Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 15, 2019 | |
Entity Registrant Name | Vystar Corp | |
Entity Central Index Key | 0001308027 | |
Document Type | 10-Q | |
Trading Symbol | VYST | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Reporting Status Current | No | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shares Outstanding | 1,041,770,559 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 | |
Series A Preferred Stock [Member] | ||
Entity Shares Outstanding | 13,828 |
CONDENSED BALANCE SHEETS
CONDENSED BALANCE SHEETS - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 438,164 | $ 50,053 |
Accounts receivable | 20,245 | 19,732 |
Inventories | 595,680 | 570,587 |
Prepaid expenses | 448 | 6,683 |
Total current assets | 1,054,536 | 647,055 |
Property and equipment, net | 281,614 | 291,346 |
Other assets: | ||
Intangible assets, net | 1,494,430 | 1,531,011 |
Total assets | 2,830,580 | 2,469,412 |
Current liabilities: | ||
Accounts payable | 571,349 | 538,461 |
Accounts payable - related parties | 131,064 | 187,698 |
Accrued expenses and interest payable | 93,208 | 101,979 |
Accrued stock-based compensation | 297,525 | 771,203 |
Shareholder, convertible and contingently convertible notes payable and accrued interest, net of debt discount - current maturities | 353,643 | 504,149 |
Derivative liabilities | 235,085 | |
Total current liabilities | 1,446,789 | 2,338,575 |
Long-term liabilities: | ||
Loan payable Fidelity Bank | 500,000 | 500,000 |
Related party line of credit | 1,361,945 | 1,499,875 |
Shareholder, convertible and contingently convertible notes payable and accrued interest - net of current maturities | 219,634 | |
Total long-term liabilities | 2,081,579 | 1,999,875 |
Total liabilities | 3,528,369 | 4,338,450 |
Stockholders' deficit: | ||
Preferred stock, $0.0001 par value 15,000,000 shares authorized; 13,828 issued and outstanding at March 31, 2019 and December 31 2018 (liquidation preference of $80,857 and $77,447 at March 31, 2019 and December 31, 2018, respectively) | 1 | 1 |
Common stock, $0.0001 par value, 1,500,000,000 shares authorized; 1,057,482,127 and 457,747,818 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 105,746 | 45,774 |
Additional paid-in capital | 35,730,012 | 31,485,532 |
Accumulated deficit | (36,533,519) | (33,400,345) |
Common stock in treasury, at cost; 30,000 and 0 shares at March 31, 2019 and December 31, 2018, respectively | (30) | |
Total stockholders' deficit | (697,789) | (1,869,038) |
Total liabilities and stockholders' deficit | $ 2,830,580 | $ 2,469,412 |
CONDENSED BALANCE SHEETS (Paren
CONDENSED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
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 | 1,500,000,000 | 1,500,000,000 |
Common stock, issued | 1,057,482,127 | 457,747,818 |
Common stock, outstanding | 1,057,482,127 | 457,747,818 |
Treasury shares | 30,000 | 0 |
Preferred stock liquidation preference | $ 80,857 | $ 77,447 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Revenue | $ 191,667 | $ 3,944 |
Cost of revenue | 199,842 | 49,421 |
Gross loss | (8,175) | (45,477) |
Operating expenses: | ||
General and administrative, including non-cash share-based compensation of $1,612,286 and $1,404,889 in 2019 and 2018, respectively | 1,995,880 | 1,763,449 |
Loss from operations | (2,004,055) | (1,808,926) |
Other income (expense): | ||
Other expense | (152) | |
Gain on settlement of debt | 14,945 | |
Interest expense | (99,663) | (41,448) |
Change in fair value of derivative liabilities | (1,044,250) | |
Total other expense, net | (1,129,119) | (41,448) |
Net loss | $ (3,133,174) | $ (1,850,374) |
Basic and diluted loss per share: | ||
Net loss per share | $ 0 | $ (0.01) |
Basic and diluted weighted average number of common shares outstanding | 770,752,984 | 133,875,885 |
CONDENSED STATEMENTS OF OPERA_2
CONDENSED STATEMENTS OF OPERATIONS (unaudited) (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Non-cash share-based compensation | $ 1,612,286 | $ 1,404,889 |
CONDENSED STATEMENT OF STOCKHOL
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT - USD ($) | Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Treasury Stock [Member] | Total |
Balance at beginning at Dec. 31, 2017 | $ 1 | $ 13,280 | $ 25,128,476 | $ (27,999,123) | $ (2,857,366) | |
Balance at beginning (in shares) at Dec. 31, 2017 | 13,828 | 132,809,218 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Common stock issued for services | $ 150 | 68,898 | 69,048 | |||
Common stock issued for services (in shares) | 1,498,000 | |||||
Net Loss | (1,850,374) | (1,850,374) | ||||
Balance at ending at Mar. 31, 2018 | $ 1 | $ 13,430 | 25,197,374 | (29,849,497) | (4,638,692) | |
Balance at ending (in shares) at Mar. 31, 2018 | 13,828 | 134,307,218 | ||||
Balance at beginning at Dec. 31, 2018 | $ 1 | $ 45,774 | 31,485,532 | (33,400,345) | (1,869,038) | |
Balance at beginning (in shares) at Dec. 31, 2018 | 13,828 | 457,747,818 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Common stock issued for services | $ 14,771 | 2,017,465 | $ 842,000 | |||
Common stock issued for services (in shares) | 147,704,875 | 147,704,875 | ||||
Share-based compensation - options | 17,783 | $ 17,783 | ||||
Common stock issued for settlement of warrants | $ 7,725 | 324,717 | 332,442 | |||
Common stock issued for settlement of warrants (in shares) | 77,246,324 | |||||
Common stock issued for cash received | $ 14,493 | 420,307 | 434,800 | |||
Common stock issued for cash received, shares (in shares) | 144,933,992 | |||||
Common stock issued for conversion of line of credit | $ 251 | 143,278 | 143,529 | |||
Common stock issued for conversion of line of credit (in shares) | 2,512,900 | |||||
Common stock issued upon conversion of convertible notes and settlement of debt | $ 22,732 | 1,320,931 | 1,343,663 | |||
Common stock issued upon conversion of convertible notes and settlement of debt, shares (in shares) | 227,336,218 | |||||
Treasury stock repurchases | $ (30) | (30) | ||||
Treasury stock repurchases (in shares) | (30,000) | |||||
Net Loss | (3,133,174) | (3,133,174) | ||||
Balance at ending at Mar. 31, 2019 | $ 1 | $ 105,746 | $ 35,730,012 | $ (36,533,519) | $ (30,000) | $ (697,789) |
Balance at ending (in shares) at Mar. 31, 2019 | 13,828 | 1,057,482,127 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (3,133,174) | $ (1,850,374) |
Adjustments to reconcile net loss to cash used in operating activities | ||
Gain on settlement of debt | (14,945) | |
Share-based compensation | 1,612,286 | 1,404,889 |
Depreciation | 10,232 | |
Amortization of intangible assets | 39,421 | 3,920 |
Amortization of debt discount | 73,519 | |
Change in fair value of derivative liabilities | 1,044,250 | |
(Increase) decrease in assets | ||
Accounts receivable | (513) | (569) |
Inventories | (25,093) | (103,055) |
Prepaid expenses | 6,235 | 6,515 |
Increase (decrease) in liabilities | ||
Accounts payable | 32,888 | (83,436) |
Accounts payable - related parties | (56,634) | 122,846 |
Accrued expenses and interest payable | 1,163 | 174,682 |
Net cash used in operating activities | (410,364) | (324,582) |
Cash flows from investing activities: | ||
Patents and trademark fees | (2,839) | |
Website development costs | (500) | |
Net cash used in investing activities | (3,339) | |
Cash flows from financing activities: | ||
Proceeds of Fidelity loan | 500,000 | |
Treasury stock repurchases | (30) | |
Issuance of common stock, net of costs | 731,020 | |
Repayments of notes payable | (146,176) | |
Proceeds from the issuance of notes | 444,050 | |
Proceeds from the issuance of notes - related parties | 217,000 | |
Net cash provided by financing activities | 801,814 | 944,050 |
Net increase in cash | 388,111 | 619,468 |
Cash - beginning of period | 50,053 | 13,502 |
Cash - end of period | 438,164 | 632,970 |
Cash paid during the period for: | ||
Interest | 16,209 | $ 32,869 |
Non-cash transactions: | ||
Debt and accrued interest payable converted to common stock | 1,487,192 | |
Shares issued for accrued compensation | 771,203 | |
Shares issued for settlement of warrant exercises | 32,442 | |
Reclass of derivative liabilities to additional paid-in capital | $ 1,279,335 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 3 Months Ended |
Mar. 31, 2019 | |
Business Combination, Description [Abstract] | |
