Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 14, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Vystar Corp | |
Entity Central Index Key | 1,308,027 | |
Document Type | 10-Q | |
Trading Symbol | VYST | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Stock, Shares Outstanding | 216,676,067 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash | $ 632,970 | $ 13,502 |
Accounts receivable, net of allowance for uncollectible amount of $0 at March 31, 2018 and March 31, 2017 | 4,532 | 3,963 |
Inventories | 103,055 | |
Prepaid expenses | 124,812 | 166,091 |
TOTAL CURRENT ASSETS | 865,369 | 183,556 |
OTHER ASSETS | ||
Intangible assets, net | 119,962 | 123,882 |
TOTAL ASSETS | 985,331 | 307,438 |
CURRENT LIABILITIES | ||
Related party line of credit | 1,499,875 | 1,499,875 |
Accounts payable | 573,322 | 468,906 |
Accrued compensation | 19,355 | |
Shareholder and contingently convertible notes payable - current portion | 706,384 | 674,990 |
Accrued expenses and stock payable | 1,671,258 | 294,995 |
TOTAL CURRENT LIABILITIES | 4,450,839 | 2,958,121 |
LONG-TERM LIABILITIES | ||
Loan payable Fidelity | 500,000 | 206,683 |
Long-term Shareholder notes payable | 673,183 | |
TOTAL LONG-TERM LIABILITIES | 1,173,183 | 206,683 |
TOTAL LIABILITIES | 5,624,022 | 3,164,804 |
STOCKHOLDERS' DEFICIT | ||
Preferred stock, $0.0001 par value, 15,000,000 shares authorized; 13,828 issued and outstanding at March 31, 2018 and December 31, 2017 | 1 | 1 |
Common stock, $0.0001 par value, 250,000,000 shares authorized; 134,307,218 and 132,809,218 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively | 13,430 | 13,280 |
Additional paid-in capital | 25,197,374 | 25,128,476 |
Accumulated deficit | (29,849,496) | (27,999,123) |
TOTAL STOCKHOLDERS' DEFICIT | (4,638,691) | (2,857,366) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 985,331 | $ 307,438 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized | 15,000,000 | 15,000,000 |
Preferred stock, issued | 13,828 | 13,828 |
Preferred stock, outstanding | 13,828 | 13,828 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 250,000,000 | 250,000,000 |
Common stock, issued | 134,307,218 | 132,809,218 |
Common stock, outstanding | 134,307,218 | 132,809,218 |
STATEMENTS OF OPERATIONS (unaud
STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
REVENUE | $ 3,944 | $ 3,366 |
COST OF REVENUE | 49,421 | 3,630 |
Gross Loss | (45,477) | (264) |
OPERATING EXPENSES | ||
General and administrative, including non-cash share-based compensation of $1,404,809 and $181,525 in 2018 and 2017, respectively | 1,763,449 | 280,817 |
Total Operating Expenses | 1,763,449 | 280,817 |
LOSS FROM OPERATIONS | (1,808,926) | (281,081) |
OTHER INCOME (EXPENSE) | ||
Interest income | 1 | |
Interest (expense) | (41,448) | (42,544) |
Total Other Income (Expense) | (41,448) | (42,543) |
NET LOSS | $ 1,850,374 | $ 323,624 |
BASIC AND DILUTED LOSS PER SHARE: | ||
Net loss per share (in dollars per share) | $ (.01) | $ 0 |
Basic and Diluted Weighted Average Number of Common Shares Outstanding (in shares) | 133,875,885 | 117,371,594 |
STATEMENTS OF OPERATIONS (unau5
STATEMENTS OF OPERATIONS (unaudited) (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Non-cash share-based compensation | $ 1,404,809 | $ 181,525 |
STATEMENTS OF CASH FLOWS (unaud
STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (1,850,374) | $ (323,624) |
Adjustments to reconcile net loss to cash used in operating activities | ||
Share-based compensation | 1,404,889 | 181,525 |
Amortization of intangible assets | 3,920 | 3,920 |
(Increase) decrease in assets | ||
Accounts receivable | (569) | 16,390 |
Inventories | (103,055) | |
Prepaid expenses | 6,515 | (29,095) |
Increase (decrease) in liabilities | ||
Accounts payable | 39,410 | 591 |
Accrued compensation and expenses | 174,682 | 29,665 |
Net cash used in operating activities | (324,582) | (120,628) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds of Fidelity loan | 500,000 | |
Issuance of common stock, net of costs | 184,500 | |
Proceeds from the issuance of notes, net | 444,050 | |
Net cash provided by financing activities | 944,050 | 184,500 |
NET INCREASE IN CASH | 619,468 | 63,872 |
CASH - BEGINNING OF YEAR | 13,502 | 36,282 |
CASH - END OF YEAR | 632,970 | 100,154 |
CASH PAID DURING THE PERIOD FOR | ||
Interest | $ 32,869 | $ 23,617 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 3 Months Ended |
Mar. 31, 2018 | |
Description Of Business | |
DESCRIPTION OF BUSINESS | NOTE 1 DESCRIPTION OF BUSINESS Vystar Corporation (“Vystar”, the “Company”, “we”, “us”, or “our”) is the creator and exclusive owner of the innovative technology to produce Vytex® Natural Rubber Latex (“NRL”). Our global multi-patented technology reduces antigenic and total protein in natural rubber latex products to virtually undetectable levels. Vytex NRL, our “ultra-low protein” natural rubber latex has been introduced throughout the worldwide marketplace that uses NRL or latex substitutes as a raw material for end products. Natural rubber latex or latex substitutes are used in an extensive range of products including balloons, textiles, footwear and clothing (threads), adhesives, foams (mattresses, pillows, mattress toppers, etc.), furniture (foam and adhesives), carpet, paints, coatings, protective equipment, sporting equipment, and, especially health care products such as condoms, surgical and exam gloves, among others. Vystar has expanded into the consumer arena with an introduction into mattresses, mattress toppers and pillows aligning with key foam manufacturers, mattresses, toppers, pillow producers, and furniture stores in specific areas of the Unites States. On January 22, 2015, Vystar announced the signing of an exclusive domestic distribution agreement with Worcester, MA based Nature’s Home Solutions (NHS) who sources eco-friendly materials and technologies for use in furnishings and other markets. In September 2016, the Vystar Board of Directors voted to end the January 2015 NHS agreement and replace it with a global exclusive for foam manufactured with Vytex and sold into the home furnishings industry. This change reflects the global nature of the mattress, topper and pillow businesses, the need for local warehousing, and access to container loads of foam cores and pillows for domestic, European and Asian manufacturers. |
BASIS OF PRESENTATION SUMMARY O
BASIS OF PRESENTATION SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed financial statements (“the financial statements”) have been prepared in accordance with generally accepted accounting principles of the United States of America (“GAAP”) for interim financial information. Accordingly, certain information and footnotes required by GAAP for complete financial statements may be condensed or omitted. These interim financial statements should be read in conjunction with our audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (“SEC”). In the opinion of Vystar management, these financial statements contain all adjustments (which comprise only normal and recurring accruals) necessary to present fairly the financial position and results of operations as of and for the three-month period ended March 31, 2018 and 2017. Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ from these estimates. Examples include valuation allowances for deferred tax assets, provisions for bad debts, realization and valuation of inventories and fair values of share-based compensation. Concentration of Credit Risk Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash and accounts receivable. Cash held in banks in many cases exceeds the Federal Deposit Insurance Corporation, or FDIC, insurance limits. While we monitor our cash balances on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, we have experienced no loss or lack of access to our cash; however, we can provide no assurances that access to our cash will not be impacted by adverse conditions in the financial markets. Loss Per Share Because the Company reported a net loss for the three-month periods ended March 31, 2018 and 2017, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same. Excluded from the computation of diluted loss per share were options outstanding to purchase 8,298,271 shares and 9,718,271 shares of common stock for the three months ended March 31, 2018 and 2017, respectively, as their effect would be anti-dilutive. Warrants to purchase 16,469,582 and 18,084,609 shares of common stock for the three months ended March 31, 2018 and 2017, respectively, were also excluded from the computation of diluted loss per share as their effect would be anti-dilutive. Inventories Inventory cost includes those costs directly attributable to the product before sale. Inventory consists of foam slabs and is carried at the lower of cost or (net realizable value), using first-in, first-out method of determining cost. As of March 31, 2018, the Company had $103,055 in finished goods inventory. At December 31, 2017 there was no inventory. Revenues Revenue Recognition On January 1, 2018, we adopted FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. We reviewed all contracts at the date of initial application and elected to use the modified retrospective transition method, where the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January 1, 2018. Therefore, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 605, Revenue Recognition, (“ASC 605”). The adoption of the new revenue recognition guidance was immaterial to our condensed consolidated statements of operations, balance sheet, and cash flows as of and for the three months ended March 31, 2018. Refer to Note 2 for additional information regarding our adoption of ASC 606. Our principal activities from which we generate our revenue are product sales. Revenue is measured based on consideration specified in a contract with a customer. A contract with a customer exists when we enter into an enforceable contract with a customer. The contract is based on either the acceptance of standard terms and conditions on the websites for e-commerce customers and via telephone with our third-party call center for our print media and direct mail customers, or the execution of terms and conditions contracts with retailers and wholesalers. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid prior to shipment via credit card or check when our products are sold direct to consumers or approximately 30 days from the time control is transferred when sold to wholesalers, distributors and retailers. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and, in some circumstances, published credit and financial information pertaining to the customer. A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for us is transfer of over-the-counter drug and consumer care products to our customers. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. We have concluded the sale of bottled finished goods and related shipping and handling are accounted for as the single performance obligation. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods to the customer. We issue refunds to e-commerce and print media customers, upon request, within 30 days of delivery. We estimate the amount of potential refunds at each reporting period using a portfolio approach of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors. For retailers, distributors and wholesalers, we do not offer a right of return or refund and revenue is recognized at the time products are shipped to customers. In all cases, judgment is required in estimating these reserves. Actual claims for returns could be materially different from the estimates. The were no estimated reserve for sales returns and allowances at March 31, 2018 and December 31, 2017, respectively. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product is shipped. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of product sales. Fair Value of Financial Instruments The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses, line of credit and shareholder notes payable. The carrying values of all the Company’s financial instruments approximate fair value because of their short maturities. In addition to the short maturities, the carrying amounts of our line of credit and shareholder notes payable approximate fair value because the interest rates at March 31, 2018 approximate market interest rates for the respective borrowings. In specific circumstances, certain assets and liabilities are reported or disclosed at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the Company’s principal market for such transactions. If there is not an established principal market, fair value is derived from the most advantageous market. Valuation inputs are classified in the following hierarchy: ● Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. ● Level 2 inputs are directly or indirectly observable valuation inputs for the asset or liability, excluding Level 1 inputs. ● Level 3 inputs are unobservable inputs for the asset or liability. Highest priority is given to Level 1 inputs and the lowest priority to Level 3 inputs. Acceptable valuation techniques include the market approach, income approach, and cost approach. In some cases, more than one valuation technique is used. Recent Accounting Pronouncements In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date. A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and ASC 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Lessees (for capital and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. While we are currently assessing the impact ASU 2016-02 will have on the consolidated financial statements, we expect the primary impact to the consolidated financial position upon adoption will be the recognition, on a discounted basis, of the minimum commitments on the consolidated balance sheet under our sole noncancelable operating lease for our facility in San Diego resulting in the recording of a right of use asset and lease obligation. |
LIQUIDITY AND GOING CONCERN
LIQUIDITY AND GOING CONCERN | 3 Months Ended |
Mar. 31, 2018 | |
Liquidity And Going Concern | |
LIQUIDITY AND GOING CONCERN | NOTE 3 LIQUIDITY AND GOING CONCERN The Company’s financial statements are prepared using the accrual method of accounting in accordance with GAAP and have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. However, the Company has incurred significant losses and experienced negative cash flow since its inception. At March 31, 2018, the Company had cash of $632,970 and a deficit in working capital of approximately $3.6 million. Further, at March 31, 2018, the accumulated deficit amounted to approximately $30 million. As a result of the Company’s history of losses and financial condition, there is substantial doubt about the ability of the Company to continue as a going concern. A successful transition to attaining profitable operations is dependent upon obtaining sufficient revenues from our recent acquisitions in the second quarter of 2018 and financing to fund the Company’s planned expenses and achieving a level of revenue adequate to support the Company’s cost structure. Management plans to finance future operations through the use of cash on hand, increased revenue from Vytex division license fees, our credit facility, stock warrant exercises from existing shareholders, raising capital through private placements of capital stock and debt. The Company’s future expenditures will depend on numerous factors, including: the rate at which the Company can introduce and license Vytex NRL to manufacturers; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; market acceptance of the Company’s products and services; revenue from the licensing agreement with NHS Holdings, LLC; and competing technological developments. As the Company expands its activities and operations, cash requirements are expected to increase at a rate consistent with revenue growth after the Company has achieved sustained revenue generation. There can be no assurances that the Company will be able to achieve its projected level of revenue in 2018 and beyond. If the Company is unable to achieve its