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Greggory Bigger, certify that:

1. I have reviewed this 10-K/A Report of QS Energy, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting) as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its condensed consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: March 15, 2016	/s/ GREGGORY BIGGER
	Greggory Bigger
	Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

AND RULES 13A-14 AND 15D-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Greggory Bigger, certify that:

1. I have reviewed this 10-K/A Report of QS Energy, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: March 15, 2016	/s/ GREGGORY BIGGER
	Greggory Bigger
	Chief Financial Officer

Exhibit 32

CERTIFICATION OF PERIODIC FINANCIAL REPORT BY THE CHIEF EXECUTIVE

OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Acting Chief Executive Officer and the Chief Financial Officer of QS Energy, Inc. (the “Company”), hereby certify, based on our knowledge, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2015 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 15, 2016	/s/ GREGGORY BIGGER
	Greggory Bigger
	Chief Executive Officer


Date: March 15, 2016	/s/ GREGGORY BIGGER
	Greggory Bigger
	Chief Financial Officer

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2015	Mar. 04, 2016	Jun. 30, 2015
Document And Entity Information
Entity Registrant Name	QS ENERGY, INC.
Entity Central Index Key	0001103795
Document Type	10-K
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		186,251,577
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2015
Entity Public Float			$ 61,579,449

CONSOLIDATED BALANCE SHEETS - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Current assets:
Cash	$ 349,186	$ 2,247,557
Prepaid expenses and other current assets	50,596	72,225
Total current assets	399,782	2,319,782
Property and Equipment, net of accumulated depreciation of $60,242 and $47,180 at December 31, 2015 and December 31, 2014, respectively	21,798	21,946
Other assets	6,480	5,830
Total assets	428,060	2,347,558
Current liabilities:
Accounts payable-license agreements	590,001	405,313
Accounts payable and accrued expenses	207,334	175,228
Accrued expenses and accounts payable-related parties	190,750	259,507
Convertible debentures, net of discounts of $100,833 and $105,542 at December 31, 2015 and December 31, 2014, respectively	222,195	139,098
Total current liabilities	$ 1,210,280	$ 979,146
Commitments and contingencies
Stockholder's equity (deficiency)
Common stock, $.001 par value: 300,000,000 shares authorized 183,831,577 and 181,028,244 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively	$ 183,832	$ 181,028
Additional paid-in capital	100,308,100	98,232,582
Accumulated deficit	(101,274,152)	(97,045,198)
Total stockholders' equity (deficiency)	(782,220)	1,368,412
Total liabilities and stockholders' equity	$ 428,060	$ 2,347,558

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Accumulated depreciation	$ 60,242	$ 47,180
Discounts on convertible debentures	$ 100,833	$ 105,542
Common stock, par value	$ .001	$ 0.001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	183,831,577	181,028,244
Common stock, shares outstanding	183,831,577	181,028,244

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	12 Months Ended
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Statement [Abstract]
Revenues	$ 0	$ 240,000	$ 0
Costs and Expenses
Operating expenses	2,915,369	3,284,666	11,884,775
Research and development expenses	577,501	893,452	2,011,486
Loss before other income (expense)	(3,492,870)	(3,938,118)	(13,896,261)
Other income (expense)
Other income (loss)	11,258	(28,598)	(23,549)
Interest and financing expense	(747,342)	(39,619)	(260)
Change in fair value of derivative liabilities	0	0	(220,614)
Gain on extinguishment of derivative liabilities	0	0	3,441,752
Gain on disposition of equipment	0	0	41,923
Net loss	$ (4,228,954)	$ (4,006,335)	$ (10,657,009)
Net loss per common share, basic and diluted	$ (.02)	$ (0.02)	$ (0.07)
Weighted average common shares outstanding, basic and diluted	182,267,719	180,386,712	160,958,284

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Deficit Accumulated [Member]	Total
Beginning balance, shares at Dec. 31, 2012	143,667,570
Beginning balance, value at Dec. 31, 2012	$ 143,668	$ 79,340,666	$ (82,381,854)	$ (2,897,520)
Common stock issued upon exercise of warrants and options, shares issued	29,152,389
Common stock issued upon exercise of warrants and options, amount	$ 29,152	8,448,066	0	8,477,218
Common stock issued for services, shares issued	50,000
Common stock issued for services, value	$ 50	48,950	0	49,000
Common stock issued to employees and directors as compensation, shares issued	325,455
Common stock issued to employees and directors as compensation, value	$ 325	369,788	0	370,113
Common stock issued as settlement, shares issued	3,047,403
Common stock issued as settlement, value	$ 3,048	3,105,299	0	3,108,347
Common stock issued on conversion of notes payable, value				0
Fair value of warrants and beneficial conversion feature of issued convertible notes				0
Fair value of options and warrants issued as compensation	0	4,495,545	0	4,495,545
Fair value of warrants issued to settle payables	0	129,622	0	129,622
Net loss	$ 0	0	(10,657,009)	(10,657,009)
Ending balance, shares at Dec. 31, 2013	176,242,817
Ending balance, value at Dec. 31, 2013	$ 176,243	95,937,936	(93,038,863)	3,075,316
Common stock issued upon exercise of warrants and options, shares issued	4,710,947
Common stock issued upon exercise of warrants and options, amount	$ 4,711	1,408,573	0	1,413,284
Common stock issued as settlement, value				0
Common stock issued on conversion of notes payable, shares issued	74,480
Common stock issued on conversion of notes payable, value	$ 74	35,676	0	35,750
Fair value of warrants and beneficial conversion feature of issued convertible notes	0	119,671	0	119,671
Fair value of options and warrants issued as compensation	0	730,726	0	730,726
Net loss	$ 0	0	(4,006,335)	(4,006,335)
Ending balance, shares at Dec. 31, 2014	181,028,244
Ending balance, value at Dec. 31, 2014	$ 181,028	98,232,582	(97,045,198)	1,368,412
Common stock issued upon exercise of warrants, shares issued	200,000
Common stock issued upon exercise of warrants, amount	$ 200	49,800		50,000
Common stock issued as settlement, value				0
Common stock issued on conversion of notes payable, shares issued	2,603,333
Common stock issued on conversion of notes payable, value	$ 2,604	666,196	0	668,800
Fair value of warrants and beneficial conversion feature of issued convertible notes	0	630,945	0	630,945
Fair value of options and warrants issued as compensation	0	728,577	0	728,577
Net loss	$ 0	0	(4,228,954)	(4,228,954)
Ending balance, shares at Dec. 31, 2015	18,331,577
Ending balance, value at Dec. 31, 2015	$ 183,832	$ 100,308,100	$ (101,274,152)	$ (782,220)

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	12 Months Ended
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities
Net Loss	$ (4,228,954)	$ (4,006,335)	$ (10,657,009)
Adjustments to reconcile net loss to net cash used in operating activities:
Settlement of litigation and debt	0	0	(346)
Share based compensation expense	728,577	730,726	4,865,658
Issuance of common stock for services	0	0	49,000
Issuance of common stock as settlement	0	0	3,108,347
Interest added to convertible notes	21,188	0	0
Amortization of debt discounts	701,654	39,619	0
Change in fair value of derivative liabilities	0	0	220,614
Gain on extinguishment of derivative liabilities	0	0	(3,441,752)
Gain on disposition of assets	0	0	(41,923)
Depreciation and amortization	13,062	13,825	15,399
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	21,629	(15,295)	10,202
Other assets	(650)	0	4,500
Accounts payable and accrued expenses	32,106	(107,577)	(43,408)
Accounts payable - license agreements	184,688	219,863	(130,400)
Accounts payable and accrued expenses - related parties	(68,757)	(402,521)	128,750
Net cash used in operating activities	(2,595,457)	(3,527,695)	(5,912,368)
Cash flows from investing activities
Purchase of equipment	(12,914)	0	(7,573)
Proceeds from sale of equipment	0	0	27,000
Net cash provided by (used) in investing activities	(12,914)	0	19,427
Cash flows from financing activities
Net proceeds from issuance of convertible notes and warrants	660,000	254,900	0
Net proceeds from exercise of warrants and options	50,000	1,383,284	8,428,218
Net cash provided by financing activities	710,000	1,638,184	8,428,218
Net decrease in cash	(1,898,371)	(1,889,511)	2,535,277
Cash, beginning of period	2,247,557	4,137,068	1,601,791
Cash, end of period	349,186	2,247,557	4,137,068
Supplemental disclosures of cash flow information
Cash paid during the year for: Interest	0	0	260
Cash paid during the year for: Income taxes	0	0	0
Non-cash investing and financing activities
Conversion of convertible debentures to common stock	668,800	35,750	0
Exercise of options and warrants applied to accounts payable	0	0	49,000
Fair value of warrants issued to settle payables	$ 0	$ 30,000	$ 129,622
Receivable from sale of equipment	0	0	27,000
Fair value of warrants and beneficial conversion feature associated with issued convertible notes	$ 630,945	$ 119,671	$ 0

1. Description of Business

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

QS Energy, Inc. (“QS Energy”, “Company”) (formerly known as Save the World Air, Inc.) was incorporated on February 18, 1998, as a Nevada Corporation under the name Mandalay Capital Corporation. The Company changed its name to Save the World Air, Inc. on February 11, 1999. Effective August 11, 2015, the Company changed its name to QS Energy, Inc. The name change was effected through a short-form merger pursuant to Section 92A.180 of the Nevada Revised Statutes. Additionally, QS Energy Pool, Inc., a California corporation, was formed as a wholly-owned subsidiaries of the Company on July 6, 2015 to serve as a vehicle for the Company to explore, review and consider acquisition opportunities. The Company’s common stock is quoted under the symbol “QSEP” on the Over-the-Counter Bulletin Board. More information including the Company’s fact sheet, logos and media articles are available at our corporate website, www.qsenergy.com.

QS Energy, Inc. develops and commercializes energy efficiency technologies that assist in meeting increasing global energy demands, improving the economics of oil extraction and transport, and reducing greenhouse gas emissions. The Company's intellectual property portfolio includes 47 domestic and international patents and patents pending, a substantial portion of which have been developed in conjunction with and exclusively licensed from Temple University of Philadelphia, PA (“Temple”). QS Energy's primary technology is called Applied Oil Technology™ (AOT™), a commercial-grade crude oil pipeline transportation flow-assurance product. AOT™ has been proven in U.S. Department of Energy tests to increase the energy efficiency of oil pipeline pump stations. The AOT product has transitioned from the research and development stage to initial commercial production for the midstream pipeline marketplace.