DESCRIPTION OF BUSINESS | NOTE 1 DESCRIPTION OF BUSINESS History and Nature 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”). Vytex NRL uses a global multi-patented technology and proprietary formulation to reduce non-rubber particles including the antigenic proteins associated with latex allergies, resulting in a cleaner form of latex. The antigenic protein levels are reduced to virtually undetectable levels. 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. On March 4, 2015, the Company announced that Hartford, CT based Gold Bond formed a strategic alliance with NHS to produce and market the world’s first Vytex NRL based mattress. In June 2015, the first mattresses made with Vytex (hybrid and pure Vytex) were placed on the sales floor at Rotmans Furniture and Carpet Store in Worcester, MA using the “Evaya” brand and Gold Bond had shipped four versions of their “Brilliance” inner coil and pure foam mattresses (Emerald, Ruby, Sapphire Plush and Sapphire Firm) to over 30 stores from Maine to Florida. In April of 2018, Vystar acquired the assets of NHS Holdings, LLC (NHS) executing on the first part of the Company’s vision to move into direct product offerings made from Vytex In May of 2018, Vystar acquired substantially all of the assets of UV Flu Technologies As part of Vystar’s mission to offer eco-friendly, sustainable materials and products that create a better environment for consumers and workers throughout the product lifecycle, UV Flu Technologies is an excellent counterpart to our Vytex materials and Vytex bedding products. Vystar products will help create a perfect natural sleep environment starting with Vytex bedding made from the purest latex in the world and UV Flu’s RxAir |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statement presentation. However, the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The Company has evaluated subsequent events through the date of the filing of its Form 10-K with the Securities and Exchange Commission. Other than those events disclosed in Note 13, the Company is not aware of any other significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Company’s financial statements. Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer. The Company and the chief executive officer view the Company’s operations and manage its business as one reportable segment with different operating segments. 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, valuation of derivative liabilities, and fair values of share-based compensation and other equity issuances. Fair Value of Financial Instruments The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses and interest payable, lines of credit, shareholder notes payable, and long-term debt. 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, 2019 and December 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. The derivative liabilities are recognized at fair value on a recurring basis at March 31, 2019 and December 31, 2018 and are level 3 measurements. There has been no transfers between levels during the three months ended March 31, 2019. Acquisition Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on valuations that use information and assumptions provided by management. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including, legal, accounting, and other costs, are capitalized in asset acquisitions and for business combinations are expensed in the periods in which the costs are incurred. The results of operations of acquired assets are included in the financial statements from the acquisition date. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based upon its assessment of the current status of individual accounts. Balances that are still outstanding after management has performed reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of March 31, 2019 and December 31, 2018, the Company determined there were no amounts deemed uncollectible. The Company grants credit to customers without requiring collateral. The amount of accounting loss for which Vystar is at risk in these unsecured accounts receivable is limited to their carrying value. Vytex customers are located in both the United States and internationally. Inventories Inventory cost includes those costs directly attributable to the product before sale. Inventory consists primarily of finished goods of foam toppers, mattresses and pillows and is carried at the lower of cost or market (net realizable value), using first-in, first-out method. Property and Equipment Property and equipment are stated at cost. Depreciation is provided by the use of the straight-line and accelerated methods for financial and tax reporting purposes, respectively, over the estimated useful lives of the assets, generally 5 to 10 years. As of March 31, 2019, the net balance of property and equipment is $281,614 with accumulated depreciation of $41,717. As of December 31, 2018, the net balance of property and equipment is $291,346 with accumulated depreciation of $31,485. Intangible Assets Patents represent legal and other fees associated with the registration of patents. The Company has four issued patents with the United States Patent and Trade Office (USPTO) as well as four issued international PCT (Patent Cooperation Treaty) patents. Patents are carried at cost and are being amortized on a straight-line basis over their estimated useful lives, typically 20 years. The Company has trademark protection for “Vystar”, “Vytex”, and “Created by Nature. Recreated by Science.” Trademarks are carried at cost and since their estimated life is indeterminable, no amortization is recognized. Instead, they are evaluated annually for impairment. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We evaluate assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the assets. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. During the three months ended March 31, 2019 and 2018, we did not recognize any impairment of our long-lived assets. Goodwill Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. We perform our annual impairment test at the end of each calendar year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Accounting for acquisitions requires us to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While we use best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. The impairment model permits, and we utilize, a simplified approach for determining goodwill impairment. In the first step, we evaluate the recoverability of goodwill by estimating the fair value of our reporting unit using multiple techniques, including an income approach using a discounted cash flow model and a market approach. Based on an equal weighting of the results of these two approaches, a conclusion of fair value is estimated. The fair value is then compared to the carrying value of our reporting unit. If the fair value of a reporting unit is less than its carrying value, the Company recognizes this amount as an impairment loss. Impairment losses, limited to the carrying value of goodwill, represent the excess of the carrying amount of goodwill over its implied fair value. Convertible Notes Payable Borrowings are recognized initially at the principal amount received. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as interest expense in the statements of operation over the period of the borrowings using the effective interest method. Derivatives The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance (ASU 2011-04), the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Loss Per Share The Company presents basic and diluted loss per share. Because the Company reported a net loss for three months ended March 31, 2019 and 2018, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same. Excluded from the computation of diluted loss per share were options to purchase 29,098,270 and 7,498,271 shares of common stock for three months ended March 31, 2019 and 2018, respectively, as their effect would be anti-dilutive. Warrants to purchase 14,382,380 and 14,831,069 shares of common stock for three months ended March 31, 2019 and 2018, respectively, were also excluded from the computation of diluted loss per share as their effect would be anti-dilutive. In addition, preferred stock convertible to 4,382,730 and 4,106,170 shares of common stock for three months ended March 31, 2019 and 2018, respectively, were excluded from the computation of diluted loss per share as their effect would be anti-dilutive. Revenue On January 1, 2018, we adopted FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers . 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 Our principal activities from which we generate our revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement 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, which is typically within a 1 to 2 days 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 finished goods 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 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. As of March 31, 2019 and December 31, 2018, reserves for estimated sales returns totaled $3,000, respectively and are included in accompanying financial statements as accrued expenses in the balance sheets. 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 based on fulfillment by the Company. The Company considers fulfillment when it passes all liability at the point of shipping through third party carriers. 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. Cost of Revenue Cost of revenue consists primarily of product and freight costs and fees paid to online retailers for costs of material. Research and Development Research and development costs are expensed when incurred. Research and development costs include all costs incurred related to the research, development and testing of the Company’s process to produce Vytex NRL. Vytex NRL has produced protein test results on finished products that are both “below detection” and “not detectable” in terms of the amount of proteins remaining in these finished goods made with Vytex NRL. These results have been reproduced in many subsequent tests. From inception through March 31, 2019, Vystar’s research and development costs have been approximately $2.4 million. Advertising Costs Advertising costs are expensed as incurred. Included in general and administrative expenses is approximately $20,483 for the three months ended March 31, 2019. There were no advertising costs for the three months ended March 31, 2018. Stock-Based Compensation The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of our common stock. The Company has elected to use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin Topic 14C to estimate the expected term of employee stock options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The value of restricted stock awards are determined using the fair value of the Company’s common stock on the date of grant. The fair value of performance share awards are estimated using a Monte-Carlo simulation model utilizing several key assumptions including expected peer group share price volatility, correlation coefficients between peers, the risk-free rate of return, the expected dividend yield and other award design features. The Company accounts for forfeitures as they occur. Compensation expense is recognized on a straight-line basis over the requisite service period of the award Income Taxes Vystar recognizes income taxes on an accrual basis based on a tax position taken or expected to be taken in its tax returns. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets or liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold is measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more likely than not be realized. A valuation allowance for the full amount of the net deferred tax asset was recorded for the three months ended March 31, 2018 and for the year ended December 31, 2018. Should they occur, interest and penalties related to tax positions are recorded as interest expense. No such interest or penalties have been incurred for the three months ended March 31, 2019 and 2018. The Company is no longer subject to federal examination for years prior to 2015. On December 22, 2017, the Tax Cuts and Jobs Act was signed into law impacting corporations by reducing the maximum tax rate from 35% to 21%, as well as various other provisions relating to the deductibility of certain items. The Act is not expected to have an immediate impact on the Company due to the large net operating loss carryforward as well as the full valuation allowance. 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 operating accounts may exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limits. While the Company monitors cash balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, the Company has experienced no loss or lack of access to our cash; however, the Company can provide no assurances that access to our cash will not be impacted by adverse conditions in the financial markets. Other Risks and Uncertainties The Company is exposed to commodity price risk, mainly associated with variations in the market price for NRL as well as wintering of the Hevea trees, which differs for each country. The timing and magnitude of industry cycles are difficult to predict and are impacted by general economic conditions including the buying climate in China. The Company responds to changes in NRL prices by adjusting sales prices on a weekly basis and by turning rather than holding inventory in anticipation of higher prices. The Company actively manages its exposure to commodity price risk and monitors the actual and expected spread between forward selling prices and purchase costs and processing and shipping expense. The Company also currently spreads the processing of Vytex NRL among three continents. Sales contracts are based on forward market prices, and generally orders are placed 30 to 90 days ahead of shipment date due to these fluctuations. However, financial results may be negatively impacted where selling prices fall more quickly than purchase price adjustments can be made or when levels of inventory have an anticipated net realizable value that is below cost. Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued ASU 2016-02, Leases In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Receipts and Cash Payments In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement 1In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718) In July 2017, the FASB issued ASU 2017-11, Earnings per share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815): Accounting for Certain Financial Instruments with Down Round Features In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business |
LIQUIDITY AND GOING CONCERN
LIQUIDITY AND GOING CONCERN | 3 Months Ended |
Mar. 31, 2019 | |
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 accounting principles generally accepted in the United States of America 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 inception. At March 31, 2019, the Company had cash of $438,164 and a deficit in working capital of $392,253. Further, at March 31, 2019, the accumulated deficit amounted to approximately $36.5 million. We use working capital to finance our ongoing operations, and since those operations do not currently cover all our operating costs, managing working capital is essential to our Company’s future success. A successful transition to attaining profitable operations is dependent upon obtaining sufficient 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, stock warrant exercises from existing shareholders, and raising capital through private placement memoranda (see Note 13, Subsequent Events). As a result of this history of losses and financial condition, there is substantial doubt about the Company’s ability to continue as a going concern. There can be no assurances that the Company will be able to achieve projected levels of revenue in 2019 and beyond. If the Company is not able to achieve projected revenue and obtain alternate additional financing of equity or debt, the Company would need to significantly curtail or reorient operations during 2019, which could have a material adverse effect on the ability to achieve the 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. 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; and market acceptance of the Company’s products, services and competing technological developments. As the Company expands our activities and operations, cash requirements are expected to increase at a rate consistent with revenue growth after the Company has achieved sustained revenue generation. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment, net consists of the following at December 31: March 31, December 31, 2019 2018 Tooling and testing equipment $ 319,000 $ 319,000 Warehouse equipment 3,831 3,831 Website development 500 — 323,331 322,831 Accumulated depreciation (41,717 ) (31,485 ) Property and equipment, net $ 281,614 $ 291,346 The Company incurred $10,232 in depreciation expense for the three months ended March 31, 2019. There was no depreciation expense incurred for the three months ended March 31, 2018. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 5 – INTANGIBLE ASSETS Intangible assets were as follows at March 31, 2019 and December 31, 2018: March 31, 2019 December 31, 2018 Amortization (in years) Amortized intangible assets Customer relationships $ 100,000 $ 100,000 10 Proprietary technology 610,000 610,000 10 Tradename and brand 610,000 610,000 10 Patents 242,149 242,149 6 - 20 Noncompete 50,000 50,000 5 Total 1,612,149 1,612,149 Accumulated amortization (276,723 ) (237,302 ) Net amortized intangibles 1,335,426 1,374,847 Indefinite-lived intangible assets Goodwill 147,092 147,092 Trademarks 11,912 9,072 Total intangible assets $ 1,494,430 $ 1,531,011 Amortization expense for the three months ended March 31, 2019 and 2018 was $39,421 and $3,920, respectively. Estimated future amortization expense for finite-lived intangible assets is as follows: Amount Remaining in 2019 $ 118,263 2020 157,684 2021 157,684 2022 157,684 2023 & thereafter 744,111 Total $ 1,335,426 As discussed in Note 13, in May 2018, nine (9) shareholders of the Company consented to purchase substantially all the assets of UV Flu Technologies, Inc., a Nevada corporation (“UV Flu”). Pursuant to the Asset Purchase Agreement, the purchase of substantially all assets of UV Flu was consummated on May 7, 2018. Vystar acquired all UV Flu intellectual property and two patents, product lines, tooling, FDA clearances, research data, websites and other assets for the purchase price of $1,814,670 or 27,918,000 shares of Vystar restricted common stock which may not be assigned or sold by UV Flu for twelve months. In addition, In April 2018, the Company issued 27,769,500 shares of its restricted common stock valued at approximately $1,110,780 based on the closing price of the Company’s common stock on April 18, 2018 in exchange for certain assets of NHS Holdings, LLC (NHS), the exclusive U.S. distributorship of Vystar’s Vytex® virtually allergen-, VOC-, and odor-free natural rubber latex (NRL) foam. In determining the fair value of the intangible assets related to the purchases, 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. An analysis was done of historical financial performance of the products and estimates of future performance of the products and intellectual properties acquired. This helped determine the fair values of the identified intangible assets related to the website, FDA Certification, tradename and branding, reacquired distribution rights and customer relationships. |
NOTES PAYABLE AND LOAN FACILITY