projected revenue and is not able to obtain alternate additional financing of equity or debt, the Company would need to significantly reorient its operations during 2018, which could have a material adverse effect on the Company’s ability to achieve its business objectives and as a result may require the Company to file for bankruptcy or cease operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 4 INTANGIBLE ASSETS Intangible assets are as follows: Patents represent legal and other fees associated with the registration of patents. The Company has four patents with the United States Patent and Trade Office (USPTO), as well as many international PCT (Patent Cooperation Treaty) patents. March 31, 2018 December 31, 2017 Patents $ 238,551 $ 238,551 Trademarks & trade name 9,072 9,072 Subtotal 247,623 247,623 Accumulated amortization (127,661 ) (123,741 ) Intangible assets, net $ 119,962 $ 123,882 Amortization expense for the three months ended March 31, 2018 and 2017 was $3,920. Estimated future amortization expense for finite-lived intangible assets is as follows: 2018 2019 2020 2021 2022 Thereafter Patents & trade name $ 15,680 $ 15,680 $ 15,680 $ 15,680 $ 15,680 $ 41,562 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 5 INCOME TAXES There is no income tax benefit recorded for the losses for the three ended March 31, 2018 and 2017 since management has determined that the realization of the net deferred tax asset is not assured and has created a valuation allowance for the entire amount of the net deferred tax asset. |
NOTES PAYABLE AND LOAN FACILITY
NOTES PAYABLE AND LOAN FACILITY | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE AND LOAN FACILITY | NOTE 6 NOTES PAYABLE AND LOAN FACILITY Related Party Line of Credit (CMA Note Payable) On November, 2 2012, the Company executed an increase with CMA Investments, LLC, a related party and a Georgia limited liability company (“CMA”), a line of credit with a principal amount of $1,500,000 (the “CMA Note”). CMA is a limited liability company of which three of the directors of the Company (“CMA directors”) were initially the members. Pursuant to the terms of the CMA Note, the Company may draw up to a maximum principal amount of $1,500,000. Interest, is computed at LIBOR plus 5.25% (6.50% at March 31, 2018), on amounts drawn and fees. The weighted average interest rate in effect on the borrowings for the three months ended March 31, 2018 was 5.25%. There are no available borrowings under the CMA note at March 31, 2018. Fidelity Note Payable During the three months ended March 31, 2018 separate investors have guaranteed $100,000 each with Fidelity to establish a $500,000 revolving line of credit with Fidelity. At the present time the Company is paying interest only to Fidelity at a rate of 4.5% per annum, with principal due in 2033. Shareholder and contingent convertible Notes Payable The following table summarizes the shareholder notes payable: March 31, December 31, Shareholder notes $ 1,398,808 $ 881,673 Accrued Interest 320,326 294,995 Total Shareholder Notes & Accrued Interest 1,719,134 1,176,678 Less: Debt Discount (19,241 ) Less: Accrued Interest (320,326 ) (294,995 ) Less: Current Portion (706,384 ) (674,990 ) Total long-term debt $ 673,183 $ 206,683 Other than the contingent convertible notes disclosed in Note 7, such notes are (i) unsecured, (ii) bear interest at an annual rate ranging from five percent (5%) to ten percent (10%) per annum, and (iii) are contingently convertible at the company’s option based on potential future events into shares of common stock. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 7 STOCKHOLDERS’ EQUITY Common Stock and Warrants From January 1, 2018 and through the date of these financial statements, the Company has issued certain convertible promissory notes in varying amounts. The face amount of the notes represents the amount due at maturity along with the accrued interest, at which time that amount will be converted into shares of the Company stock based on the lowest 2 day closing price for the trailing 20 days prior to conversion and carrying a 35% discount. In connection with the issuance of one of the contingently convertible notes, the Company issued a warrant to purchase 286,875 shares of the Company’s common stock. The exercise term of the warrant is at any time on or after the six (6) month anniversary or prior to the five (5) year anniversary of the related note (February 2023). The exercise price of the warrant is $.40 per share of the Company’s common stock, as may be adjusted from time to time pursuant to the antidilution provisions of the related warrant. The Company evaluated the warrant under ASC 480 “Distinguishing Liabilities from Equity” and ASC 815 “Derivatives and Hedging”. Due to the existence of the antidilution provision, which reduces the exercise price in the event of subsequent Dilutive Issuances, the warrant is not indexed to the Company’s common stock, and the Company has determined that the warrant meet the definition of a derivative under ASC 815. The company deemed the warrant immaterial at the date of issuance at March 31, 2018. At each subsequent reporting date, the fair value of the warrant will be remeasured and changes in the fair value will be reported in the condensed Statements of Operations. On June 30, 2016, the Company issued 997,466 common shares as compensation under the Company’s Business Development Agreement with Blue Oar Consulting, Inc. executed in March 2013 as amended in August 2013 as amended in February 2014, as amended in June 30, 2016 and amended January 3, 2018 issued 8,916,667 shares as part of this agreement issued April 27, 2018. The Company accrued approximately $450,000, which approximates the fair value of the common stock on the measured dates (included in accrued expenses and stock payable on the condensed balance sheet). On January 3, 2018, the Company agreed to issue 1,502,778 common shares as compensation under the Company’s Business Development Agreement with Designcenters.com issued April 27, 2018. The Company accrued approximately $75,000, which approximates the fair value of the common stock on the measured dates (included in accrued expenses and stock payable on the condensed balance sheet). On January 3, 2018, the Company agreed to issue 11,000,000 common shares as a signing bonus under an employment agreement to the CEO Steven Rotman issued April 27, 2018. The Company accrued approximately $550,000, which approximates the fair value of the common stock on the measured dates (included in accrued expenses and stock payable on the condensed balance sheet). On January 3, 2018, the Company agreed to issue 4,833,333 common shares as compensation under an consultant agreement to The Anchor Group issued April 27, 2018. The Company accrued approximately $242,000, which approximates the fair value of the common stock on the measured dates (included in accrued expenses and stock payable on the condensed balance sheet). These notes are included in the table below: Issue Date Face Amount Interest Rate Maturity Net Cash Proceeds Jan 29, 2018 $ 80,000 12 % Jan 29, 2019* $ 72,300 Feb 14, 2018 Auctus $ 80,000 12 % Nov 14, 2018* $ 72,500 Feb 13, 2018 FF $ 76,500 5 % Nov 13, 2018* $ 72,500 Feb 14, 2018 Power Up $ 85,000 12 % Feb 14, 2019* $ 82,000 *Note that these notes can be converted only after 6 months from the issue date. From January 1, 2018 to February 9, 2018, the Company issued Convertible Promissory Notes (the “Notes”) for contract work, investment and in lieu of salary and expense reimbursement in the amount of $195,635. The Notes are (i) unsecured, (ii) bear interest at an annual rate of five percent (5%) per annum from date of issuance, and (iii) are convertible by the Company upon the closing of the previously announced intention to purchase all of the assets of NHS. The Notes mature one year from issuance but may be extended one (1) additional year by the Company. If converted, the Notes plus accrued interest are convertible into shares of the Company’s common stock at the prior