In 2014, the Company began commercial development of a suite of products based around the Joule Heat technology. The Company began fabrication of prototype equipment to be operated under a joint development agreement with a commercial entity in the fourth quarter of 2014. The Company’s first Joule Heat prototype was installed for testing purposes at the Newfield facility in June 2015 and the system is operational; however, changes to the prototype configuration will be required to determine commercial effectiveness of this unit. In addition, the Company filed two additional provisional patents related to the technology’s method and apparatus. The first of the two provisional patents was finalized and submitted to non-provisional status on April 29, 2014. The second of the two provisional patents was finalized and submitted to non-provisional status at the end of the third quarter of 2014. In December 2015, we temporarily suspended Joule Heat and AOT Upstream development activities to focus Company resources on finalizing commercial development of the AOT Midstream. We currently plan to resume Joule Heat and AOT Upstream development in the fourth quarter of 2016 depending on the availability of sufficient capital and other resources.

2. Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Consolidation Policy

The accompanying consolidated financial statements of QS Energy Inc. include the accounts of QS Energy Inc. (the Parent) and its wholly owned subsidiaries, QS Energy Pool, Inc. and STWA Asia Pte. Limited. Intercompany transactions and balances have been eliminated in consolidation.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the year ended December 31, 2015, the Company incurred a net loss of $4,228,954, used cash in operations of $2,595,457 and had a stockholders’ deficiency of $782,220 as of that date. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

At December 31, 2015, the Company had cash on hand in the amount of $349,186. Management estimates that the current funds on hand will be sufficient to continue operations through May 2016. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities for cash to operate our business, including without limitation the expenses it will incur in connection with the license and research and development agreements with Temple; costs associated with product development and commercialization of the AOT and Joule Heat technologies; costs to manufacture and ship the products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, as discussed below, the Company has substantial contractual commitments, including without limitation salaries to our executive officers pursuant to employment agreements, certain payments to a former officer and consulting fees, during the remainder of 2016 and beyond.

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case or equity financing.

Revenue Recognition Policy

The Company recognizes lease revenue upon commencement of the lease. Revenue on future product sales will be recognized upon meeting the following criteria: persuasive evidence of an arrangement exists; delivery has occurred or services rendered; the seller's price to the buyer is fixed or determinable; and collectability is reasonably assured.

Property and Equipment and Depreciation

Property and equipment are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three to ten years. Expenditures for major renewals and improvements that extend the useful lives of property and equipment are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.

Impairment of Long-lived Assets

Our long-lived assets, such as property and equipment, are reviewed for impairment at least annually, or when events and circumstances indicate that depreciable or amortizable long lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current value.

We use various assumptions in determining the current fair value of these assets, including future expected cash flows and discount rates, as well as other fair value measures. Our impairment loss calculations require us to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.

If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results. Based upon management’s annual review, no impairments were recorded for the years ended December 31, 2015, 2014 and 2013.

Loss per Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution, using the treasury stock method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the Company. In computing diluted loss per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants.

For the years ended December 31, 2015, 2014 and 2013, the dilutive impact of outstanding stock options of 21,535,148, 21,052,030 and 20,309,908; outstanding warrants of 4,411,667, 5,692,087 and 11,763,966; and notes convertible into 509,667, -0- and -0- shares of our common stock, respectively, have been excluded because their impact on the loss per share is anti-dilutive.

Income Taxes

Income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets are recognized for the future tax consequences of transactions that have been recognized in the Company’s consolidated financial statements or tax returns. A valuation allowance is provided when it is more likely than not that some portion or entire deferred tax asset will not be realized.

Stock-Based Compensation

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.

The fair value of the Company's stock options and warrants grant is estimated using the Black-Scholes Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes Option Pricing model could materially affect compensation expense recorded in future periods.

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include those related to assumptions used in valuing equity instruments and derivative liabilities. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Effective January 1, 2008, fair value measurements are determined by the Company's adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities as permitted. The adoption of the authoritative guidance did not have a material impact on the Company's fair value measurements. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

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

Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company's assumptions.

The Company is required to use of observable market data if such data is available without undue cost and effort.

The carrying amounts for cash, accounts payable, accrued expenses and convertible debentures approximate their fair value due to their short term nature.

Research and Development Costs

Costs incurred for research and development are expensed as incurred. Purchased materials that do not have an alternative future use are also expensed. Furthermore, costs incurred in the construction of prototypes with no certainty of any alternative future use and established commercial uses are also expensed.

For the years ended December 31, 2015, 2014 and 2013 research and development costs were $577,501, $893,542 and $2,011,486, respectively.

Patent Costs

Patent costs consist of patent-related legal and filing fees. Due to the uncertainty associated with the successful development of our AOT and Joule Heat products, all patent costs are expensed as incurred. During the year ended December 31, 2015, 2014 and 2013, patent costs were $53,044, $103,434 and $144,326, respectively, and were included as part of operating expenses in the accompanying consolidated statements of operations.

Recent Accounting Pronouncements

On August 27, 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statement presentation or disclosures.

3. Certain Relationships and Related Transactions

12 Months Ended

Dec. 31, 2015

Certain Relationships and Related Transactions

Accrued Expenses and Accounts Payable - Related Parties

As of December 31, 2015 and December 31, 2014, the Company had accounts payable to related parties in the amount of $76,089 and $80,589, respectively. These amounts are unpaid Directors Fees and unpaid Company expenses incurred by Officers and Directors.

As of December 31, 2015 and December 31, 2014, the Company accrued the unpaid salaries, unused vacation and the corresponding payroll taxes of Officers in the aggregate of $114,661, and $178,468, respectively. Included in these accruals are the unpaid salaries to a former President and current member of the Company’s Board of Directors of $75,429, and $135,429, respectively. The Company agreed to a monthly payment of $5,000 to the current Board member until his unpaid salary is fully settled.

Bonus Paid to Officers

General and administrative expenses for the year ended December 31, 2013 include bonuses in the aggregate of $150,000 paid to Officers. There were no such bonuses paid during the years ended December 31, 2015 and 2014.

Consulting Fees Paid to Related Party

General and administrative expenses for the year ended December 31, 2014 and 2013 include consulting fees of $60,000 for services rendered by a consulting firm controlled by a member of our Board of Directors. There were no such costs in 2015.

4. Property and Equipment

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Property and Equipment

At December 31, 2015 and 2014, property and equipment consists of the following:

	December 31,
	2015			2014

Office equipment	$	65,051		$	65,051
Furniture and fixtures		4,075			4,075
Testing Equipment		12,914			–
Subtotal		82,040			69,126
Less accumulated depreciation		(60,242	)		(47,180	)
Total	$	21,798		$	21,946

Depreciation expense for the years ended December 31, 2015, 2014 and 2013 was $13,062, $13,825 and $15,399, respectively.

5. Convertible Notes and Warrants

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Convertible Notes and Warrants

	December 31,
	2015			2014

Convertible note	$	321,024		$	244,640
Interest		2,004			–
Subtotal		323,028			244,640
Convertible note discount		(100,833	)		(105,542	)
Total	$	222,195		$	139,098

In 2014, the Company conducted a private placement and issued an aggregate of $280,390 of its convertible notes for proceeds of $254,900 or an original issue discount (“OID”) of $25,490. The notes do not bear any interest, however, the implied interest rate used was 10% since the notes were issued 10% less than its face value, are unsecured, and will mature in twelve months from issuance. The notes are convertible, at the option of the note holder, into the Company’s common stock at a conversion price of $0.48 per share, for a total of 584,146 shares of common stock. In addition, each note holder also received a warrant to purchase common stock equivalent to 25% of the number of shares the notes are convertible into or a total of 146,037 shares of common stock. Each warrant is exercisable on a cash basis only at a price of $0.48 per share, vests immediately upon issuance, and is exercisable for one year from the date of issuance.

As a result, the Company recorded a note discount of $145,160 to account for the relative fair value of the warrants, the notes’ beneficial conversion feature (“BCF”), and OID. The note discounts are being amortized over the life of the note or will be amortize in full upon the conversion of the corresponding notes to common stock. At December 31, 2014, total outstanding notes payable amounted to $244,640 and unamortized note discount was $105,542.

In 2015, the Company issued similar convertible promissory notes in the aggregate of $726,000 for cash proceeds of $660,000 or a discount of $66,000. The notes do not bear any interest; however, the implied interest rate used was 10% since the notes were issued 10% less than its face value, are unsecured, mature in twelve months from issuance and convertible at $0.30 and $0.10 per share. In addition, the Company also granted these note holders warrants to purchase 1,796,667 shares of the Company’ common stock. The warrants are fully vested, exercisable at $0.30 and $0.10 per share and will expire in one year. As a result, the Company recorded a note discount of $696,945 to account for the relative fair value of the warrants, the notes’ BCF and OID. The note discounts are being amortized over the life of the note or will be amortize in full upon the conversion of the corresponding notes to common stock.

During the year ended December 31, 2015, a total of $668,800 of notes payable were converted into 1.1 million shares of common stock and amortized note discount of $701,654 was recorded as interest expense.

As of December 31, 2015, total outstanding notes payable amounted to $321,024 and unamortized note discount of $100,833. Three notes in the aggregate of $211,024 had reached maturity without conversion as of December 31, 2015. As a result, the Company increased the principal amount of each note by 10% under terms of the notes in the aggregate amount of $19,184, which the Company recorded as an interest expense. As of the date of maturity, each of the notes commenced the accrual of interest thereon at an annual rate of 10% under terms of the notes. As of December 31, 2015, interest accrued for these notes amounted to $2,004.

6. Research and Development

12 Months Ended

Dec. 31, 2015

Research and Development [Abstract]

Research and Development

The Company constructs, develops and tests the AOT and Joule Heat technologies with internal resources and through the assistance of various third party entities. Costs incurred and expensed include fees such as patent fees, U.S. Department of Energy testing fees, purchase of test equipment, pipeline pumping equipment, crude oil tank batteries, viscometers, SCADA systems, computer equipment, payroll and other related equipment and various logistical expenses for the purposes of evaluating and testing the Company’s AOT prototypes.