NOTES PAYABLE AND LOAN FACILITY | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE AND LOAN FACILITY | NOTE 6 NOTES PAYABLE AND LOAN FACILITY Related Party Line Loan (CMA Note Payable) On November 2, 2012, the Company executed a $1,500,000 unsecured line of credit agreement with CMA Investments, LLC, a related party and a Georgia limited liability company (the “CMA Note”). Three of the directors of the Company (“CMA directors”) were initially the members of CMA. Pursuant to the terms of the CMA Note, interest is computed at LIBOR plus 5.25% (8.22% at March 31, 2019) on amounts drawn and fees. The weighted average interest rate in effect on the borrowings for the three months ended March 31, 2019 was 7.99%. There are no available borrowings under the CMA note at March 31, 2019. The holders of CMA Investments, LLC agreed as of July 10, 2018, to change the terms of the debt as follows: ● The Company will continue to service the interest on the debt through 2019. ● This debt is considered long-term. The Company entered into a Loan Payoff and Share Payment Agreement on July 10, 2018. The Company had borrowed approximately $1,500,000 from CMA Investments, LLC (a related party) (the “Lender”) pursuant to several promissory notes. The Lender made the loans by using proceeds from a loan through Atlantic Capital Bank (the “ACB Loan”). In lieu of cash, the Company has paid the Lender 15,000,000 shares of restricted common stock (the “Shares”), which based on closing price on June 10, 2018 of $0.034 is equal to $510,000, provided that the Company continue to pay interest on the ACB Loan on Lender’s behalf for a six-month period. The certificate representing the Shares will be delivered to an escrow agent. After six months, the Escrow Agent is authorized to sell the Shares at a price of no less than $0.035 per share with a targeted date to complete sales of July 1, 2022. The Company shall be required to pay any shortfall between the proceeds Lender receives on the sale of the Shares and the total principal outstanding on the Company Loan at the settlement date. In the event of a surplus, the Company shall be authorized to repurchase the remaining Shares at par value. As of March 31, 2019, the Company reduced the amounts due by approximately $144,000 of the $1.5 million dollar CMA loan through the issuance out of escrow and sale of approximately 2,512,900 shares of its common stock. The balance as of March 31, 2019 on the CMA loan was approximately $1.3 million. See Note 13. There was no accrued interest on the loan as of March 31, 2019 and December 31, 2018, respectively. Fidelity Note Payable During the year ended December 31, 2018, certain investors have guaranteed $100,000 each with Fidelity Bank to establish a $500,000 revolving line of credit. At the present time, the Company is paying interest only at a rate of 4.5% per annum, with a balloon payment of $500,000 due in 2033. The balance is $500,000 as of March 31, 2019. Shareholder convertible and contingent convertible Notes Payable The following table summarizes the shareholder notes payable: March 31, December 31, Shareholder convertible notes $ 200,695 $ 338,195 Contingent convertible notes 3 54,500 204,333 Accrued interest 18,082 35,140 Debt discount — (73,519 ) Total shareholder notes & accrued interest 573,278 504,149 Less: current portion (353,643 ) (504,149 ) Total long-term debt $ 219,634 $ — Shareholder Convertible Notes Payable Included in the table above, there were shareholder notes payable outstanding as of March 31, 2019 and December 31, 2018 totaling $555,195 and $200,695, respectively. From January 1, 2018 to February 9, 2018, the Company issued contingently convertible promissory notes (the “Notes”) for contract work performed by other entities in lieu of compensation and expense reimbursement in the amount of $200,695. 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 at the Company’s option post April 19, 2018. 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. As of March 31, 2019, the balance on these notes was $212,537 and they were extended one additional year Convertible and Contingently Convertible Notes Payable From January 1, 2018 and through the date of these financial statements, the Company has issued certain convertible and contingently convertible promissory notes in varying amounts, in the aggregate of $710,000. The face amount of the notes represents the amount due at maturity along with the accrued interest, at which time that amount may 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. The contingently convertible notes provide for interest to accrue at an interest rate equal to 12% per annum or the maximum rate permitted under applicable law after the occurrence of any event of default as provided in the notes. At any time after 180 days from the issue date, the holder, at its option, may convert the outstanding principal balance and accrued interest into shares of common stock of the Company. The initial conversion price for the principal and interest in connection with voluntary conversions by a holder of the convertible notes ranges from $0.05 to $0.10 per share, subject to adjustment as provided therein. The total outstanding balance of the contingent convertible notes was converted as of March 31, 2019. They we converted into into approximately 303 million shares of the Company’s common stock. Based on the variable conversion price, the Company recorded initial derivative liabilities of $465,905. The remaining balance of $235,085, net of discount, as of December 31, 2018 was reduced to zero after a change in fair value of $1,044,250 and a decrease of $1,279,335 to the balance of the derivative liabilities upon the date all notes were converted. In connection with the issuance of the convertible notes, the Company issued warrants to purchase 411,875 shares of the Company’s common stock. The exercise term of the warrants ranges from issuance to any time on or after the six (6) month anniversary or prior to the maturity of the related note. The exercise price of the warrants is $0.40 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. Pursuant to ASU 2017-11, such antidilution features do not subject the Company to derivative accounting pursuant to ASC 815. All warrants were forfeited during the three months ended March 31, 2019 upon negotiation and conversion of the remaining outstanding balances. Peak One Opportunity Fund, L.P. During the year ended December 31, 2018, the Company entered into a financing agreement with Peak One Opportunity Fund, L.P. to receive $435,000 of original issue discount notes in three tranches as follows: 1. July 17, 2018, principal $85,000 with an imputed interest rate of 6%, discounted by 10%, and $5,000 for legal fees, for a net of $71,500 due three years from the funding date. The Company has the option of receiving two additional amounts ninety days apart; 2. September 14, 2018: $150,000 principal, $135,000 net. 3. November 13, 2018: a final $200,000 principal, $180,000 net. Peak One Opportunity Fund is entitled to convert the note into common stock at a price equal to 65% of the lowest traded price for the twenty trading days immediately preceding the date of the date of conversion. The Company has the option to redeem the note at varying prices based upon the redemption date. As of March 31, 2019, the entire balance has been converted into shares of common stock. Crown Bridge Partners, LLC During the year ended December 31, 2018, the Company entered into a financing agreement with Crown Bridge Partners, LLC to receive $100,000 of original issue discount notes in two tranches as follows: 1. August 6, 2018: principal $50,000 bearing interest at 8%, discounted by 10%, and $2,000 for legal fees, for a net of $43,000 due one year from the funding date; 2. The remaining tranche may be funded at the holder’s discretion. Crown Bridge Partners was entitled to convert the note into common stock at a price equal to 65% of the average of the two lowest traded prices for the twenty-five trading days immediately preceding the date of the date of conversion. In addition, the following notes were convertible after six months from the issue date: Face Interest Net Cash Amount Issue Date and Name Amount Rate Maturity Proceeds Converted/Paid Jan 29, 2018 EMA $ 80,000 12 % Jan 29, 2019 $ 72,300 $ 80,000 Feb 14, 2018 Auctus 80,000 12 % Nov 14, 2018 72,500 80,000 Feb 13, 2018 FirstFire Global 76,500 5 % Nov 13, 2018 72,500 81,500 May 2, 2018 Power Up #3 83,000 12 % May 23, 2019 80,000 83,000 October 10, 2018 Power Up #4 103,000 12 % Oct 10, 2019 103,000 $ 103,000 All notes have been paid in full. During the three months ended March 31, 2019, approximately $63,000 of the convertible notes and approximately $21,000 of accrued interest were exchanged for approximately 227,000,000 shares of common stock. In addition, approximately $142,000 of the Power Up notes have been settled in cash and all notes have been fully converted or paid as of March 31, 2019. During the three months ended March 31, 2019, the Company has issued certain convertible promissory notes in varying amounts to existing shareholders. The face amount of the notes represents the amount due at maturity along with the accrued interest, at which time that amount can be converted upon the triggering event of a reverse stock split. At which time the conversion into shares of the Company stock will be based on the lowest 2 day closing price for the trailing 20 days prior to conversion and carrying a 35% discount. These notes are included in the table below: Issue Date Face Amount Interest Rate Maturity Net Cash Proceeds Jan 3, 2019 $ 4,500 5 % Jan 3, 2021 $ 4,500 Jan 3, 2019 $ 93,750 5 % Jan 3, 2021 $ 93,750 Jan 3, 2019 $ 102,200 5 % Jan 3, 2021 $ 102,200 Feb 4, 2019 $ 18,750 5 % Feb 4, 2021 $ 18,750 Note that these notes can be converted only after an acceleration event which involves a symbol change, or uplisting or reverse stock split. |