twenty (20) day average closing price with a 50% discount. On February 5, 2018, the Company issued 1,500,000 shares under the terms of a Consulting Agreement dated January 26, 2018 to STILLH20s Financial, LLC. Cumulative Convertible Preferred Stock On May 2, 2013, the Company began a private placement offering to sell up to 200,000 shares of the Company’s 10% Series A Cumulative Convertible Preferred Stock. Under the terms of the offering, the Company offered to sell up to 200,000 shares of preferred stock at $10.00 per share for a value of $2,000,000. The preferred stock accumulates a 10% per annum dividend and was convertible at a conversion price of $0.075 per common share at the option of the holder after a nine-month holding period. The conversion price was lowered to $0.05 per common share for those holders who invested an additional $25,000 or more in the Company’s common stock in the aforementioned September 2014 Private Placement. The preferred shares have full voting rights as if converted and have a fully participating liquidation preference. At March 31, 2018, the 13,828 shares of outstanding preferred stock had accumulated undeclared dividends of approximately $60,133 and could be converted into 3,968,269 shares of common stock, at the option of the holder. At December 31, 2017 and 2016, the 13,828 shares of outstanding preferred stock had accumulated undeclared dividends of approximately $63,600 and $49,800 and could be converted into 4,037,977 and 3,761,417 shares of common stock, respectively, at the option of the holder. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 8 SHARE-BASED COMPENSATION Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures. In total, the Company recorded $1,404,889 and $181,525 of stock-based compensation expense for the three-month period ended March 31, 2018 and 2017, respectively, including shares to be issued related to employee and board member stock options and common stock and warrants issued to non-employees. As of March 31, 2018, $153,000 of unrecognized compensation expense related to non-vested share-based awards remains to be recognized over a period of approximately four years. Options and Warrants The Company used the Black-Scholes option pricing model to estimate the grant-date fair value of option and warrant awards granted. The following assumptions were used for warrant awards during the three months ended March 31, 2018: ● Expected Dividend Yield - because we do not currently pay dividends, the expected dividend yield is zero; ● Expected Volatility in Stock Price - volatility based on our own trading activity was used to determine expected volatility; ● Risk-free Interest Rate - reflects the average rate on a United States Treasury Bond with a maturity equal to the expected term of the option; and ● Expected Life of Award - because we have minimal experience with the exercise of options or warrants for use in determining the expected life of each award, we used the option or warrant’s contractual term as the expected life. Options During 2004, the Board of Directors of the Company adopted a stock option plan (the “Plan”) and authorized up to 4,000,000 shares to be issued under the Plan. In April 2009, the Company’s Board of Directors authorized an increase in the number of shares to be issued under the Plan to 10,000,000 shares and to include the independent Board Members in the Plan in lieu of continuing the previous practice of granting warrants each quarter to independent Board Members for services. At March 31, 2018, there were 2,251,729 shares of common stock available for issuance under the Plan. In 2014, the Board adopted an additional stock option plan which provides for an additional 5,000,000 shares which are all available as of March 31, 2018. The Plan is intended to permit stock options granted to employees to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the Plan that are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options. Stock options are granted at an exercise price equal to the fair market value of the Company’s common stock on the date of grant, typically vest over periods up to 4 years and are typically exercisable up to 10 years. There were no options granted during the three-month period ended March 31, 2018. The following table summarizes all stock option activity of the Company for the period. Number of Shares Weighted Average Weighted Average Remaining Contractual Life Outstanding, December 31, 2017 7,748,271 $ 0.16 5.80 Granted Exercised — Expired (250,000 ) $ .68 Outstanding, March 31, 2018 7,498,271 $ 0.14 4.10 Exercisable, March 31, 2018 5,133,271 $ 0.20 5.29 Warrants Warrants are issued to employees for expenses and for compensation in lieu of cash as well as to third parties as payment for services and in conjunction with the issuance of common stock. The fair value of each common stock warrant issued for services is estimated on the date of grant using the Black-Scholes option pricing model. The weighted-average assumptions used in the option pricing model for stock warrant grants were as follows: 2018 Expected Dividend Yield 0.00 % Expected Volatility in Stock Price 150.82 % Risk-Free Interest Rate 1.99 % Expected Life of Stock Awards – Years 6.86 The following table represents the Company’s warrant activity for the three months ended March 31, 2018: Number Weighted Weighted Weighted Outstanding, December 31, 2017 14,699,582 $ 0.10 5.41 Exercisable, December 31, 2017 14,699,582 Granted 286,875 — $ 0.40 4.92 Exercised 0 — — Forfeited 0 — — Expired — — — Outstanding, March 31, 2018 14,986,457 $ 0.11 5.04 Exercisable, March 31, 2018 14,986,457 $ 0.11 5.36 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 9 SUBSEQUENT EVENTS Entry into a Material Definitive Agreement Effective April 18, 2018, ten (10) shareholders of Vystar Corporation, a Georgia corporation (the “Company”), consented to (a) the Company’s purchase of substantially all the assets of NHS Holdings, LLC, a Massachusetts limited liability company (“NHS”), and (b) the increase of the authorized shares of Common Stock of the Company from 250 million to 600 million. The consents were submitted pursuant to Rule 14(a)-2(b) (2) promulgated under the Securities and Exchange Act of 1934, as amended. Such Rule provides that other than certain proxy solicitation rules which were either complied with or were otherwise not applicable to the consents submitted to the Company, the proxy solicitation rules set forth in SEC Regulation 14A do not apply to “[any] solicitation made otherwise than on behalf of the registrant where the total number of persons being solicited is not more than ten.” The Company has been presented with written consents which include (a) an approved form of Asset Purchase Agreement between the Company and NHS with respect to the purchase of substantially all the assets of NHS, and (b) an approved amendment to the Company’s Articles of Incorporation to increase its authorized shares of common stock to 600 million shares. The Common Stock held by the consenting shareholders totaled 67,852,699 shares or approximately 51% of the total outstanding shares of Common Stock of the Company. Purchase Transaction Pursuant to the Asset Purchase Agreement, the purchase of substantially all assets of NHS was consummated on April 18, 2018. The Company issued 27,769,500 shares of its restricted Common Stock valued at approximately $975,000 based on the closing price of the Company’s Common Stock on such date. NHS assets include: The Distribution Agreement between the Company and NHS described below, mattress toppers and other foam inventory valued at $850,000; intellectual property relating to product development, cutting and roll packing equipment; and goodwill. All shares of restricted Common Stock issued to NHS at closing will be held in escrow for a minimum of six months to secure certain potential indemnification obligations of NHS. Such shares will be voted by NHS until distribution to NHS. NHS is the exclusive U.S. distributor of Vystar’s Vytex® virtually allergen-, VOC- and