For the years ended December 31, 2015, 2014 and 2013, our research and development expenses were $577,501, $893,452 and $2,011,486, respectively.

AOT and Joule Heat Product Development and Testing

The Company constructs, develops and tests the AOT and Joule Heat technologies with internal resources and through the assistance of various third party entities. Costs incurred and expensed include fees such as U.S. Department of Energy testing fees, purchase of test equipment, pipeline pumping equipment, crude oil tank batteries, viscometers, SCADA systems, computer equipment, payroll and other related equipment and various logistical expenses for the purposes of evaluating and testing the Company’s AOT and Joule Heat prototypes.

Total expenses incurred during the years ended December 31, 2015, 2014 and 2013 on AOT and Joule Heat product development and testing amounted to $215,668, $73,937 and $676,287 respectively and has been reflected as part of Research and Development expenses on the accompanying consolidated statements of operations.

AOT Prototypes

In 2013, the Company entered into a lease agreement with TransCanada Keystone Pipeline, L.P. for the manufacture and delivery of our AOT Prototype Equipment. In 2014, the Company entered into another lease agreement with Kinder Morgan Crude & Condensate, LLC for the manufacture and delivery of our AOT Prototype Equipment. See Note 7 for further discussion.

During the years ended December 31, 2015, 2014 and 2013, the Company incurred total expenses of $109,645, $502,720 and $1,029,143, respectively, in the manufacture and delivery of the AOT prototype equipment. These expenses have been reflected as part of Research and Development expenses on the accompanying consolidated statements of operations.

Temple University Licensing Agreement

On August 1, 2011, the Company and Temple University (“Temple”) entered into two (2) Exclusive License Agreements (collectively, the “License Agreements”) relating to Temple’s patent applications, patents and technical information pertaining to technology associated with an electric and/or magnetic field assisted fuel injector system (the “First Temple License”), and to technology to reduce crude oil viscosity (the “Second Temple License”). The License Agreements are exclusive and the territory licensed to the Company is worldwide and replace previously issued License Agreements.

Pursuant to the two licensing agreements, the Company agreed to pay Temple the following: (i) non-refundable license maintenance fee of $300,000; (ii) annual maintenance fees of $187,500; (iii) royalty fee ranging from 4% up to 7% from revenues generated from the licensing agreements; and (iv) 25% of all revenues generated from sub-licensees to secure or maintain the sub-license or option thereon. Temple also agreed to defer $37,500 of the amount due if the Company agrees to fund at least $250,000 in research or development of Temple’s patent rights licensed to the Company. The term of the licenses commenced in August 2011 and will expire upon the expiration of the patents. The agreement can also be terminated by either party upon notification under terms of the licensing agreements or if the Company ceases the development of the patent or failure to commercialize the patent rights.

Total expenses recognized during each year ended December 31, 2015, 2014 and 2013 pursuant to these two agreements amounted to $187,500 and has been reflected in Research and Development expenses on the accompanying consolidated statements of operations.

As of December 31, 2015 and 2014, total unpaid fees due to Temple pursuant to these agreements amounted to $460,625 and $340,625, respectively, which are included as part of Accounts Payable – licensing agreement in the accompanying consolidated balance sheets. As of December 31, 2015, $165,125 of the $460,625 payable has been deferred under terms of the license agreements and $295,500 is deemed past due. The Company is currently in negotiations with Temple to settle this amount.

In 2014, the Company recognized revenues of $240,000 as a result of these two licenses. No royalty payment was due to Temple as the reported revenues did not meet the threshold at which the Company would pay royalties in addition to the annual maintenance agreement. There were no revenues generated from these two licenses during the years ended December 31, 2015 and 2013.

Temple University Sponsored Research Agreement

On March 19, 2012, the Company entered into a Sponsored Research Agreement (“Research Agreement”) with Temple University (“Temple”), whereby Temple, under the direction of Dr. Rongjia Tao, will perform ongoing research related to the Company’s AOT device (the “Project”), for the period April 1, 2012, through April 1, 2014. All rights and title to intellectual property resulting from Temple’s work related to the Project shall be subject to the Exclusive License Agreements between Temple and the Company, dated August 1, 2011. In exchange for Temple’s research efforts on the Project, the Company has agreed to pay Temple $500,000, payable in quarterly installments of $62,500. A copy of the Temple Research Agreement dated March 19, 2012, as amended March 19, 2013 is attached to this Form 10-K filing as Exhibit 10.121.

In August 2013, the Company and Temple amended the Research Agreement. Under the amended agreement, parties agreed that total cost for Phase 1 of the agreement was $241,408 and total cost for Phase 2 of the agreement was $258,592 payable beginning September 1, 2013 in eight quarterly installments of $32,324.

During the years ended December 31, 2015, 2014 and 2013, the Company recognized a total expense of $64,688, $129,295 and $118,556, respectively, pursuant to this agreement and such costs have been reflected in Research and Development expenses on the accompanying consolidated statements of operations.

As of December 31, 2015 and 2014, total unpaid fees due to Temple pursuant to this agreement amounted to $129,377 and $64,688, respectively, which are included as part of Accounts Payable – licensing agreement in the accompanying consolidated balance sheets. As of December 31, 2015, the entire $129,377 is deemed past due. The Company is currently in negotiations with Temple to settle this amount.

7. Leases

12 Months Ended

Dec. 31, 2015

Leases [Abstract]

Leases

TransCanada Keystone Pipeline, L.P. Lease

On August 1, 2013, the Company entered into an Equipment Lease/Option to Purchase Agreement (“Lease”) with TransCanada Keystone Pipeline, L.P. by its agent TC Oil Pipeline Operations, Inc. ("TransCanada") which agreed to lease and test the effectiveness of the Company’s AOT technology and equipment on one of TransCanada’s operating pipelines. The initial term of the lease was for six months at an amount of $60,000 per month. During the initial term, either the Company or TransCanada had the right to terminate the Agreement for any reason on 90-days written notice. TransCanada had an option to purchase the equipment during the term of the lease for approximately $4.3 million.

In June 2014, the equipment was accepted by TransCanada and the lease commenced. The Company accounted the TransCanada Lease as an operating lease, and recognized total lease revenue of $240,000 from June 2014 up to October 2014.

In October 2014, the lease was mutually terminated by the Company and TranCanada and the AOT Equipment was returned to the Company.

Kinder Morgan Crude & Condensate, LLC Lease

On July 15, 2014, the Company entered into an Equipment Lease/Option to Purchase Agreement (“Lease”) with Kinder Morgan Crude & Condensate, LLC (“Kinder Morgan”). In accordance with the terms and conditions of the agreement, Kinder Morgan agreed to lease and test the effectiveness of the Company’s AOT technology and equipment on one of Kinder Morgan’s operating pipelines. Equipment provided under the Lease includes a single AOT Midstream pressure vessel with a maximum flow capacity of 5,000 gallons per minute.

The initial term (“Initial Term”) of the Lease is four months, with an option to extend the Lease for up to a maximum of 84 months. During the Initial Term, either the Company or Kinder Morgan may terminate the Agreement for any reason on 45 days’ written notice. Lease payments shall be $20,000 per month; provided however, that in the event the Equipment is removed from service at its initial location during the Initial Term, the monthly lease payments shall be reduced to $5,000 until the Equipment is placed back in service at its new location, at which time the Lease payments shall resume at $20,000 per month. The agreement further provides that Kinder Morgan shall have an option to purchase the Equipment during the term of the Lease for a fixed price of between $600,000 and $1,200,000, depending upon the date of purchase.

The AOT equipment was delivered to Kinder Morgan in December 2014 and installed in March 2015. In April 2015, the AOT equipment experienced technical issues that needed further modifications. In February 2016, the AOT equipment was installed at Kinder Morgan’s facility with pre-start testing to begin in March 2016. The Company will account for the lease with Kinder Morgan as an operating lease once the AOT equipment is accepted.

8. Derivative Liability

12 Months Ended

Dec. 31, 2015

Derivative Liability [Abstract]

Derivative Liability

Pursuant to current accounting pronouncements, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The FASB’s guidance requires the fair value of these liabilities be re-measured at the end of every reporting period. The Company characterized the fair value of these warrants as derivative liabilities upon issuance and re-measured every reporting period with the change in value reported in the accompanying statement of operations.

In 2009 and 2010, in connection with certain convertible note offerings, the Company granted warrants to purchase an aggregate of 8,522,500 shares of the Company’s common stock. The warrants are initially exercisable at $0.30 per share with exercise prices that may fluctuate based on the occurrence of future offerings or events. At December 31, 2012, a total of 4.4 million warrants remained outstanding with a fair value of $3,221,138.

In January 2013, the remaining 4.4 million warrants expired or were exercised at which time the warrants had a fair value of $3,441,752, which resulted in a loss of $220,614 due to the change in the fair value of the derivative liability. Furthermore, as a result of the exercise and expiration of these warrants, the Company recorded a gain of $3,441,752 due to the extinguishment of the corresponding derivative liability. There were no similar warrants issued or outstanding in 2015 and 2014.

The derivative liabilities were valued using a probability weighted average of Black-Scholes Option Pricing models as a valuation technique, which approximates the Monte Carlo and other binominal valuation techniques with the following assumptions:

	January 15
	2013
Risk-free interest rate		0.12%
Expected volatility		92%
Expected life (in years)		0.75 - 1.00
Expected dividend yield		0%
Fair Value:
2009 Warrants		3,441,752
Total Fair Value	$	3,441,752

The risk-free interest rate is based on the yield available on U.S. Treasury securities. The Company estimates volatility based on the historical volatility of its common stock. The expected life warrants are based on the expiration date of the related warrants. The expected dividend yield was based on the fact that the Company has not paid dividends to stockholders in the past nor is it expected to pay any dividends in the foreseeable future.

9. Common Stock Transactions

12 Months Ended

Dec. 31, 2015

Stockholders' Equity Note [Abstract]

Common Stock Transactions

2015

During the year ended December 31, 2015, the Company issued an aggregate of 2,803,333 shares of its common stock as follows:

The Company issued 2,603,333 shares of its common stock in exchange for conversion of $668,800 of Convertible Notes pursuant to the convertible notes conversion price ranging from $0.10 to $0.48 per share.