DERIVATIVE LIABILITIES
DERIVATIVE LIABILITIES | 3 Months Ended |
Mar. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE LIABILITIES | NOTE 7 DERIVATIVE LIABILITIES As of March 31, 2019, the Company had a $0 derivative liability balance on the balance sheet and recorded a loss from derivative fair value adjustments of $1,044,250 for the three months ended March 31, 2019. The derivative liability activity comes from the convertible notes payable (and any related warrants). The Company analyzed the conversion features and warrants of the various note agreements for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion feature of the notes and recorded a derivative liability. The embedded derivatives for the notes are carried on the Company’s balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the statement of operations and the associated fair value carrying amount on the balance sheet is adjusted by the change. The Company fair values the embedded derivative using a lattice-based valuation model. The conversion feature is valued at the date the feature can be convertible which ranges from the issuance date of the note to 180 days after the issue date. The following table summarizes the derivative liabilities included in the balance sheet at March 31, 2019: Fair Value of Embedded Derivative and Warrant Liabilities: Balance, December 31, 2018 $ 235,085 Change in fair value 1,044,250 Settlement due to conversion (1,279,335 ) Balance, March 31, 2019 $ — |
STOCKHOLDERS' DEFICIT
STOCKHOLDERS' DEFICIT | 3 Months Ended |
Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' DEFICIT | NOTE 8 STOCKHOLDERS’ DEFICIT 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. As of March 31, 2019, the 13,828 shares of outstanding preferred stock had accumulated undeclared dividends of approximately $80,857 and could be converted into 4,382,730 shares of common stock, at the option of the holder. As of December 31, 2018, the 13,828 shares of outstanding preferred stock had accumulated undeclared dividends of approximately $77,447 and could be converted into 4,314,537 shares of common stock, at the option of the holder. Common Stock and Warrants From January 1, 2018 through March 31, 2018, we issued 1,498,000 shares of our common stock valued at approximately $69,048 for services rendered to the Company in 2018. During the three months ended March 31, 2019, through majority shareholder consent, the Company increased the amount of authorized common stock shares to 1,500,000,000 which increased the available shares to be issued and outstanding. During the three months ended March 31, 2019, the Company issued 144,933,992 shares under equity purchase agreements for cash proceeds totaling $434,800 (included in this were approximately 19,999,999 shares to be subsequently issued in connection with cash proceeds received during the three months ended March 31, 2019). Included in this amount are 12,999,999 of shares purchased for $14,000 from related parties. Approximately 54,999,997 shares were issued during the three months ended March 31, 2019 but were included in shares issued and outstanding at December 31, 2018 as the related cash was received prior to year end 2018. There were additional shares issuances to First Fire Global Opportunities Fund, LLC and Crown Bridge Partners for cash related to the settlement of warrants previously attached to convertible notes payable. See discussion below in Other Shares Issued. During the three months ended March 31, 2019, the Company issued 227,336,218 shares due to the conversion of principal and interest totaling $85,000. The fair value at dates of conversion totaled approximately $1.3 million which were offset by the settlement of derivative liabilities upon conversion of approximately $1.3 million. The difference was recognized as a gain on settlement of debt of approximately $21,000 and is included in the condensed statement of operations in other income (expense) for the three months ended March 31, 2019. See Note 6 for further details on conversion of the contingent convertible notes. As discussed in Note 6, in July 2018, the Company issued 15 million shares in escrow which CMA began to sell in March 2019 at the end of the six-month period. The sales were sold at their discretion to bring down the balance of the debt. In accordance with the agreement, CMA had to sell all shares at no less than $0.035 per share. As of March 31, 2019, the Company reduced the amounts due by approximately $144,000 of the $1.5 million CMA loan through the issuance and sale of approximately 2,512,900 shares of its common stock that were previously held in escrow. Subsequent to year end the remaining balance of the loan has been settled (see Note 13). On February 25, 2019, Vystar issued an aggregate of 4,000,000 shares to each Board member for compensation totaling 24,000,000 shares. The shares were valued at $1,207,200for six (6) board members.(based on the fair value on the measurement date). Other Shares Issued 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. The shares were valued at $75,000. In January 2019, the Company repurchased 30,000 shares of common stock from an existing shareholder for $30 in cash. The transaction was recorded as treasury stock repurchased and is included in the accompanying financial statements as a separate item in the condensed statement of stockholders’ deficit. In January 2019, the Company issued 14,746,324 shares to Peak One as part of a settlement. The shares were issued to settle any exercise of the 600,000 warrants previously granted to the investor related to convertible debt that was already converted, in addition to under conversion of previously outstanding convertible notes payable. As part of settlement to consider any remaining dispute over convertible notes payable and to avoid returning shares to the Company, the parties agreed the debt would be considered fully converted as of March 31, 2019. As part of that settlement agreement, the previously issued warrants were forfeited during the three months ended March 31, 2019 in exchange for shares issued for cash noted above. On the date of settlement, the shares had a fair value of $33,917. In March 2019, the Company issued a total of 31,133,333 shares for $200,000 in cash received from First Fire Global Opportunities Fund, LLC. The shares were issued to settle any exercise of the 286,875 warrants previously granted to the investor related to convertible debt that was already converted in addition to over conversion of previously outstanding convertible notes payable. These warrants were issued in connection with convertible notes payable. As part of settlement to consider any remaining dispute over convertible notes payable and to avoid returning shares to the Company, the parties agreed the debt would be considered fully converted as of March 31, 2019. As part of that settlement agreement, the previously issued warrants were forfeited during the three months ended March 31, 2019 in exchange for shares issued for cash noted above. In January and March of 2019, the Company issued 31,166,667 shares for $100,000 in cash received from Crown Bridge. The shares were issued to settle any exercise of the 125,000 warrants previously granted to the investor related to convertible debt that was already converted. As part of settlement to consider any remaining dispute over convertible notes payable, the parties agreed the debt would be considered fully converted as of March 31, 2019. As part of that settlement agreement, the previously issued warrants were forfeited during the three months ended March 31, 2019 in exchange for shares issued for cash noted above. During the three months ended March 31, 2019, the Company issued 147,704,875 shares for consulting services valued at approximately $842,000 based on the respective measurement dates. Of these shares, 81,664,655 were issued to related parties and the total expense amount of approximately $700,000 was accrued at December 31, 2018. See further detail of related party shares in Note 10. |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | NOTE 9 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. 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, 2019: ● 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. In total for the three months ended March 31, 2019 and 2018, the Company recorded $17,783 and $1,404,889, respectively, of share-based compensation expense related to employee and Board Members’ stock options. The unrecognized compensation expense as of March 31, 2019 was $81,938 for non-vested share-based awards to be recognized over a period of approximately four years. 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, 2019, there are 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, 2019. 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, 2019. The following table summarizes all stock option activity of the Company for the period. Options - Number of Shares Weighted Average Exercise Price Outstanding, December 31, 2018 29,098,270 $ 0.04 Granted — $ Exercised — $ Forfeited — $ Outstanding, March 31, 2019 29,098,270 $ 0.04 Exercisable, March 31, 2019 27,273,270 $ 0.03 As of March 31, 2019 and December 31, 2018, the aggregate intrinsic value of the Company’s outstanding options was $52,380 and $22,000, respectively. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock. Warrants Warrants are issued to third parties as payment for services, debt financing compensation and conversion 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 following table represents the Company’s warrant activity for the three months ended March 31, 2019: Number Weighted Weighted Weighted Outstanding, December 31, 2018 15,488,832 $ $ 0.12 4.27 Exercisable, December 31, 2018 15,488,832 0.12 4.27 Granted — Exercised — Forfeited (1,106,452 ) 0.48 — Expired — Outstanding, March 31, 2019 14,382,380 0.09 2.56 Exercisable, March 31, 2019 14,382,380 $ $ 0.09 2.56 Of the warrants that were forfeited, 1,011,875 of them were issued in connection with convertible notes payable. When the notes fully converted, 411,875 warrants were forfeited during the three months ended March 31, 2019 as part of a settlement in two separate cash transactions. The remaining 600,000 warrants were forfeited during the three months ended March 31, 2019 as part of a separate settlement in a cashless issuance. See further discussion in Note 8 of these financial statements. There was no stock compensation expense for the three months ended March 31, 2019 related to warrants. The stock compensation expense for the three months ended March 31, 2018 was $13,947. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 10 – RELATED PARTY TRANSACTIONS Officers and Directors Per Steven Rotman’s Employment agreement, he is to be paid approximately $1 per year in cash and $20,833 per month to be paid in shares based on a 20-day average at a 0% discount to market. During the three months ended March 31, 2019, the Company issued Steven Rotman 28,016,022 shares in accordance with his employment agreement that were accrued and expensed as of December 31, 2018. The Company expensed $201,000 during the three months ended March 31, 2019 related to 4,000,000 shares issued for services as a Board Member of the Company. In addition, the Company accrued and expensed approximately $103,000 related to shares to be issued in the future. Designcenters.com This entity is owned by Jamie Rotman, who is the daughter of the Company’s CEO, Steven Rotman. Designcenters.com provides bookkeeping and management services to the Company. In exchange for such services, the Company has entered into a consulting agreement with the related party entity. Per Designcenter.com consulting agreement, it is to be paid approximately $7,100 per month to be paid in shares based on a 20-day average at a 50% discount to market, and a $10,000 quarterly bonus to be paid in shares using the same formula. During the three months ended March 31, 2019, the Company issued Designcenters.com 20,030,407 shares in accordance with the consulting agreement that were accrued and expensed as of December 31, 2018. During the three months ended March 31, 2019, the Company expensed approximately $46,122 related to the consulting agreement. Of the expensed amount, approximately $17,992 was paid in cash. As of March 31, 2019, the Company had an accrued stock-based compensation balance of $22,820 related to this party. Blue Oar Consulting, Inc. This entity is owned by Gregory Rotman, who is the son of the Company’s CEO, Steven Rotman. Blue Oar Consulting provides business consulting services to the Company. In exchange for such services, the Company has entered into a consulting agreement with the related party entity. Per Blue Oar Consulting consulting agreement, it is to be paid approximately $15,000 per month in cash for expenses, and $12,500 per month to be paid in shares. It will be based on a 20-day average at a 50% discount to market. During the three months ended March 31, 2019, the Company issued Blue Oar 33,618,226 shares in accordance with the consulting agreement that were accrued and expensed as of December 31, 2018. During the three months ended March 31, 2019, the Company expensed approximately $82,500. Of the expensed amount, approximately $45,000 was paid in cash. As of March 31, 2019, the Company had an accrued stock-based compensation balance of $123,002 related to this party. Rotmans Furniture During the three months ended March 31, 2019, the Company had sales of approximately $42,000 to Murida Furniture Co., Inc, DBA Rotmans Furniture (“Rotmans”). Steven Rotman, the Company’s CEO, is a 42% owner of Rotmans. At March 31, 2019 and December 31, 2018, the Company had an amount receivable of approximately $15,522 and $2,254, respectively. During the three months ended March 31, 2019 and 2018, the Company utilized certain warehouse staff, warehouse and office space/services and an executive assistant of Rotmans for the Company’s purposes. The Company estimates the cost of such services to be approximately $40,000 per month or approximately $120,000, respectively, for the three months ended March 31, 2019 and 2018 (based on the term such resources were used). The Company was not charged for these resources and does not owe any amounts to Rotmans for the services utilized through March 31, 2019. |
COMMITMENTS
COMMITMENTS | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS | NOTE 11 – COMMITMENTS Employment and Consulting Agreements We have entered into employment and consulting agreements with certain of our officers, employees, and affiliates. For employees, payment and benefits would become payable in the event of termination by us for any reason other than cause, or upon change in control of our Company, or by the employee for good reason. There is currently one employment agreement in place for 2018 and 2019 with the CEO, Steven Rotman. See compensation terms in Note 10. During the 3 months ended March 31, 2019, the Company entered into various services agreement with consultants for financial reporting, advisory, and compliance services. The services agreement calls for monthly payments. Litigation From time to time, the Company is party to certain legal proceedings that arise in the ordinary course and are incidental to our business. Future events or circumstances, currently unknown to management, will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods. On February 19, 2019, EMA Financial, Inc. filed a lawsuit in the Southern District of New York against the Company. The lawsuit alleged various breaches of an underlying convertible promissory note and stock purchase agreement, and sought four claims for relief: (i) specific performance to enforce a stock conversion and contractual obligations; (ii) breach of contract; (iii) permanent injunction to enforce the stock conversion and contractual obligations; and (iv) legal fees and costs of the litigation. The complaint was filed with a motion seeking: (i) a preliminary injunction seeking an immediate resolution of the case through the stock conversion; (ii) a consolidation of the trial with the preliminary injunctive hearing; and (iii) summary judgment on the first and third claims for relief. The Company filed an opposition to the motion and at oral argument the motion for injunctive relief was denied. The Court issued a decision permitting a motion for summary judgment to proceed and permitted the Company the opportunity to supplement its opposition papers together with the plaintiff who was also provided opportunity to submit reply papers. As of March 31, 2019, there was no accurate assumption of liability to be accrued. It is the Company’s position that they issued all shares under the conversion terms. On April 5, 2019, the Company filed the opposition papers as well as a motion to dismiss the first and third causes of action in the complaint. |
MAJOR CUSTOMERS AND VENDORS
MAJOR CUSTOMERS AND VENDORS | 3 Months Ended |
Mar. 31, 2019 | |
Major Customers And Vendors | |
MAJOR CUSTOMERS AND VENDORS | NOTE 12 – MAJOR CUSTOMERS AND VENDORS Major customers and vendors are defined as a customer or vendor from which the Company derives at least 10% of its revenue and cost of revenue, respectively. During the three months ended March 31, 2019, Vytex licensing revenue came from three major customers; Wurfbian Polymer, Centrotrade and Mast Global, which collectively comprised 100% of the total Vytex licensing revenue. No amounts were owed to major vendors at March 31, 2019 and December 31, 2018. During the three months ended March 31, 2019, Vytex Foam revenue came from three major customers; Jeffco, King Koil, and Rotmans. The receivable for Rotmans was $15,522 as of March 31, 2019. There was no receivable for Jeffco and King Koil as of March 31, 2019. During the three months ended March 31, 2019 Vytex licensing revenue came from three major customers; Wurfbian Polymer, Centrotrade, Mast Global, which collectively comprised 100% total Vytex licensing revenue. No amounts were owed to major vendors at December 31, 2018 and December 31, 2017. During the three months ended March 31, 2019, Vytex Foam revenue came from three major customers; Jeffco, King Koil, and Rotmans. The receivable for Rotmans was $2,254 as of December 31, 2018. There was no receivable for Jeffco and King Koil as of December 31, 2018. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 13 SUBSEQUENT EVENTS As discussed in Note 8, in July 2018, On April 29, 2019, the previously approved increase to the authorized shares by majority shareholder consent was ratified by the board. The authorized common stock shares increased to 1,500,000,000 for the three months ended March 31, 2019, which increased the available shares to be issued and outstanding. |