odor-free natural rubber latex (NRL) foam. NHS was instrumental to introducing Vytex foam to manufacturers for use in mattresses, pillows and other bedding products. NHS has created approximately 200 SKUS of Vytex foam products, such as slabs, toppers and mattresses, which are sold through multiple channels. The NHS acquisition is intended to lower the cost of Vytex to the manufacturer by eliminating the middleman. In September 2016, the Company and NHS entered into a Distribution Agreement with respect to the distribution of finished parts and components of home furnishing goods, and other products manufactured with the Company’s patented Vytex® NRL process. The Agreement provided that NHS shall be the exclusive world-wide distributor for such home furnishing goods, and the non-exclusive world-wide distributor of products in other industries utilizing the Vytex® NRL process. The Company was paid seven percent (7%) of the cost of such products to NHS. This Distribution Agreement was one of the assets held by NHS at the closing of the asset sale transaction. As the new owner of substantially all assets of NHS, including the rights of NHS pursuant to such Distribution Agreement, the Company has terminated such Agreement. The following summarizes the transaction with NHS Holdings, LLC at closing on April 18, 2018: Cash $ 15,000 Inventory $ 850,000 Property & Equipment, Net $ 28,000 Intangible assets $ 82,000 Total Assets $ 975,000 Net Purchase (fair value of common stock issued) $ 975,000 In determining the fair value of the intangible assets, the Company considered, among other factors, the best use of acquired assets such as latex foam slabs, toppers and equipment, analysis of historical financial performance of the products and estimates of future performance of the products and intellectual properties acquired. The fair values of the identified intangible assets related to Intellectual Property and Goodwill and the Company has preliminarily recorded the purchase price of the identified intangible assets and is amortizing such assets over their estimated useful lives ranging from 1 - 5 years. The Company is in the process of finalizing the purchase price allocation and this preliminary allocation is subject to adjustment. The intangibles of $82,000 arising from the purchase of NHS Holdings, LLC. assets is derived largely from the rapid expected growth of the Company, as well as synergies and economies of scale expected from combining the operations of the Company and NHS Holdings Inc. The establishment of the allocation to identifiable intangible assets requires the extensive use of accounting estimates and management judgment. The fair values assigned to the assets acquired are based on estimates and assumptions from data currently available. The operations of NHS were not considered significant during the three months ended March 31, 2018 and 2017. Related Parties NHS’s largest membership interest owners are also major investors and in some cases affiliates and/or reporting insiders of the Company. NHS major shareholders include: ● Lam Ngoc Minh, CEO of Lien ‘A and President of the Young Businessmen Association, Ho Chi Minh City. Lien ‘A is one of the world’s largest latex foam manufacturers, and a major producer of Vytex foam. Lien ‘A has worked closely with NHS to develop new products, densities and applications; ● Dr. Keith Osborn, MD; member of the Company’s Board of Directors, orthopedic spine surgeon; ● Dr. Bryan Stone, MD, member of the Company’s Board of Directors, nephrologist and CEO of Fluid Energy Conversion; Entry into a Material Definitive Agreement Effective May 7, 2018, nine (9) shareholders of Vystar Corporation, a Georgia corporation (the “Company”), consented to the Company’s purchase of substantially all the assets of UV Flu Technologies, Inc., a Nevada corporation (“UV Flu”). The consents were submitted pursuant to Rule 14(a)-2(b) (2) promulgated under the Securities and Exchange Act of 1934, as amended. Such Rule provides that other than certain proxy solicitation rules which were either complied with or were otherwise not applicable to the consents submitted to the Company, the proxy solicitation rules set forth in SEC Regulation 14A do not apply to “[any] solicitation made otherwise than on behalf of the registrant where the total number of persons being solicited is not more than ten.” The Company has been presented with written consents which include (a) an approved form of Asset Purchase Agreement between the Company and UV Flu with respect to the purchase of substantially all the assets of UV Flu. The Common Stock held by the consenting shareholders totaled 118,211,379 shares or approximately 52.8% of the total outstanding shares of Common Stock of the Company. Pursuant to the Asset Purchase Agreement, the purchase of substantially all assets of UV Flu was consummated on May 10, 2018. Vystar acquired all UV Flu intellectual property & multiple patents, product lines, tooling, FDA clearances, research data, websites and other assets related to the business for the purchase price of $975K or 27,918,000 shares of Vystar restricted common stock to be issued which may not be assigned or sold by UV Flu for twelve months. With the exchange of Vystar shares for UV Flu shares, Vystar will welcome UV Flu’s approximately 1,000 shareholders to the Vystar family. Vystar will continue production of UV Flu product lines with BOI, a world-class manufacturer. Vystar anticipates it will take 45 days to complete manufacture of the next orders of air purifier units and another 45 days to relaunch sales with a new, more robust distribution model. Vystar plans to sell RxAir residential units via online and retail channels. Vystar is assembling the distribution network to relaunch sales of UV400 and Rx3000 units to the healthcare and medical markets, which UV Flu had ceased due to sales force, distribution and cash flow constraints. Once production and sales are firmly re-established, Vystar expects that the air purification products will produce margins of approximately 75%. All shares of restricted Common Stock issued to UV Flu at closing will be held for a minimum of one year before distribution of such shares to the UV Flu shareholders and will be voted consistent with the vote of the Company’s other shareholders until such distribution. The following summarizes the transaction with UV Flu Technologies, Inc. at closing on May 7, 2018: Cash $ 0 Inventory $ 0 Property & Equipment, Net $ 175,000 Intangible assets $ 625,000 Total Assets $ 800,000 Net Purchase (fair value of common stock issued) $ 800,000 In determining the fair value of the intangible assets, the Company considered, among other factors, the best use of acquired assets such as tooling and testing equipment, analysis of historical financial performance of the products and estimates of future performance of the products and intellectual properties acquired. The fair values of the identified intangible assets related to Intellectual Property and Goodwill and the Company has preliminarily recorded the purchase price of the identified intangible assets and is amortizing such assets over their estimated useful lives ranging from 3-5 years. The Company is in the process of finalizing the purchase price allocation and this preliminary allocation is subject to adjustment. The intangibles of $625,000 arising from the purchase of UV Flu Technologies, Inc. is derived largely from the rapid expected growth of the Company, as well as synergies and economies of scale expected from combining the operations of the Company and UV Flu Technologies, Inc. The establishment of the allocation to identifiable intangible assets requires the extensive use of accounting estimates and management judgment. The fair values assigned to the assets acquired are based on estimates and assumptions from data currently available. The operations of UV Flu Technologies were not considered significant during the three months ended March 31, 2018 and 2017. Termination of a Material Definitive Agreement Effective May 8, 2018, the Company paid all of its long-term convertible indebtedness totaling $1,134,225 (including accrued interest) through the issuance of a total of 27,918,000 million restricted shares of its common stock. On April 9 2018, the Company issued 428,571 common shares as compensation under the Company’s Business Development Agreement with vSource1 Capital Corporation. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed financial statements (“the financial statements”) have been prepared in accordance with generally accepted accounting principles of the United States of America (“GAAP”) for interim financial information. Accordingly, certain information and footnotes required by GAAP for complete financial statements may be condensed or omitted. These interim financial statements should be read in conjunction with our audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (“SEC”). In the opinion of Vystar management, these financial statements contain all adjustments (which comprise only normal and recurring accruals) necessary to present fairly the financial position and results of operations as of and for the three-month period ended March 31, 2018 and 2017. |