The Company issued 200,000 shares of its common stock upon exercise of warrants at price of $0.25 per share for total cash proceeds of at $50,000.

2014

During the year ended December 31, 2014, the Company issued an aggregate of 4,785,427 shares of its common stock as follows:

The Company issued 74,480 shares of its common stock in exchange for conversion of $35,750 of Convertible Notes pursuant to the convertible notes conversion price of $0.48 per share.

The Company issued 4,710,947 shares of its common stock for exercise of options and warrants at price of $0.30 per share and valued at $1,413,284, of which, $30,000 was applied to an existing accounts payable and $1,383,284 was received in cash.

2013

During the year ended December 31, 2013, the Company issued an aggregate of 32,575,247 shares of its common stock as follows:

The Company issued 29,152,389 shares of its common stock upon exercise of options and warrants at a price of $0.25 up to $0.98 which resulted in net cash proceeds of $8,428,218 and settlement of unpaid fees recorded in prior years of $49,000 for a total of $8,477,218.

The Company issued 375,455 shares of its common stock with a fair value of $419,113 or $1.12 per share to employees, officers, members of the Board of Directors and a consultant for service rendered. The shares were valued at market at the date of the agreement.

In December 2013, the Company issued 3,047,403 shares of common stock with a fair value of $3,108,347 pursuant to a settlement with CEDE & Co (see Note 13). The shares were valued at market at the date of issuance.

In December 2013, the Company’s stockholders agreed to increase the authorized shares of common stock of the Company from 200,000,000 to 300,000,000.

10. Stock Options and Warrants

12 Months Ended

Dec. 31, 2015

Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]

Stock Options and Warrants

The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs. Options and warrants vest and expire according to terms established at the grant date.

Options

The Company previously issued stock options to employees, directors and consultants under its 2004 Stock Option Plan (the Plan). The Company could issue options under the Plan to acquire up to 7,000,000 shares of common stock as amended in May 2006. On March 2, 2014, the Plan expired and the Board decided not to extend it.

Employee options vest according to the terms of the specific grant and expire from 5 to 10 years from date of grant. Non-employee option grants vest upon issuance up to 2 years. The weighted-average, remaining contractual life of employee and Non-employee options outstanding at December 31, 2015 was 5.2 years. Stock option activity for the period January 1, 2013 to December 31, 2015, was as follows:

	Weighted Avg. Options			Weighted Avg. Exercise Price
Options, January 1, 2013		27,278,098		$	0.27
Options granted		207,819			1.17
Options exercised		(115,000	)		0.60
Options forfeited		(7,061,009	)		0.25
Options, December 31, 2013		20,309,908		$	0.28
Options granted		852,122			0.80
Options exercised		(20,000	)		0.30
Options forfeited		(90,000	)		0.91
Options, December 31, 2014		21,052,030		$	0.20
Options granted		838,552			0.46
Options exercised		–			–
Options forfeited		(355,434	)		0.72
Options, December 31, 2015		21,535,148		$	0.30

The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest under the Plan as of December 31, 2015 were as follows:

	Outstanding Options						Exercisable Options
Option Exercise Price Per Share	Shares		Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$ 0.21 - $ 0.99		21,343,280		5.2	$	0.29		20,408,283	$	0.29
$ 1.00 - $ 1.99		191,868		4.2	$	1.22		263,229	$	1.20
		21,535,148			$	0.30		20,671,512	$	0.30

As of December 31, 2015 the market price of the Company’s stock was $0.19 per share. At December 31, 2015 the aggregate intrinsic value of the options outstanding was $0. Future unamortized compensation expense on the unvested outstanding options at December 31, 2015 is approximately $34,000.

2015

From January through July 2015, the Company issued options to purchase a total of 838,552 shares of common stock to employees, officers and members of the Board of Directors with a fair value of $323,787 using the Black-Scholes Option Pricing model. The options are exercisable from $0.65 up to $0.99 per share, vesting within one year and expiring in ten years from the date of grant. During the year ended December 31, 2015, the Company recognized compensation costs of $323,787 based on the fair value of options that vested.

During the year ended December 31, 2015, the Company amortized $366,266 of compensation cost based on the vesting of the options granted to employees and directors in prior years.

2014

In February 2014, options to purchase 20,000 shares of common stock were exercised resulting in proceeds of $6,000.

From January up to October 2014, the Company issued options to purchase a total of 852,122 shares of common stock to employees, officers and members of the Board of Directors with an estimated fair value of approximately $454,499 using the Black-Scholes Option Pricing model. The options are exercisable from $0.65 up to $0.99 per share, vesting within two years and expire in two and ten years from the date of grant. During the year ended December 31, 2014, the Company recognized compensation costs of $295,884 based on the fair value of options that vested.

During the year ended December 31, 2014, the Company amortized $376,247 of compensation cost based on the vesting of the options granted to employees, directors and consultants in prior years.

2013

From April up to September 2013, options to purchase 115,000 shares of common stock were exercised resulting in net proceeds of $19,500. Included in the exercise was issuance of 50,000 shares of common stock valued at $49,000 pursuant to an exercise of options and accounted for as partial settlement of a liability recorded in prior years.

From July up to September 2013, the Company issued options to purchase 207,819 shares of common stock to consultants, employees, officers and members of the Board of Directors with a fair value of approximately $201,000 using the Black-Scholes Option Pricing model. The options are exercisable at $1.09/share up to $1.71/share, vest over a period of one year and expire in two years and ten years from the date of grant. During the year ended December 31, 2013, the Company recognized compensation costs of $101,157 based on the fair value of options that vested.

In November 2013, pursuant to separation agreement with an Officer of the Company, the Company cancelled unvested option to purchase 7,040,000 shares of common stock at $0.25 and modified the vesting period of unvested option to purchase 3,520,000 shares of common stock at $0.25, both granted during 2011.

During the year ended December 31, 2013, the Company amortized $403,127 of compensation cost based on the vesting of the options granted to employees, directors and consultants in prior years.

Black-Scholes Option Pricing

The Company used the following average assumptions in its calculation using the Black-Scholes Option Pricing model:

	Years Ended
	2015		2014		2013
Expected life (years)	5.0 – 5.5		1.5 – 5.5		1.5 – 5.5
Risk free interest rate	1.56 – 1.72	%	0.12 – 1.70	%	0.34 – 1.65	%
Volatility	106 – 121	%	123 – 135	%	127 – 130	%
Expected dividend yield	0	%	0	%	0	%

The expected life is based on the expiration date of the related options. The risk-free interest rate is based on the yield available on U.S. Treasury securities. The Company estimates volatility based on the historical volatility of its common stock. The expected dividend yield was based on the fact that the Company has not paid dividends to stockholders in the past nor is it expected to pay any dividends in the foreseeable future.

The weighted average fair value for options granted in 2015, 2014 and 2013 was $0.39, $0.96 and $0.30, respectively.

Warrants

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

	Warrants			Weighted Avg. Exercise Price
Warrants outstanding, January 1, 2013		42,205,507		$	0.31
Warrants granted		150,000			0.30
Warrants exercised		(29,037,389	)		0.29
Warrants cancelled		(1,554,152	)		0.33
Warrants outstanding, December 31, 2013		11,763,966		$	0.34
Warrants granted		761,037			0.71
Warrants exercised		(4,690,947	)		0.30
Warrants cancelled		(2,141,969	)		0.46
Warrants outstanding, December 31, 2014		5,692,087		$	0.36
Warrants granted		1,796,667			0.20
Warrants exercised		(200,000	)		0.25
Warrants cancelled		(2,877,087	)		0.36
Warrants outstanding, December 31, 2015		4,411,667		$	0.31

At December 31, 2015 the price of the Company’s common stock was $0.19 per share and the aggregate intrinsic value of the warrants outstanding was $79,200. Future unamortized compensation expense on the unvested outstanding warrants at December 31, 2015 is approximately $1,867.

	Outstanding Warrants						Exercisable Warrants
Warrant Exercise Price Per Share	Shares		Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$ 0.25 - $ 0.99		4,291,667		3.2	$	0.36		4,291,667	$	0.34
$ 1.00 - $ 1.99		120,000		0.0	$	1.01		120,000	$	1.01
		4,411,667			$	0.38		4,411,667	$	0.35

2015

In January 2015, warrants to acquire 200,000 shares of common stock were exercised resulting in gross proceeds of $50,000.

In May through December 2015, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 1,796,667 shares with exercise prices of $0.30 per share and $0.10 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion.

During the year ended December 31, 2015, the Company amortized $38,524 of compensation cost based on the vesting of the warrants granted to employees, directors and consultants in prior years.

2014

In January and February 2014, warrants to acquire 4,690,947 shares of common stock were exercised resulting in gross proceeds of $1,407,284. Furthermore, included in the exercise was issuance of 100,000 shares of common stock valued at $30,000 pursuant to an exercise of warrants and accounted for as partial settlement of unpaid fees recorded in prior years. As a result, the aggregate net proceeds received amounted to $1,377,284.

From January up to October 2014, the Company granted consultants warrants to purchase a total of 315,000 shares with an average exercise price of $0.84 per share, vesting in six months up to two years and expiring in two years up to ten years from the date of grant. The fair value of the warrants upon vesting amounted to $20,950 using the Black-Scholes Option Pricing model with the following average assumptions: risk-free interest rate of 0.89%; dividend yield of 0%; volatility of 66%; and an expected life of twenty-nine months. During the year ended December 31, 2014, the Company recognized an amortized expense of $20,950 based on the fair value of warrants that vested.

In May 2014, the Company granted a consultant warrants to purchase 300,000 shares over eighteen months at the rate of 50,000 shares every three months, with an exercise price of equal to the closing stock price on the date of vesting, and expiring two years from the date of grant. The fair value of the warrants vested at December 31, 2014 amounted to $21,000 using the Black-Scholes Option Pricing model with the following average assumptions: risk-free interest rate of 0.50%; dividend yield of 0%; volatility of 65%; and an expected life of 18 months. During the year ended December 31, 2014, the Company recognized an amortized expense of $21,000 based on the fair value of options that vested.