BASIS OF PRESENTATION AND SUM_2
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statement presentation. However, the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The Company has evaluated subsequent events through the date of the filing of its Form 10-K with the Securities and Exchange Commission. Other than those events disclosed in Note 13, the Company is not aware of any other significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Company’s financial statements. |
Segment Reporting | Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer. The Company and the chief executive officer view the Company’s operations and manage its business as one reportable segment with different operating segments. |
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, valuation of derivative liabilities, and fair values of share-based compensation and other equity issuances. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses and interest payable, lines of credit, shareholder notes payable, and long-term debt. 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, 2019 and December 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. The derivative liabilities are recognized at fair value on a recurring basis at March 31, 2019 and December 31, 2018 and are level 3 measurements. There has been no transfers between levels during the three months ended March 31, 2019. |
Acquisition | Acquisition Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on valuations that use information and assumptions provided by management. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including, legal, accounting, and other costs, are capitalized in asset acquisitions and for business combinations are expensed in the periods in which the costs are incurred. The results of operations of acquired assets are included in the financial statements from the acquisition date. |
Accounts Receivable | Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based upon its assessment of the current status of individual accounts. Balances that are still outstanding after management has performed reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable. As of March 31, 2019 and December 31, 2018, the Company determined there were no amounts deemed uncollectible. The Company grants credit to customers without requiring collateral. The amount of accounting loss for which Vystar is at risk in these unsecured accounts receivable is limited to their carrying value. Vytex customers are located in both the United States and internationally. |
Inventories | Inventories Inventory cost includes those costs directly attributable to the product before sale. Inventory consists primarily of finished goods of foam toppers, mattresses and pillows and is carried at the lower of cost or market (net realizable value), using first-in, first-out method. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation is provided by the use of the straight-line and accelerated methods for financial and tax reporting purposes, respectively, over the estimated useful lives of the assets, generally 5 to 10 years. As of March 31, 2019, the net balance of property and equipment is $281,614 with accumulated depreciation of $41,717. As of December 31, 2018, the net balance of property and equipment is $291,346 with accumulated depreciation of $31,485. |
Intangible Assets | Intangible Assets Patents represent legal and other fees associated with the registration of patents. The Company has four issued patents with the United States Patent and Trade Office (USPTO) as well as four issued international PCT (Patent Cooperation Treaty) patents. Patents are carried at cost and are being amortized on a straight-line basis over their estimated useful lives, typically 20 years. The Company has trademark protection for “Vystar”, “Vytex”, and “Created by Nature. Recreated by Science.” Trademarks are carried at cost and since their estimated life is indeterminable, no amortization is recognized. Instead, they are evaluated annually for impairment. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We evaluate assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the assets. If the carrying amount of the assets exceeds the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets and fair value. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. During the three months ended March 31, 2019 and 2018, we did not recognize any impairment of our long-lived assets. |
Goodwill | Goodwill Goodwill reflects the cost of an acquisition in excess of the fair values assigned to identifiable net assets acquired. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. We perform our annual impairment test at the end of each calendar year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Accounting for acquisitions requires us to recognize, separately from goodwill, the assets acquired and the liabilities assumed at their acquisition-date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition-date fair values of the assets acquired and the liabilities assumed. While we use best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. The impairment model permits, and we utilize, a simplified approach for determining goodwill impairment. In the first step, we evaluate the recoverability of goodwill by estimating the fair value of our reporting unit using multiple techniques, including an income approach using a discounted cash flow model and a market approach. Based on an equal weighting of the results of these two approaches, a conclusion of fair value is estimated. The fair value is then compared to the carrying value of our reporting unit. If the fair value of a reporting unit is less than its carrying value, the Company recognizes this amount as an impairment loss. Impairment losses, limited to the carrying value of goodwill, represent the excess of the carrying amount of goodwill over its implied fair value. |
Convertible Notes Payable | Convertible Notes Payable Borrowings are recognized initially at the principal amount received. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as interest expense in the statements of operation over the period of the borrowings using the effective interest method. |
Derivatives | Derivatives The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance (ASU 2011-04), the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. |
Loss Per Share | Loss Per Share The Company presents basic and diluted loss per share. Because the Company reported a net loss for three months ended March 31, 2019 and 2018, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same. Excluded from the computation of diluted loss per share were options to purchase 29,098,270 and 7,498,271 shares of common stock for three months ended March 31, 2019 and 2018, respectively, as their effect would be anti-dilutive. Warrants to purchase 14,382,380 and 14,831,069 shares of common stock for three months ended March 31, 2019 and 2018, respectively, were also excluded from the computation of diluted loss per share as their effect would be anti-dilutive. In addition, preferred stock convertible to 4,382,730 and 4,106,170 shares of common stock for three months ended March 31, 2019 and 2018, respectively, were excluded from the computation of diluted loss per share as their effect would be anti-dilutive. |
Revenue | Revenue On January 1, 2018, we adopted FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers . 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 Our principal activities from which we generate our revenue are product sales. Revenue is measured based on considerations specified in a contract with a customer. A contract exists when it becomes a legally enforceable agreement 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, which is typically within a 1 to 2 days 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 finished goods 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 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. As of March 31, 2019 and December 31, 2018, reserves for estimated sales returns totaled $3,000, respectively and are included in accompanying financial statements as accrued expenses in the balance sheets. 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 based on fulfillment by the Company. The Company considers fulfillment when it passes all liability at the point of shipping through third party carriers. 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. |
Cost of Revenue | Cost of Revenue Cost of revenue consists primarily of product and freight costs and fees paid to online retailers for costs of material. |
Research and Development | Research and Development Research and development costs are expensed when incurred. Research and development costs include all costs incurred related to the research, development and testing of the Company’s process to produce Vytex NRL. Vytex NRL has produced protein test results on finished products that are both “below detection” and “not detectable” in terms of the amount of proteins remaining in these finished goods made with Vytex NRL. These results have been reproduced in many subsequent tests. From inception through March 31, 2019, Vystar’s research and development costs have been approximately $2.4 million. |