Estimates | Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ from these estimates. Examples include valuation allowances for deferred tax assets, provisions for bad debts, realization and valuation of inventories and fair values of share-based compensation. |
Concentration of Credit Risk | Concentration of Credit Risk Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash and accounts receivable. Cash held in banks in many cases exceeds the Federal Deposit Insurance Corporation, or FDIC, insurance limits. While we monitor our cash balances on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, we have experienced no loss or lack of access to our cash; however, we can provide no assurances that access to our cash will not be impacted by adverse conditions in the financial markets. |
Loss Per Share | Loss Per Share Because the Company reported a net loss for the three-month periods ended March 31, 2018 and 2017, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same. Excluded from the computation of diluted loss per share were options outstanding to purchase 8,298,271 shares and 9,718,271 shares of common stock for the three months ended March 31, 2018 and 2017, respectively, as their effect would be anti-dilutive. Warrants to purchase 16,469,582 and 18,084,609 shares of common stock for the three months ended March 31, 2018 and 2017, respectively, were also excluded from the computation of diluted loss per share as their effect would be anti-dilutive. |
Inventories | Inventories Inventory cost includes those costs directly attributable to the product before sale. Inventory consists of foam slabs and is carried at the lower of cost or (net realizable value), using first-in, first-out method of determining cost. As of March 31, 2018, the Company had $103,055 in finished goods inventory. At December 31, 2017 there was no inventory. |
Revenues | Revenues Revenue Recognition On January 1, 2018, we adopted FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP. The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance. We reviewed all contracts at the date of initial application and elected to use the modified retrospective transition method, where the cumulative effect of the initial application is recognized as an adjustment to opening retained earnings at January 1, 2018. Therefore, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 605, Revenue Recognition, (“ASC 605”). The adoption of the new revenue recognition guidance was immaterial to our condensed consolidated statements of operations, balance sheet, and cash flows as of and for the three months ended March 31, 2018. Refer to Note 2 for additional information regarding our adoption of ASC 606. Our principal activities from which we generate our revenue are product sales. Revenue is measured based on consideration specified in a contract with a customer. A contract with a customer exists when we enter into an enforceable contract with a customer. The contract is based on either the acceptance of standard terms and conditions on the websites for e-commerce customers and via telephone with our third-party call center for our print media and direct mail customers, or the execution of terms and conditions contracts with retailers and wholesalers. These contracts define each party’s rights, payment terms and other contractual terms and conditions of the sale. Consideration is typically paid prior to shipment via credit card or check when our products are sold direct to consumers or approximately 30 days from the time control is transferred when sold to wholesalers, distributors and retailers. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and, in some circumstances, published credit and financial information pertaining to the customer. A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for us is transfer of over-the-counter drug and consumer care products to our customers. Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. We have concluded the sale of bottled finished goods and related shipping and handling are accounted for as the single performance obligation. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods to the customer. We issue refunds to e-commerce and print media customers, upon request, within 30 days of delivery. We estimate the amount of potential refunds at each reporting period using a portfolio approach of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors. For retailers, distributors and wholesalers, we do not offer a right of return or refund and revenue is recognized at the time products are shipped to customers. In all cases, judgment is required in estimating these reserves. Actual claims for returns could be materially different from the estimates. The were no estimated reserve for sales returns and allowances at March 31, 2018 and December 31, 2017, respectively. We recognize revenue when we satisfy a performance obligation in a contract by transferring control over a product to a customer when product is shipped. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of product sales. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses, line of credit and shareholder notes payable. The carrying values of all the Company’s financial instruments approximate fair value because of their short maturities. In addition to the short maturities, the carrying amounts of our line of credit and shareholder notes payable approximate fair value because the interest rates at March 31, 2018 approximate market interest rates for the respective borrowings. In specific circumstances, certain assets and liabilities are reported or disclosed at fair value. Fair value is the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the Company’s principal market for such transactions. If there is not an established principal market, fair value is derived from the most advantageous market. Valuation inputs are classified in the following hierarchy: ● Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. ● Level 2 inputs are directly or indirectly observable valuation inputs for the asset or liability, excluding Level 1 inputs. ● Level 3 inputs are unobservable inputs for the asset or liability. Highest priority is given to Level 1 inputs and the lowest priority to Level 3 inputs. Acceptable valuation techniques include the market approach, income approach, and cost approach. In some cases, more than one valuation technique is used. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date. A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and ASC 606, Revenue from Contracts with Customers. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Lessees (for capital and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. While we are currently assessing the impact ASU 2016-02 will have on the consolidated financial statements, we expect the primary impact to the consolidated financial position upon adoption will be the recognition, on a discounted basis, of the minimum commitments on the consolidated balance sheet under our sole noncancelable operating lease for our facility in San Diego resulting in the recording of a right of use asset and lease obligation. |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | Patents represent legal and other fees associated with the registration of patents. The Company has four patents with the United States Patent and Trade Office (USPTO), as well as many international PCT (Patent Cooperation Treaty) patents. March 31, 2018 December 31, 2017 Patents $ 238,551 $ 238,551 Trademarks & trade name 9,072 9,072 Subtotal 247,623 247,623 Accumulated amortization (127,661 ) (123,741 ) Intangible assets, net $ 119,962 $ 123,882 |