In October through December 2014, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 146,037 shares with an exercise price of $0.48 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion.

During the year ended December 31, 2014, the Company amortized $16,645 of compensation cost based on the vesting of the warrants granted to employees, directors and consultants in prior years.

2013

In March 2013, pursuant to a settlement of debt agreement, the Company granted a consultant a warrant to purchase 150,000 shares of its common stock with an exercise price of $0.30 per share, vesting immediately and expiring in two years from grant date. The fair value of the warrant amounted to $129,622 using the Black-Scholes Option Pricing model with the following average assumptions: risk-free interest rate of 0.26%; dividend yield of 0%; volatility of 132%; and an expected life of two years.

During the year ended December 31, 2013, warrants to acquire 29,037,389 shares of common stock were exercised resulting in proceeds of $8,408,718, net of direct costs incurred of $78,521.

During the year ended December 31, 2013, the Company recorded $52,314 of compensation cost based on the vesting of the warrants granted to employees, directors and consultants in prior years.

11. Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

There is no current or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.

Leases

On August 1, 2013, the Company entered into a non-cancellable lease with a 5-year term, expiring July 31, 2018 at a monthly rent of $13,075. On February 1, 2014, the Company amended its lease in order to reduce the leased area as well as the monthly lease to $5,830 per month.

Total rent expense during the years ended December 31, 2015, 2014 and 2013, was $69,960, $81,851 and $160,535 respectively which are included as part of Operating Expenses in the attached consolidated statements of operations. The following is a schedule by years of future minimum rental payments required under the non-cancellable office lease as of December 31, 2015.

Year ending		Non-cancellable
December 31,		Office Leases
	2016		69,960
	2017		69,960
	2018		40,810
	Total	$	180,730

12. Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

The Company did not record an income tax provision for 2015, 2014 and 2013, other than $800 for the minimum state tax provision. A reconciliation of income taxes with the amounts computed at the statutory federal rate follows:

	December 31,
	2015			2014			2013
Computed tax provision (benefit) at federal statutory rate (34%)	$	(1,065,000	)	$	(1,133,000	)	$	(1,993,000	)
State income taxes, net of federal benefit		(277,000	)		(295,000	)		(518,000	)
Permanent items		–			–			–
Valuation allowance		1,342,800			1,428,800			2,511,800
Income tax provision	$	800		$	800		$	800

The deferred tax assets and deferred tax liabilities recorded on the balance sheet are as follows:

	December 31,
	2015			2014
Net operating loss carry forwards		21,000,000			19,600,000
Valuation allowance		(21,000,000	)		(19,600,000	)
Total deferred taxes net of valuation allowance	$	–		$	–

As of December 31, 2015, the Company had net operating losses available for carry forward for state and federal tax purposes of approximately $51 million expiring through 2035. These carry forward benefits may be subject to annual limitations due to the ownership change limitations imposed by the Internal Revenue Code and similar state provisions. The annual limitation, if imposed, may result in the expiration of net operating losses before utilization.

As of December 31, 2015, the Company recorded valuation allowance of $21,000,000 for its deferred tax assets the Company believes that such assets did not meet the more likely than not criteria to be recoverable through projected future profitable operations in the foreseeable future

Effective January 1, 2007, the Company adopted FASB guidance that addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The FASB also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2015, 2014 and 2013, the Company does not have a liability for unrecognized tax benefits.

The Company files income tax returns in the U.S. federal jurisdiction and the state of California. The Company is subject to U.S. federal or state income tax examinations by tax authorities for years after 2002. During the periods open to examination, the Company has net operating loss and tax credit carry forwards for U.S. federal and state tax purposes that have attributes from closed periods. Since these net operating losses and tax credit carry forwards may be utilized in future periods, they remain subject to examination. The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2015, the Company has no accrued interest or penalties related to uncertain tax positions. The Company believes that it has not taken any uncertain tax positions that would impact its consolidated financial statements as of December 31, 2015, 2014 or 2013.

13. Settlement with CEDE & Co.

12 Months Ended

Dec. 31, 2015

Settlement With Cede Co.

Settlement with CEDE & Co.

In 2001, a total of 3,047,403 shares of common stock of the Company that were held in street (nominee) name by Cede & Co. of the Depository Trust Co. (the “Cede Shares”) were ordered cancelled by a federal district court relating to litigation initiated by the Securities and Exchange Commission against the Company and its former Chief Executive Officer (CEO). Either before or after the court’s order (the timing of which is unknown to the Company), the Cede Shares, at that time were held directly or indirectly by the former CEO and were placed with Cede & Co. in nominee name. In furtherance of the court’s order, the physical certificates relating to the Cede Shares should have been returned to the Company’s stock transfer agent, NATCO, for cancellation. This did not occur. Rather, Cede & Co. retained the stock certificates representing the Cede Shares and continued to treat the Cede Shares as outstanding and free trading shares of the Company. Notwithstanding the foregoing, NATCO, in furtherance of then Company counsel’s instructions, cancelled the Cede Shares on the Company’s books and records in 2005, and, in furtherance thereof, reduced the Company’s outstanding shares of common stock by 3,047,403.

In 2013, Cede & Co. has requested, in effect, that, inasmuch as the Cede Shares continue to be within its system, the Cede Shares be reinstated on the Company’s books and records and that the outstanding shares of the Company be increased by 3,047,403. Although the Company believes Cede & Co.’s request is misplaced, particularly since it appears that Cede & Co. had prior notice of the court’s order cancelling the Cede Shares, the Company has elected to avoid litigation with Cede & Co. and instead has elected to reinstate the Cede Shares.

In December 2013, the Company approved the reinstatement of 3,047,403 shares of common stock of the Company with a fair value of $3,108,347 and recorded as part of Operating Expenses in 2013 in the accompanying consolidated Statement of Operations. The fair value of the shares was determined based on the trading price of the Company’s shares on December 16, 2013, the date of the Company’s Board of Directors approved such reinstatement.

14. Settlement with Former Officer

12 Months Ended

Dec. 31, 2015

Settlement With Former Officer

Settlement with Former Officer

On November 15, 2013, Cecil Kyte voluntarily resigned as a Director, Chairman of the Board, a member of the Nominating and Corporate Governance Committee, and Chief Executive Officer. Pursuant to his separation agreement, the Company recognized expense of $364,315 to account for his severance pay plus corresponding payroll taxes which was recorded as part of Operating Expenses in the accompanying consolidated Statement of Operations for 2013. The entire amount due to Mr. Kyte was paid in full in 2014.

At the time of separation, Mr. Kyte also held unvested options which had been granted in January 2011 to purchase 10,560,000 shares of common stock at $0.25 per share, of which 3,520,000 shares were due to vest in January 2014 and 7,040,000 shares were due to fully vest by January 2016. Under terms of the separation agreement, the Company accelerated the vesting of the 3,520,000 options to November 15, 2013 while the remaining 7,040,000 options were forfeited. As a result, the Company recognized compensation expense of $3,809,325, to account for the fair value of the options that were modified. The fair value was determined using a Black-Scholes Option Pricing model with the following: risk-free interest rate of 2.06%; dividend yield of 0%; volatility of 130%; and an expected life of 7 years. Previously recorded compensation recorded in 2013 related to the original vesting schedule of the 3,520,000 options was reversed, and the $3,809,325 was recorded as part of Operating Expenses in the accompanying consolidated Statement of Operations for 2013.

15. Quarterly Information (unaudited)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Quarterly Information

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Year Ended December 31, 2015:
Net sales	$	–		$	–		$	–		$	–
Gross profit	$	–		$	–		$	–		$	–
Net loss	$	(1,174,337	)	$	(1,542,944	)	$	(825,797	)	$	(685,876	)
Loss per share, Basic and Diluted (1)	$	(0.01	)	$	(0.01	)	$	(0.00	)	$	(0.00	)

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Year Ended December 31, 2014:
Net sales	$	–		$	60,000		$	180,000		$	–
Gross profit	$	–		$	60,000		$	180,000		$	–
Net loss	$	(1,403,474	)	$	(1,008,392	)	$	(715,774	)	$	(878,695	)
Loss per share, Basic and Diluted (1)	$	(0.01	)	$	(0.01	)	$	(0.00	)	$	(0.00	)

(1)

Per share data was computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share information may not equal the annual income per share.

16. Contractual Obligations

12 Months Ended

Dec. 31, 2015

Contractual Obligations

Contractual Obligations

The Company has certain contractual commitments for future periods, including office leases, minimum guaranteed compensation payments and other agreements as described in the following table and associated footnotes:

Year ending		Office		Research and License		Compensation		Total
December 31,		Lease (1)		Agreements (2)		Agreements (3)		Obligations
	2016	$	69,960	$	187,500	$	350,000	$	607,460
	2017		69,960		187,500		305,429		562,889
	2018		40,810		187,500		290,000		518,310
	2019		–		187,500		54,375		241,875
	2020		–		187,500		–		187,500
	Total	$	180,730	$	937,500	$	999,804	$	2,118,034

___________________

	(1)	Consists of rent for the Company’s Santa Barbara Facility expiring on July 31, 2018.
	(2)	Consists of license maintenance fees to Temple University in the amount of $187,500 paid annually through the life of the underlying patents or until otherwise terminated by either party.
	(3)	Consists of base salary and certain contractually-provided benefits, to i) an executive officer, pursuant to an employment agreement at a base salary of $290,000 per year and, as amended by the Board on March 10, 2016, expires on March 8, 2019; and ii) and a severance agreement of a former officer in the amount of $75,429.

17. Subsequent Events

12 Months Ended

Dec. 31, 2015

Subsequent Events [Abstract]

Subsequent Events

Increase in Outstanding Shares

From January 1, 2016 up to March 15, 2016, the Company issued convertible notes in aggregate of $390,610 in exchange for cash of $355,100. The notes are unsecured, convertible into 3,90,100 shares in common stock of the Company at a conversion price of $0.10 per share and matures in one year. In connection with these notes, the Company also issued warrants to purchase 1,953,050 shares of common stock of the Company at an exercise price of $0.10 per share and expiring one year from the date of issuance. As a result, the Company will record a note discount of $390,610 to account for the relative fair value of the warrants, the notes’ beneficial conversion feature and original issue discount which will be amortized as interest expense over the life of the notes.

From January 1, 2016 up to March 15, 2016, Company issued 3,029,050 shares of common stock upon voluntary conversion of previously issued convertible notes in aggregate value of $302,905.

2. Summary of Significant Accounting Policies (Policies)	12 Months Ended
	Dec. 31, 2015
Accounting Policies [Abstract]
Description of business	Description of Business QS Energy, Inc. (“QS Energy”, “Company”) (formerly known as Save the World Air, Inc.) was incorporated on February 18, 1998, as a Nevada Corporation under the name Mandalay Capital Corporation. The Company changed its name to Save the World Air, Inc. on February 11, 1999. Effective August 11, 2015, the Company changed its name to QS Energy, Inc. The name change was effected through a short-form merger pursuant to Section 92A.180 of the Nevada Revised Statutes. Additionally, QS Energy Pool, Inc., a California corporation, was formed as a wholly-owned subsidiaries of the Company on July 6, 2015 to serve as a vehicle for the Company to explore, review and consider acquisition opportunities. The Company’s common stock is quoted under the symbol “QSEP” on the Over-the-Counter Bulletin Board. More information including the Company’s fact sheet, logos and media articles are available at our corporate website, www.qsenergy.com. QS Energy, Inc. develops and commercializes energy efficiency technologies that assist in meeting increasing global energy demands, improving the economics of oil extraction and transport, and reducing greenhouse gas emissions. The Company's intellectual property portfolio includes 47 domestic and international patents and patents pending, a substantial portion of which have been developed in conjunction with and exclusively licensed from Temple University of Philadelphia, PA (“Temple”). QS Energy's primary technology is called Applied Oil Technology™ (AOT™), a commercial-grade crude oil pipeline transportation flow-assurance product. AOT™ has been proven in U.S. Department of Energy tests to increase the energy efficiency of oil pipeline pump stations. The AOT product has transitioned from the research and development stage to initial commercial production for the midstream pipeline marketplace. In 2014, the Company began commercial development of a suite of products based around the Joule Heat technology. The Company began fabrication of prototype equipment to be operated under a joint development agreement with a commercial entity in the fourth quarter of 2014. This prototype equipment was installed in June, 2015, with testing beginning shortly thereafter, which is anticipated to be completed first quarter of 2016. In addition, the Company filed two additional provisional patents related to the technology’s method and apparatus. The first of the two provisional patents was finalized and submitted to non-provisional status on April 29, 2014. The second of the two provisional patents was finalized and submitted to non-provisional status at the end of the third quarter of 2014.
Consolidation policy	Consolidation Policy The accompanying consolidated financial statements of QS Energy Inc. include the accounts of QS Energy Inc. (the Parent) and its wholly owned subsidiaries, QS Energy Pool, Inc. and STWA Asia Pte. Limited. Intercompany transactions and balances have been eliminated in consolidation.
Going concern	Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the year ended December 31, 2015, the Company incurred a net loss of $4,228,954, used cash in operations of $2,595,457 and had a stockholders’ deficiency of $782,220 as of that date. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. At December 31, 2015, the Company had cash on hand in the amount of $349,186. Management estimates that the current funds on hand will be sufficient to continue operations through May 2016. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities for cash to operate our business, including without limitation the expenses it will incur in connection with the license and research and development agreements with Temple; costs associated with product development and commercialization of the AOT and Joule Heat technologies; costs to manufacture and ship the products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, as discussed below, the Company has substantial contractual commitments, including without limitation salaries to our executive officers pursuant to employment agreements, certain payments to a former officer and consulting fees, during the remainder of 2016 and beyond. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in case or equity financing.
Revenue Recognition Policy	Revenue Recognition Policy The Company recognizes lease revenue upon commencement of the lease. Revenue on future product sales will be recognized upon meeting the following criteria: persuasive evidence of an arrangement exists; delivery has occurred or services rendered; the seller's price to the buyer is fixed or determinable; and collectability is reasonably assured.
Property and Equipment and Depreciation	Property and Equipment and Depreciation Property and equipment are stated at cost. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets, generally ranging from three to ten years. Expenditures for major renewals and improvements that extend the useful lives of property and equipment are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term.
Impairment of Long-Lived Assets	Impairment of Long-lived Assets Our long-lived assets, such as property and equipment, are reviewed for impairment at least annually, or when events and circumstances indicate that depreciable or amortizable long lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current value. We use various assumptions in determining the current fair value of these assets, including future expected cash flows and discount rates, as well as other fair value measures. Our impairment loss calculations require us to apply judgment in estimating future cash flows, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results. Based upon management’s annual review, no impairments were recorded for the years ended December 31, 2015, 2014 and 2013.
Loss per Share	Loss per Share Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution, using the treasury stock method that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the Company. In computing diluted loss per share, the treasury stock method assumes that outstanding options and warrants are exercised and the proceeds are used to purchase common stock at the average market price during the period. Options and warrants may have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options and warrants. For the years ended December 31, 2015, 2014 and 2013, the dilutive impact of outstanding stock options of 21,535,148, 21,052,030 and 20,309,908; outstanding warrants of 4,411,667, 5,692,087 and 11,763,966; and notes convertible into 509,667, -0- and -0- shares of our common stock, respectively, have been excluded because their impact on the loss per share is anti-dilutive.
Income Taxes	Income Taxes Income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets are recognized for the future tax consequences of transactions that have been recognized in the Company’s consolidated financial statements or tax returns. A valuation allowance is provided when it is more likely than not that some portion or entire deferred tax asset will not be realized.
Stock-Based Compensation	Stock-Based Compensation The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the Financial Accounting Standards Board whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the Financial Accounting Standards Board whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date. The fair value of the Company's stock options and warrants grant is estimated using the Black-Scholes Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes Option Pricing model, and based on actual experience. The assumptions used in the Black-Scholes Option Pricing model could materially affect compensation expense recorded in future periods.
Estimates	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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include those related to assumptions used in valuing equity instruments and derivative liabilities. Actual results could differ from those estimates.
Fair value of financial instruments	Fair Value of Financial Instruments Effective January 1, 2008, fair value measurements are determined by the Company's adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities as permitted. The adoption of the authoritative guidance did not have a material impact on the Company's fair value measurements. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly. Level 3—Unobservable inputs based on the Company's assumptions. The Company is required to use of observable market data if such data is available without undue cost and effort. The carrying amounts for cash, accounts payable, accrued expenses and convertible debentures approximate their fair value due to their short term nature.
Research and Development Costs	Research and Development Costs Costs incurred for research and development are expensed as incurred. Purchased materials that do not have an alternative future use are also expensed. Furthermore, costs incurred in the construction of prototypes with no certainty of any alternative future use and established commercial uses are also expensed. For the years ended December 31, 2015, 2014 and 2013 research and development costs were $577,501, $893,542 and $2,011,486, respectively.
Patent costs	Patent Costs Patent costs consist of patent-related legal and filing fees. Due to the uncertainty associated with the successful development of our AOT and Joule Heat products, all patent costs are expensed as incurred. During the year ended December 31, 2015, 2014 and 2013, patent costs were $53,044, $103,434 and $144,326, respectively, and were included as part of operating expenses in the accompanying consolidated statements of operations.
Recent Accounting Pronouncements	Recent Accounting Pronouncements On August 27, 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is in the process of evaluating the impact of ASU 2016-02 on the Company’s financial statements and disclosures. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statement presentation or disclosures.

4. Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Property and equipment

	December 31,
	2015			2014

Office equipment	$	65,051		$	65,051
Furniture and fixtures		4,075			4,075
Testing Equipment		12,914			–
Subtotal		82,040			69,126
Less accumulated depreciation		(60,242	)		(47,180	)
Total	$	21,798		$	21,946

5. Convertible Notes and Warrants (Tables)

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Convertible Notes and Warrants

	December 31,
	2015			2014

Convertible note	$	321,024		$	244,640
Interest		2,004			–
Subtotal		323,028			244,640
Convertible note discount		(100,833	)		(105,542	)
Total	$	222,195		$	139,098

8. Derivative Liability (Tables)

12 Months Ended

Dec. 31, 2015

Derivative Liability [Abstract]

Schedule of derivative liabilities

	January 15
	2013
Risk-free interest rate		0.12%
Expected volatility		92%
Expected life (in years)		0.75 - 1.00
Expected dividend yield		0%
Fair Value:
2009 Warrants		3,441,752
Total Fair Value	$	3,441,752

10. Stock Options and Warrants (Tables)

12 Months Ended

Dec. 31, 2015

Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]

Stock options outstanding

	Weighted Avg. Options			Weighted Avg. Exercise Price
Options, January 1, 2013		27,278,098		$	0.27
Options granted		207,819			1.17
Options exercised		(115,000	)		0.60
Options forfeited		(7,061,009	)		0.25
Options, December 31, 2013		20,309,908		$	0.28
Options granted		852,122			0.80
Options exercised		(20,000	)		0.30
Options forfeited		(90,000	)		0.91
Options, December 31, 2014		21,052,030		$	0.20
Options granted		838,552			0.46
Options exercised		–			–
Options forfeited		(355,434	)		0.72
Options, December 31, 2015		21,535,148		$	0.30

Options outstanding by Per Share Price

	Outstanding Options						Exercisable Options
Option Exercise Price Per Share	Shares		Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$ 0.21 - $ 0.99		21,343,280		5.2	$	0.29		20,408,283	$	0.29
$ 1.00 - $ 1.99		191,868		4.2	$	1.22		263,229	$	1.20
		21,535,148			$	0.30		20,671,512	$	0.30

Assumptions

	Years Ended
	2015		2014		2013
Expected life (years)	5.0 – 5.5		1.5 – 5.5		1.5 – 5.5
Risk free interest rate	1.56 – 1.72	%	0.12 – 1.70	%	0.34 – 1.65	%
Volatility	106 – 121	%	123 – 135	%	127 – 130	%
Expected dividend yield	0	%	0	%	0	%