Schedule of future amortization expense | Estimated future amortization expense for finite-lived intangible assets is as follows: 2018 2019 2020 2021 2022 Thereafter Patents & trade name $ 15,680 $ 15,680 $ 15,680 $ 15,680 $ 15,680 $ 41,562 |
NOTES PAYABLE AND LOAN FACILI18
NOTES PAYABLE AND LOAN FACILITY (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable | The following table summarizes the shareholder notes payable: March 31, December 31, Shareholder notes $ 1,398,808 $ 881,673 Accrued Interest 320,326 294,995 Total Shareholder Notes & Accrued Interest 1,719,134 1,176,678 Less: Debt Discount (19,241 ) Less: Accrued Interest (320,326 ) (294,995 ) Less: Current Portion (706,384 ) (674,990 ) Total long-term debt $ 673,183 $ 206,683 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Schedule of contingently convertible notes and warrants | These notes are included in the table below: Issue Date Face Amount Interest Rate Maturity Net Cash Proceeds Jan 29, 2018 $ 80,000 12 % Jan 29, 2019* $ 72,300 Feb 14, 2018 Auctus $ 80,000 12 % Nov 14, 2018* $ 72,500 Feb 13, 2018 FF $ 76,500 5 % Nov 13, 2018* $ 72,500 Feb 14, 2018 Power Up $ 85,000 12 % Feb 14, 2019* $ 82,000 *Note that these notes can be converted only after 6 months from the issue date. |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock option activity | The following table summarizes all stock option activity of the Company for the period. Number of Shares Weighted Average Weighted Average Remaining Contractual Life Outstanding, December 31, 2017 7,748,271 $ 0.16 5.80 Granted Exercised — Expired (250,000 ) $ .68 Outstanding, March 31, 2018 7,498,271 $ 0.14 4.10 Exercisable, March 31, 2018 5,133,271 $ 0.20 5.29 |
Schedule of weighted-average assumptions used in the option pricing model for stock warrant grants | The weighted-average assumptions used in the option pricing model for stock warrant grants were as follows: 2018 Expected Dividend Yield 0.00 % Expected Volatility in Stock Price 150.82 % Risk-Free Interest Rate 1.99 % Expected Life of Stock Awards – Years 6.86 |
Schedule of warrant activity | The following table represents the Company’s warrant activity for the three months ended March 31, 2018: Number Weighted Weighted Weighted Outstanding, December 31, 2017 14,699,582 $ 0.10 5.41 Exercisable, December 31, 2017 14,699,582 Granted 286,875 — $ 0.40 4.92 Exercised 0 — — Forfeited 0 — — Expired — — — Outstanding, March 31, 2018 14,986,457 $ 0.11 5.04 Exercisable, March 31, 2018 14,986,457 $ 0.11 5.36 |
SUBSEQUENT EVENTS (Tables)
SUBSEQUENT EVENTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Schedule of acquisitions | The following summarizes the transaction with NHS Holdings, LLC at closing on April 18, 2018: Cash $ 15,000 Inventory $ 850,000 Property & Equipment, Net $ 28,000 Intangible assets $ 82,000 Total Assets $ 975,000 Net Purchase (fair value of common stock issued) $ 975,000 The following summarizes the transaction with UV Flu Technologies, Inc. at closing on May 7, 2018: Cash $ 0 Inventory $ 0 Property & Equipment, Net $ 175,000 Intangible assets $ 625,000 Total Assets $ 800,000 Net Purchase (fair value of common stock issued) $ 800,000 |
BASIS OF PRESENTATION SUMMARY22
BASIS OF PRESENTATION SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | May 07, 2018 | Mar. 31, 2018 | Mar. 31, 2017 |
Inventories - finished goods | $ 103,055 | ||
Subsequent Event [Member] | Air Purification Products [Member] | |||
Profit margin (percent) | 75.00% | ||
Subsequent Event [Member] | UV Flu [Member] | |||
Purchase price of acquisition | $ 975,000 | ||
Stock issued in acquisition (shares) | 27,918,000 | ||
Stock Options [Member] | |||
Antidilutive securities excluded from computation of earnings per share, amount | 8,298,271 | 9,718,271 | |
Warrant [Member] | |||
Antidilutive securities excluded from computation of earnings per share, amount | 16,469,582 | 18,084,609 |
LIQUIDITY AND GOING CONCERN (De
LIQUIDITY AND GOING CONCERN (Details Narrative) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Liquidity And Going Concern Details Narrative | ||||
Cash | $ 632,970 | $ 13,502 | $ 100,154 | $ 36,282 |
Working capital deficit | 3,600,000 | |||
Accumulated deficit | $ (29,849,496) | $ (27,999,123) |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Patents | $ 238,551 | $ 238,551 |
Trademarks & trade name | 9,072 | 9,072 |
Subtotal | 247,623 | 247,623 |
Accumulated amortization | (127,661) | (123,741) |
Intangible assets, net | $ 119,962 | $ 123,882 |
INTANGIBLE ASSETS (Details 1)
INTANGIBLE ASSETS (Details 1) | Mar. 31, 2018USD ($) |
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
2,018 | $ 15,680 |
2,019 | 15,680 |
2,020 | 15,680 |
2,021 | 15,680 |
2,022 | 15,680 |
Thereafter | $ 41,562 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of intangible assets | $ 3,920 | $ 3,920 | $ 15,680 | $ 15,861 |
NOTES PAYABLE AND LOAN FACILI27
NOTES PAYABLE AND LOAN FACILITY (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Debt Disclosure [Abstract] | ||
Shareholder notes payable | $ 1,398,808 | $ 835,068 |
Accrued Interest | 320,326 | 231,080 |
Total Shareholder Notes & Accrued Interest | 1,719,134 | 1,066,148 |
Less: Debt Discount | (19,241) | |
Shareholder notes payable | (706,384) | (674,990) |
Long-term Shareholder notes payable | 673,183 | |
Loan payable Fidelity | $ 500,000 | $ 206,683 |
NOTES PAYABLE AND LOAN FACILI28
NOTES PAYABLE AND LOAN FACILITY (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 30, 2018 | Mar. 31, 2018 | Nov. 02, 2012 | |
Fidelity [Member] | |||
Credit Facility, Maximum Borrowing Capacity | $ 500,000 | ||
Credit Facility, interest rate | 4.50% | ||
Guarantee of credit facility by each investor | $ 100,000 | ||
Shareholders Convertible Promissory Notes [Member] | Minimum [Member] | |||
Debt instrument interest rate | 5.00% | ||
Shareholders Convertible Promissory Notes [Member] | Maximum [Member] | |||
Debt instrument interest rate | 10.00% | ||
CMA Note [Member] | |||
Credit Facility, Maximum Borrowing Capacity | $ 1,500,000 | ||
Variable rate basis | LIBOR | ||
Basis Spread on Variable Rate, During Period | 6.50% | ||
Debt, Weighted Average Interest Rate | 5.25% | ||
Warrant exercise price (per share) | $ 0.35 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) - USD ($) | Feb. 14, 2018 | Feb. 14, 2018 | Feb. 13, 2018 | Jan. 29, 2018 |
Convertible Notes Payable EMA [Member] | ||||
Issue Date | Jan. 29, 2018 | |||
Face Amount | $ 80,000 | |||
Interest Rate | 12.00% | |||
Maturity | Jan. 29, 2019 | |||
Net Cash Proceeds | $ 72,300 | |||
Convertible Notes Payable Auctus [Member] | ||||
Issue Date | Feb. 14, 2018 | |||
Face Amount | $ 80,000 | $ 80,000 | ||
Interest Rate | 12.00% | 12.00% | ||
Maturity | Nov. 14, 2018 | |||
Net Cash Proceeds | $ 72,500 | |||
Convertible Notes Payable FF [Member] | ||||
Issue Date | Feb. 13, 2018 | |||
Face Amount | $ 76,500 | |||
Interest Rate | 5.00% | |||
Maturity | Nov. 13, 2018 | |||
Net Cash Proceeds | $ 72,500 | |||
Convertible Notes Payable Power Up [Member] | ||||
Issue Date | Feb. 14, 2018 | |||
Face Amount | $ 85,000 | $ 85,000 | ||
Interest Rate | 12.00% | 12.00% | ||
Maturity | Feb. 14, 2019 | |||
Net Cash Proceeds | $ 82,000 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | Apr. 27, 2018 | Apr. 09, 2018 | Feb. 05, 2018 | Jun. 30, 2016 | May 02, 2013 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Mar. 28, 2018 |