Warrants outstanding

	Warrants			Weighted Avg. Exercise Price
Warrants outstanding, January 1, 2013		42,205,507		$	0.31
Warrants granted		150,000			0.30
Warrants exercised		(29,037,389	)		0.29
Warrants cancelled		(1,554,152	)		0.33
Warrants outstanding, December 31, 2013		11,763,966		$	0.34
Warrants granted		761,037			0.71
Warrants exercised		(4,690,947	)		0.30
Warrants cancelled		(2,141,969	)		0.46
Warrants outstanding, December 31, 2014		5,692,087		$	0.36
Warrants granted		1,796,667			0.20
Warrants exercised		(200,000	)		0.25
Warrants cancelled		(2,877,087	)		0.36
Warrants outstanding, December 31, 2015		4,411,667		$	0.31

Warrants outstanding by Per Share Price

	Outstanding Warrants						Exercisable Warrants
Warrant Exercise Price Per Share	Shares		Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$ 0.25 - $ 0.99		4,291,667		3.2	$	0.36		4,291,667	$	0.34
$ 1.00 - $ 1.99		120,000		0.0	$	1.01		120,000	$	1.01
		4,411,667			$	0.38		4,411,667	$	0.35

11. Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Future minimum rental payments

Year ending		Non-cancellable
December 31,		Office Leases
	2016		69,960
	2017		69,960
	2018		40,810
	Total	$	180,730

12. Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Reconciliation of income tax provision

	December 31,
	2015			2014			2013
Computed tax provision (benefit) at federal statutory rate (34%)	$	(1,065,000	)	$	(1,133,000	)	$	(1,993,000	)
State income taxes, net of federal benefit		(277,000	)		(295,000	)		(518,000	)
Permanent items		–			–			–
Valuation allowance		1,342,800			1,428,800			2,511,800
Income tax provision	$	800		$	800		$	800

Net operating loss carryforwards

	December 31,
	2015			2014
Net operating loss carry forwards		21,000,000			19,600,000
Valuation allowance		(21,000,000	)		(19,600,000	)
Total deferred taxes net of valuation allowance	$	–		$	–

15. Quarterly Information (Tables)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Quarterly information

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Year Ended December 31, 2015:
Net sales	$	–		$	–		$	–		$	–
Gross profit	$	–		$	–		$	–		$	–
Net loss	$	(1,174,337	)	$	(1,542,944	)	$	(825,797	)	$	(685,876	)
Loss per share, Basic and Diluted (1)	$	(0.01	)	$	(0.01	)	$	(0.00	)	$	(0.00	)

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
Year Ended December 31, 2014:
Net sales	$	–		$	60,000		$	180,000		$	–
Gross profit	$	–		$	60,000		$	180,000		$	–
Net loss	$	(1,403,474	)	$	(1,008,392	)	$	(715,774	)	$	(878,695	)
Loss per share, Basic and Diluted (1)	$	(0.01	)	$	(0.01	)	$	(0.00	)	$	(0.00	)

(1)

Per share data was computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share information may not equal the annual income per share.

16. Contractual Obligations (Tables)

12 Months Ended

Dec. 31, 2015

Contractual Obligations Tables

Contractual Obligations

Year ending		Office		Research and License		Compensation		Total
December 31,		Lease (1)		Agreements (2)		Agreements (3)		Obligations
	2016	$	69,960	$	187,500	$	350,000	$	607,460
	2017		69,960		187,500		305,429		562,889
	2018		40,810		187,500		290,000		518,310
	2019		–		187,500		54,375		241,875
	2020		–		187,500		–		187,500
	Total	$	180,730	$	937,500	$	999,804	$	2,118,034

2. Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Net loss	$ (685,876)	$ (825,797)	$ (1,542,944)	$ (1,174,337)	$ (878,695)	$ (715,774)	$ (1,008,392)	$ (1,403,474)	$ (4,228,954)	$ (4,006,335)	$ (10,657,009)
Cash flow from operations									(2,595,457)	(3,527,695)	(5,912,368)
Stockholders' equity (deficiency)	(782,220)				1,368,412				(782,220)	1,368,412	3,075,316	$ (2,897,520)
Cash on Hand	$ 349,186				$ 2,247,557				349,186	2,247,557	4,137,068	$ 1,601,791
Impairment on long-lived assets									0	0	0
Research and development expenses									577,501	893,452	2,011,486
Patent costs									$ 53,044	$ 103,434	$ 144,326
Options [Member]
Antidilutive shares excluded from loss per share									21,535,148	21,052,030	20,309,908
Warrants [Member]
Antidilutive shares excluded from loss per share									4,411,667	5,692,087	11,763,966
Convertible Notes [Member]
Antidilutive shares excluded from loss per share									509,667	0	0

3. Certain Relationships and Related Transactions (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Accounts payable to related parties	$ 190,750	$ 259,507
Accrued unpaid salaries, vacation and payroll taxes	114,661	178,468
Bonuses paid to officers included in general and administrative expenses	0	0	$ 150,000
Consulting fees	0	60,000	$ 60,000
Officer and Directors [Member]
Accounts payable to related parties	76,089	80,589
Former President
Accrued unpaid salaries, vacation and payroll taxes	$ 75,429	$ 135,429

4. Property and Equipment (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Property and equipment, gross	$ 82,040	$ 69,126
Less: accumulated depreciation	(60,242)	(47,180)
Property and equipment, net	21,798	21,946
Office equipment [Member]
Property and equipment, gross	65,051	65,051
Furniture and fixtures [Member]
Property and equipment, gross	4,075	4,075
Testing equipment [Member]
Property and equipment, gross	$ 12,914	$ 0

4. Property and Equipment (Details Narrative) - USD ($)	12 Months Ended
4. Property and Equipment (Details Narrative) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 13,062	$ 13,825	$ 15,399

5. Convertible Notes and Warrants Convertible Notes and Warrants (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Debt Disclosure [Abstract]
Convertible note	$ 321,024	$ 244,640
Interest	2,004	0
Subtotal	323,028	244,640
Convertible note discount	(100,833)	(105,542)
Total convertible notes and warrants	$ 222,195	$ 139,098

5. Convertible Notes and Warrants (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Debt Disclosure [Abstract]
Convertible notes issued	$ 726,000	$ 280,390
Proceeds from convertible notes	$ 660,000	$ 254,900	$ 0
Conversion price		$ .48
Conversion price range	$0.10 and $0.30
Original Issue Discount	$ 696,945	$ 145,160
Convertible note gross	323,028	244,640
Unamortized discount	100,833	105,542
Convertible notes balance	222,195	139,098
Debt converted during year	$ 668,800
Debt converted, shares issued	1,100,000
Interest expense	$ 701,654
Accrued interest	$ 2,004	$ 0

6. Research and Development (Details Narrative) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expenses incurred									$ 577,501	$ 893,452	$ 2,011,486
Accounts payable - licensing agreement	$ 590,001				$ 405,313				590,001	405,313
License revenue generated	0	$ 0	$ 0	$ 0	0	$ 180,000	$ 60,000	$ 0	0	240,000	0
AOT and Joule Heat Product Development and Testing [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expenses incurred									215,668	73,937	676,287
AOT Prototypes [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expenses incurred									109,645	502,720	1,029,143
Temple University License Agreements [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expenses incurred									187,500	187,500	187,500
Accounts payable - licensing agreement	460,625				340,625				460,625	340,625
License revenue generated									0	240,000	0
Royalty fees earned										0
Temple University License Agreements [Member] \| Accounts payable deferred [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Accounts payable - licensing agreement	165,125								165,125
Temple University License Agreements [Member] \| Accounts payable past due [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Accounts payable - licensing agreement	295,500								295,500
Temple University Sponsored Research Agreement [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development expenses incurred									64,688	129,295	$ 118,556
Accounts payable - licensing agreement	129,377				$ 64,688				129,377	$ 64,688
Temple University Sponsored Research Agreement [Member] \| Accounts payable past due [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Accounts payable - licensing agreement	$ 129,377								$ 129,377

7. Leases (Details Narrative)	12 Months Ended
7. Leases (Details Narrative)	Dec. 31, 2014 USD ($)
TransCanada Keystone Pipeline [Member]
Lease revenue	$ 240,000

8. Derivative Liability (Details) - Warrants [Member]	Jan. 15, 2013 USD ($)
Risk-free interest rate	0.12%
Expected volatility	92.00%
Expected life (in years)	0.75 - 1.00
Expected dividend yield	0.00%
Total Fair Value	$ 3,441,752

8. Derivative Liability (Details Narrative) - USD ($)	12 Months Ended
8. Derivative Liability (Details Narrative) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Derivative Liability [Abstract]
Change in fair value of derivative liability	$ 0	$ 0	$ (220,614)
Gain on extinguishment of derivative liability	$ 0	$ 0	$ 3,441,752
Warrants expired or exercised		4,400,000

9. Common Stock Transactions (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Common stock issued upon conversion, value	$ 668,800
Common stock issued for services, value			$ 49,000
Common stock issued as settlement, value	$ 0	$ 0	$ 3,108,347
CEDE & Co [Member]
Common stock issued as settlement, shares issued			3,047,403
Common stock issued as settlement, value			$ 3,108,347
Employees, Officers, Board Members, Consultant [Member]
Common stock issued for services, shares issued			375,455
Common stock issued for services, value			$ 419,113
Convertible Notes converted [Member]
Common stock issued upon conversion, shares issued	2,603,333	74,480
Common stock issued upon conversion, value	$ 668,800	$ 35,750
Exercise of Warrants [Member]
Common stock issued upon exercise of warrants, shares issued	200,000
Proceeds from exercise of warrants	$ 50,000
Exercise of Options and Warrants [Member]
Common stock issued upon conversion, shares issued		4,710,947	29,152,389
Common stock issued upon conversion, value		$ 1,413,284
Proceeds from exercise of options and warrants		$ 1,413,284	$ 8,477,218
Common Stock [Member]
Common stock issued new, shares	2,803,333	4,785,427	32,575,247

10. Stock Options and Warrants (Details-Options Outstanding) - Options [Member] - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Beginning Balance	21,052,030	20,309,308	27,278,098
Granted	838,552	852,122	207,819
Exercised	0	(20,000)	(115,000)
Forfeited	(355,434)	(90,000)	(7,061,009)
Ending Balance	21,535,148	21,052,030	20,309,308
Weighted Average Exercise Price, Outstanding Beginning Balance	$ 0.20	$ 0.28	$ 0.27
Weighted Average Exercise Price, Granted	$ .46	0.80	1.17
Weighted Average Exercise Price, Exercised		0.30	0.60
Weighted Average Exercise Price, Forfeited	$ .72	0.91	0.25
Weighted Average Exercise Price, Outstanding Ending Balance	$ .30	$ 0.20	$ 0.28