Accrued expenses and stock payable | $ 1,671,258 | $ 294,995 | |||||||
Accumulated dividends preferred stock | $ 60,133 | $ 63,600 | $ 49,800 | ||||||
Preferred stock, outstanding | 13,828 | 13,828 | |||||||
Number of shares issuable upon conversion of preferrd stock | 3,968,269 | 4,037,977 | 3,761,417 | ||||||
10% Series A Cumulative Convertible Preferred Stock [Member] | |||||||||
Preferred stock, shares in private placement offering | 200,000 | ||||||||
Price per share | $ 10 | ||||||||
Preferred stock value in private placement offering | $ 2,000,000 | ||||||||
Preferred stock, dividend rate | 10.00% | ||||||||
Preferred stock, stated conversion rate | $ 0.075 | ||||||||
10% Series A Cumulative Convertible Preferred Stock [Member] | Additional Investment [Member] | |||||||||
Preferred stock, stated conversion rate | $ 0.05 | ||||||||
Additional investment lowering conversion price | $ 25,000 | ||||||||
Convertible Promissory Notes [Member] | |||||||||
Debt conversion discount rate | 50.00% | ||||||||
Issuance of unsecured debt | $ 195,635 | ||||||||
Interest rate of convertible promissory notes | 5.00% | ||||||||
Business Development Agreements [Member] | |||||||||
Accrued expenses and stock payable | $ 75,000 | ||||||||
Consulting Agreement [Member] | |||||||||
Common stock issued for services, shares | 1,500,000 | ||||||||
Subsequent Event [Member] | Chief Executive Officer [Member] | |||||||||
Common stock issued for services, shares | 11,000,000 | ||||||||
Accrued expenses and stock payable | $ 550,000 | ||||||||
Subsequent Event [Member] | Business Development Agreements [Member] | |||||||||
Common stock issued for services, shares | 1,502,778 | ||||||||
Subsequent Event [Member] | Consulting Agreement [Member] | |||||||||
Common stock issued for services, shares | 4,833,333 | 428,571 | |||||||
Accrued expenses and stock payable | $ 242,000 | ||||||||
Blue Oar Consulting, LLC (Consulting Agreement ) [Member] | |||||||||
Common stock issued for services, shares | 997,466 | ||||||||
Accrued expenses and stock payable | $ 450,000 | ||||||||
Blue Oar Consulting, LLC (Consulting Agreement ) [Member] | Subsequent Event [Member] | |||||||||
Common stock issued for services, shares | 8,916,667 |
SHARE-BASED COMPENSATION (Detai
SHARE-BASED COMPENSATION (Details) - Stock Options [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Number of options: | ||
Number of Options outstanding, beginning | 7,748,271 | |
Number of Options expired | (250,000) | |
Number of Options outstanding, ending | 7,498,271 | 7,748,271 |
Number of Options exercisable | 5,133,271 | |
Weighted Average Exercise Price: | ||
Options outstanding, beginning | $ .16 | |
Option expired | .68 | |
Options outstanding, ending | .14 | $ .16 |
Options exercisable | $ .20 | |
Weighted Average Remaining Contractual Life (Years) | ||
Options outstanding | 4 years 1 month 6 days | 5 years 9 months 18 days |
Options exercisable | 5 years 3 months 15 days |
SHARE-BASED COMPENSATION (Det32
SHARE-BASED COMPENSATION (Details 1) - Warrant [Member] | 3 Months Ended |
Mar. 31, 2018 | |
Expected Dividend Rate | 0.00% |
Expected Volatility in Stock price | 150.82% |
Risk Free Interest Rate | 1.99% |
Expected Term | 6 years 10 months 10 days |
SHARE-BASED COMPENSATION (Det33
SHARE-BASED COMPENSATION (Details 2) - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Number of Warrant: | ||
Number of Warrant outstanding, beginning | 14,699,582 | |
Number of Warrant granted | 286,875 | |
Number of Warrant outstanding, ending | 14,986,457 | 14,699,582 |
Number of Warrant exercisable | 14,986,457 | 14,699,582 |
Warrant Weighted Average Exercise Price: | ||
Warrant outstanding, beginning | $ .10 | |
Warrant granted | 0.40 | |
Warrant outstanding, ending | .11 | $ .10 |
Warrant exercisable | $ 0.11 | |
Weighted Average Remaining Contractual Life | ||
Warrant outstanding | 5 years 15 days | 5 years 4 months 28 days |
Warrant granted | 4 years 11 months 1 day | |
Warrant exercisable | 5 years 4 months 9 days |
SHARE-BASED COMPENSATION (Det34
SHARE-BASED COMPENSATION (Details Narrative) - USD ($) | 3 Months Ended | ||||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | Apr. 30, 2009 | Jan. 01, 2004 | |
Share-based compensation | $ 1,404,889 | $ 181,525 | |||
Unrecognized compensation cost for non-vested awards | 153,000 | ||||
Share-based compensation - stock options | $ 95,000 | $ 181,525 | |||
Period for recognizition of non-vested awards compensation cost | 4 years | ||||
Number of shares reserved for issuance | 2,251,729 | ||||
Unvested warrants | 14,986,457 | 14,699,582 | |||
Warrant [Member] | |||||
Fair value grant date of warrants | $ 15,821 | ||||
Warrant issued for services (shares) | 1,786,875 | ||||
Unvested warrants | 286,875 | ||||
Warrant [Member] | Minimum [Member] | |||||
Exercisable period | 5 years | ||||
Warrant exercise price (in dollars per share) | $ .05 | ||||
Warrant [Member] | Maximum [Member] | |||||
Exercisable period | 10 years | ||||
Warrant exercise price (in dollars per share) | $ .40 | ||||
Stock Option Plan [Member] | |||||
Number of shares authorized under stock option plan | 10,000,000 | 4,000,000 | |||
Vesting period | 4 years | ||||
Exercisable period | 10 years | ||||
Stock Options [Member] | |||||
Number of shares authorized under stock option plan | 5,000,000 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event [Member] - USD ($) | May 07, 2018 | Apr. 18, 2018 |
NHS Holdings LLC [Member] | ||
Cash | $ 15,000 | |
Inventory | 850,000 | |
Property & Equipment, Net | 28,000 | |
Intangible assets | 82,000 | |
Total Assets | 975,000 | |
Net Purchase (fair value of common stock issued) | $ 975,000 | |
UV Flu [Member] | ||
Cash | $ 0 | |
Inventory | 0 | |
Property & Equipment, Net | 175,000 | |
Intangible assets | 625,000 | |
Total Assets | 800,000 | |
Net Purchase (fair value of common stock issued) | $ 800,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) | May 07, 2018USD ($)NumberOfConsentingShareholdersshares | Apr. 27, 2018shares | Apr. 18, 2018USD ($)NumberOfConsentingShareholdersshares | Apr. 09, 2018shares | Feb. 05, 2018shares | Mar. 31, 2018shares | Dec. 31, 2017shares |
Number of common shares authorized | 250,000,000 | 250,000,000 | |||||
Consulting Agreement [Member] | |||||||
Common stock issued for services, shares | 1,500,000 | ||||||
Subsequent Event [Member] | |||||||
Number of common shares authorized | 600,000,000 | ||||||
Number of consenting shareholders | NumberOfConsentingShareholders | 9 | 10 | |||||
Common stock held by consenting shareholders (percent) | 52.80% | 51.00% | |||||
Common stock held by consenting shareholders (shares) | 118,211,379 | 67,852,699 | |||||
Subsequent Event [Member] | Consulting Agreement [Member] | |||||||
Common stock issued for services, shares | 4,833,333 | 428,571 | |||||
Subsequent Event [Member] | Air Purification Products [Member] | |||||||
Profit margin (percent) | 75.00% | ||||||
Subsequent Event [Member] | NHS Holdings LLC [Member] | |||||||
Stock issued in acquisition | $ | $ 975,000 | ||||||
Stock issued in acquisition (shares) | 27,769,500 | ||||||
Assets acquired - inventory | $ | $ 850,000 | ||||||
Distribution agreement payment of costs of products | 7.00% | ||||||
Subsequent Event [Member] | NHS Holdings LLC [Member] | Minimum [Member] | |||||||
Estimated useful life of intangibles | 1 year | ||||||
Subsequent Event [Member] | NHS Holdings LLC [Member] | Maximum [Member] | |||||||
Estimated useful life of intangibles | 5 years | ||||||
Subsequent Event [Member] | UV Flu [Member] | |||||||
Stock issued in acquisition | $ | $ 975,000 | ||||||
Stock issued in acquisition (shares) | 27,918,000 | ||||||
Assets acquired - inventory | $ | $ 0 | ||||||
Subsequent Event [Member] | UV Flu [Member] | Minimum [Member] | |||||||
Estimated useful life of intangibles | 3 years | ||||||
Subsequent Event [Member] | UV Flu [Member] | Maximum [Member] | |||||||
Estimated useful life of intangibles | 5 years |