10. Stock Options and Warrants (Details-Options by Exercise Price Per Share) - Options [Member] - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Outstanding Options
Options outstanding	21,535,148	21,052,030	20,309,308	27,278,098
Weighted Average Exercise Price, options outstanding	$ .30	$ 0.20	$ 0.28	$ 0.27
Exercisable Options
Options exercisable	20,671,512
Weighted Average Exercise Price, options exercisable	$ .30
$ 0.21 - $ 0.99 [Member]
Outstanding Options
Options outstanding	21,343,280
Life (Years), options outstanding	5 years 2 months 12 days
Weighted Average Exercise Price, options outstanding	$ .29
Exercisable Options
Options exercisable	20,408,283
Weighted Average Exercise Price, options exercisable	$ .29
$ 1.00 - $ 1.99 [Member]
Outstanding Options
Options outstanding	191,868
Life (Years), options outstanding	4 years 2 months 12 days
Weighted Average Exercise Price, options outstanding	$ 1.22
Exercisable Options
Options exercisable	263,229
Weighted Average Exercise Price, options exercisable	$ 1.20

10. Stock Options and Warrants (Details-Assumptions - Options [Member]	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Expected life (years)	5.0 to 5.5 years	1.5 to 5.5 years	1.5 to 5.5 years
Risk free interest rate-minimum	1.56%	0.12%	0.34%
Risk free interest rate-maximum	1.72%	1.70%	1.65%
Volatility-miminum	106.00%	123.00%	127.00%
Volatility-maximum	121.00%	135.00%	130.00%
Expected dividend yield	0.00%	0.00%	0.00%

10. Stock Options and Warrants (Details-Warrants Outstanding) - Warrants [Member] - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Beginning Balance	5,692,087	11,763,966	42,205,507
Granted	1,796,667	761,037	150,000
Exercised	(200,000)	(4,690,947)	(29,037,389)
Cancelled	(2,877,087)	(2,141,969)	(1,554,152)
Ending Balance	4,411,667	5,692,087	11,763,966
Weighted Average Exercise Price, Outstanding Beginning Balance	$ 0.36	$ 0.34	$ 0.31
Weighted Average Exercise Price, Granted	0.20	.71	0.30
Weighted Average Exercise Price, Exercised	0.25	.30	.29
Weighted Average Exercise Price, Cancelled	0.36	.46	0.33
Weighted Average Exercise Price, Outstanding Ending Balance	$ 0.31	$ 0.36	$ 0.34

10. Stock Options and Warrants (Details-Warrant Exercise Price per Share) - Warrants [Member] - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Outstanding Warrants
Warrants outstanding	4,411,667	5,692,087	11,763,966	42,205,507
Weighted Average Exercise Price, warrants outstanding	$ .38
Exercisable Warrants
Warrants exercisable	4,411,667
Weighted Average Exercise Price, warrants exercisable	$ 0.35
$ 0.25 - $ 0.99 [Member]
Outstanding Warrants
Warrants outstanding	4,291,667
Weighted Average Exercise Price, warrants outstanding	$ .36
Exercisable Warrants
Warrants exercisable	4,291,667
Weighted Average Exercise Price, warrants exercisable	$ 0.34
$1.00 - $1.99 [Member]
Outstanding Warrants
Warrants outstanding	120,000
Life (Years), warrants outstanding	0 years
Weighted Average Exercise Price, warrants outstanding	$ 1.01
Exercisable Warrants
Warrants exercisable	120,000
Weighted Average Exercise Price, warrants exercisable	$ 1.01
$ 0.25 - $ 0.99 [Member]
Outstanding Warrants
Life (Years), warrants outstanding	3 years 2 months 12 days

10. Stock options and Warrants (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Options [Member]
Aggregate intrinsic value of options outstanding	$ 34,000
Options granted, shares	838,552	852,122	207,819
Fair value of options at grant date	$ 323,787
Options cancelled or forfeited	355,434	90,000	7,061,009
Options exercised	0	20,000	115,000
Options outstanding	21,535,148	21,052,030	20,309,308	27,278,098
Proceeds from exercise of options		$ 6,000	$ 19,500
Compensation costs recognized	$ 323,787	295,884
Compensation costs amortized	$ 366,266	$ 376,247	$ 403,127
Weighted average fair value for options granted	$ 0.39	$ .96	$ .30
Options [Member] \| Employees and Directors
Options granted, shares	838,552	852,122
Fair value of options at grant date	$ 454,999
Options [Member] \| Employees, Officers, Board Members, Consultant [Member]
Options granted, shares			207,819
Fair value of options at grant date			$ 201,000
Compensation costs recognized			$ 101,157
Options [Member] \| Officer [Member]
Options cancelled or forfeited			7,040,000
Warrants [Member]
Compensation costs amortized	$ 38,524	$ 20,950	$ 52,314
Warrants exercised	200,000	4,690,947	29,037,389
Proceeds from warrants exercised	$ 50,000	$ 1,377,284	$ 8,408,718
Warrants granted	1,796,667	761,037	150,000
Fair value of warrants granted			$ 129,622
Warrants [Member] \| Convertible Notes [Member]
Warrants granted		146,037
Warrants [Member] \| Consultants [Member]
Warrants granted		315,000
Fair value of warrants granted		$ 20,950
Warrants [Member] \| Consultant A [Member]
Compensation costs amortized		$ 21,000
Warrants granted		300,000
Warrants [Member] \| Employees, Directors and Consultants [Member]
Compensation costs amortized		$ 16,645

11. Commitments and Contingencies (Details)	Dec. 31, 2015 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Remaining lease commitment 2016	$ 69,960
Remaining lease commitment 2017	69,960
Remaining lease commitment 2018	40,810
Remaining lease commitment total	$ 180,730

11. Commitments and Contingencies (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]
Rent expense	$ 69,960	$ 81,851	$ 160,535

12. Income Taxes (Details-Reconciliation of Income Tax) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Federal tax rate	34.00%
Computed tax provision (benefit) at federal statutory rate (34%)	$ (1,065,000)	$ (1,133,000)	$ (1,993,000)
State income taxes, net of federal benefit	(277,000)	(295,000)	(518,000)
Permanent items	0	0	0
Valuation allowance	1,342,800	1,428,800	2,511,800
Income tax provision	$ 800	$ 800	$ 800

12. Income Taxes (Details-Deferred tax assets) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Net operating loss carryforwards	$ 21,000,000	$ 19,600,000
Valuation allowance	(21,000,000)	(19,600,000)
Total deferred taxes net of valuation allowance	$ 0	$ 0

12. Income Taxes (Details Narrative)	12 Months Ended
12. Income Taxes (Details Narrative)	Dec. 31, 2015 USD ($)
Income Tax Disclosure [Abstract]
Net operating loss carryforward	$ 51,000,000
Carryforward expiration date	Dec. 31, 2035

15. Quarterly Information (Details) - USD ($)

3 Months Ended

12 Months Ended

Dec. 31, 2015

Sep. 30, 2015

Jun. 30, 2015

Mar. 31, 2015

Dec. 31, 2014

Sep. 30, 2014

Jun. 30, 2014

Mar. 31, 2014

Dec. 31, 2015

Dec. 31, 2014

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Revenues

$ 0

$ 180,000

$ 60,000

$ 0

$ 240,000

$ 0

Gross profit

180,000

60,000

Net loss

$ (685,876)

$ (825,797)

$ (1,542,944)

$ (1,174,337)

$ (878,695)

$ (715,774)

$ (1,008,392)

$ (1,403,474)

$ (4,228,954)

$ (4,006,335)

$ (10,657,009)

Income per shares, Basic and Diluted (1)

$ 0.00

^[1]

$ 0.00

^[1]

$ (.01)

^[1]

$ (.01)

^[1]

$ 0.00

^[1]

$ (.00)

^[1]

$ (.00)

^[1]

$ (.01)

^[1]

$ (.02)

$ (0.02)

$ (0.07)

[1]	Per share data was computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share information may not equal the annual income per share.

16. Contractual Obligations (Details)

Dec. 31, 2015

USD ($)

$ 607,460

562,889

518,310

241,875

187,500

2,118,034

69,960

^[1]

Year ending 2017

69,960

^[1]

Year ending 2018

40,810

^[1]

Year ending 2019

Year ending 2020

Total obligations

180,730

^[1]

Research and License Agreements

Year ending 2016

187,500

^[2]

Year ending 2017

187,500

^[2]

Year ending 2018

187,500

^[2]

Year ending 2019

187,500

^[2]

Year ending 2020

187,500

^[2]

Total obligations

937,500

^[2]

Compensation Agreements

Year ending 2016

350,000

^[3]

Year ending 2017

305,429

^[3]

Year ending 2018

290,000

^[3]

Year ending 2019

54,375

^[3]

Year ending 2020

Total obligations

$ 999,804

^[3]

[1]	Consists of rent for the Company's Santa Barbara Facility expiring on July 31, 2018.
[2]	Consists of license maintenance fees to Temple University in the amount of $187,500 paid annually through the life of the underlying patents or until otherwise terminated by either party.
[3]	Consists of base salary and certain contractually-provided benefits, to i) an executive officer, pursuant to an employment agreement at a base salary of $290,000 per year and, as amended by the Board on March 10, 2016, expires on March 8, 2019; and ii) and a severance agreement of a former officer in the amount of $75,429.

17. Subsequent Events (Details Narrative) - USD ($)	2 Months Ended	12 Months Ended
17. Subsequent Events (Details Narrative) - USD ($)	Mar. 15, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Proceeds from convertible notes		$ 660,000	$ 254,900	$ 0
Original issue discount		$ 696,945	$ 145,160
Subsequent Event [Member]
Convertible notes issued	$ 390,610
Proceeds from convertible notes	355,100
Original issue discount	$ 390,610
Convertible notes converted, shares issued	3,029,050
Convertible notes converted, value	$ 302,905

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