Advertising Costs | Advertising Costs Advertising costs are expensed as incurred. Included in general and administrative expenses is approximately $20,483 for the three months ended March 31, 2019. There were no advertising costs for the three months ended March 31, 2018. |
Stock-Based Compensation | Stock-Based Compensation The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of our common stock. The Company has elected to use the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin Topic 14C to estimate the expected term of employee stock options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The value of restricted stock awards are determined using the fair value of the Company’s common stock on the date of grant. The fair value of performance share awards are estimated using a Monte-Carlo simulation model utilizing several key assumptions including expected peer group share price volatility, correlation coefficients between peers, the risk-free rate of return, the expected dividend yield and other award design features. The Company accounts for forfeitures as they occur. Compensation expense is recognized on a straight-line basis over the requisite service period of the award |
Income Taxes | Income Taxes Vystar recognizes income taxes on an accrual basis based on a tax position taken or expected to be taken in its tax returns. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets or liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold is measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more likely than not be realized. A valuation allowance for the full amount of the net deferred tax asset was recorded for the three months ended March 31, 2018 and for the year ended December 31, 2018. Should they occur, interest and penalties related to tax positions are recorded as interest expense. No such interest or penalties have been incurred for the three months ended March 31, 2019 and 2018. The Company is no longer subject to federal examination for years prior to 2015. On December 22, 2017, the Tax Cuts and Jobs Act was signed into law impacting corporations by reducing the maximum tax rate from 35% to 21%, as well as various other provisions relating to the deductibility of certain items. The Act is not expected to have an immediate impact on the Company due to the large net operating loss carryforward as well as the full valuation allowance. |
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 operating accounts may exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limits. While the Company monitors cash balances in our operating accounts on a regular basis and adjust the balances as appropriate, these balances could be impacted if the underlying financial institutions fail. To date, the Company has experienced no loss or lack of access to our cash; however, the Company can provide no assurances that access to our cash will not be impacted by adverse conditions in the financial markets. |
Other Risks and Uncertainties | Other Risks and Uncertainties The Company is exposed to commodity price risk, mainly associated with variations in the market price for NRL as well as wintering of the Hevea trees, which differs for each country. The timing and magnitude of industry cycles are difficult to predict and are impacted by general economic conditions including the buying climate in China. The Company responds to changes in NRL prices by adjusting sales prices on a weekly basis and by turning rather than holding inventory in anticipation of higher prices. The Company actively manages its exposure to commodity price risk and monitors the actual and expected spread between forward selling prices and purchase costs and processing and shipping expense. The Company also currently spreads the processing of Vytex NRL among three continents. Sales contracts are based on forward market prices, and generally orders are placed 30 to 90 days ahead of shipment date due to these fluctuations. However, financial results may be negatively impacted where selling prices fall more quickly than purchase price adjustments can be made or when levels of inventory have an anticipated net realizable value that is below cost. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued ASU 2016-02, Leases In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Receipts and Cash Payments In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement 1In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718) In July 2017, the FASB issued ASU 2017-11, Earnings per share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815): Accounting for Certain Financial Instruments with Down Round Features In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment, net | Property and equipment, net consists of the following at December 31: March 31, December 31, 2019 2018 Tooling and testing equipment $ 319,000 $ 319,000 Warehouse equipment 3,831 3,831 Website development 500 — 323,331 322,831 Accumulated depreciation (41,717 ) (31,485 ) Property and equipment, net $ 281,614 $ 291,346 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | Intangible assets were as follows at March 31, 2019 and December 31, 2018: March 31, 2019 December 31, 2018 Amortization Period (in years) Amortized intangible assets Customer relationships $ 100,000 $ 100,000 10 Proprietary technology 610,000 610,000 10 Tradename and brand 610,000 610,000 10 Patents 242,149 242,149 6 - 20 Noncompete 50,000 50,000 5 Total 1,612,149 1,612,149 Accumulated amortization (276,723 ) (237,302 ) Net amortized intangibles 1,335,426 1,374,847 Indefinite-lived intangible assets Goodwill 147,092 147,092 Trademarks 11,912 9,072 Total intangible assets $ 1,494,430 $ 1,531,011 |
Schedule of future amortization expense | Estimated future amortization expense for finite-lived intangible assets is as follows: Amount Remaining in 2019 $ 118,263 2020 157,684 2021 157,684 2022 157,684 2023 & thereafter 744,111 Total $ 1,335,426 |
NOTES PAYABLE AND LOAN FACILI_2
NOTES PAYABLE AND LOAN FACILITY (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of shareholder, convertible and contingently convertible notes payable | The following table summarizes the shareholder notes payable: March 31, December 31, Shareholder convertible notes $ 200,695 $ 338,195 Contingent convertible notes 3 54,500 204,333 Accrued interest 18,082 35,140 Debt discount — (73,519 ) Total shareholder notes & accrued interest 573,278 504,149 Less: current portion (353,643 ) (504,149 ) Total long-term debt $ 219,634 $ — |
Schedule of convertible notes | Face Interest Net Cash Amount Issue Date and Name Amount Rate Maturity Proceeds Converted/Paid Jan 29, 2018 EMA $ 80,000 12 % Jan 29, 2019 $ 72,300 $ 80,000 Feb 14, 2018 Auctus 80,000 12 % Nov 14, 2018 72,500 80,000 Feb 13, 2018 FirstFire Global 76,500 5 % Nov 13, 2018 72,500 81,500 May 2, 2018 Power Up #3 83,000 12 % May 23, 2019 80,000 83,000 October 10, 2018 Power Up #4 103,000 12 % Oct 10, 2019 103,000 $ 103,000 Issue Date Face Amount Interest Rate Maturity Net Cash Proceeds Jan 3, 2019 $ 4,500 5 % Jan 3, 2021 $ 4,500 Jan 3, 2019 $ 93,750 5 % Jan 3, 2021 $ 93,750 Jan 3, 2019 $ 102,200 5 % Jan 3, 2021 $ 102,200 Feb 4, 2019 $ 18,750 5 % Feb 4, 2021 $ 18,750 |
DERIVATIVE LIABILITIES (Tables)
DERIVATIVE LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of derivative liabilities | The following table summarizes the derivative liabilities included in the balance sheet at March 31, 2019: Fair Value of Embedded Derivative and Warrant Liabilities: Balance, December 31, 2018 $ 235,085 Change in fair value 1,044,250 Settlement due to conversion (1,279,335 ) Balance, March 31, 2019 $ — |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
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. Options - Number of Shares Weighted Average Exercise Price Outstanding, December 31, 2018 29,098,270 $ 0.04 Granted — $ Exercised — $ Forfeited — $ Outstanding, March 31, 2019 29,098,270 $ 0.04 Exercisable, March 31, 2019 27,273,270 $ 0.03 |
Schedule of warrant activity | The following table represents the Company’s warrant activity for the three months ended March 31, 2019: Number Weighted Weighted Weighted Outstanding, December 31, 2018 15,488,832 $ $ 0.12 4.27 Exercisable, December 31, 2018 15,488,832 0.12 4.27 Granted — Exercised — Forfeited (1,106,452 ) 0.48 — Expired — Outstanding, March 31, 2019 14,382,380 0.09 2.56 Exercisable, March 31, 2019 14,382,380 $ $ 0.09 2.56 |
BASIS OF PRESENTATION AND SUM_3
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Research and development cost | $ 2,400,000 | ||
Previously statutory income tax rate | 35.00% | ||
Statutory income tax rate | 21.00% | ||
Net property and equipment | $ 281,614 | $ 291,346 | |
Accumulated depreciation | 41,717 | $ 31,485 | |
Revenue recognition, reserve for sales returns | $ 3,000 | ||
Days of delivery for transaction price | 30 days | ||
General and administrative expenses | $ 1,995,880 | $ 1,763,449 | |
Minimum [Member] | |||
Days of delivery for transaction price to customers | 1 day | ||
Maximum [Member] | |||
Days of delivery for transaction price to customers | 2 days | ||
Stock Option [Member] | Minimum [Member] | |||
Useful life | 5 years | ||
Stock Option [Member] | Maximum [Member] | |||
Useful life | 10 years | ||
Patents [Member] | |||
Intangible asset, useful life | 20 years | ||
Patents [Member] | Minimum [Member] | |||
Intangible asset, useful life | 6 years | ||
Patents [Member] | Maximum [Member] | |||
Intangible asset, useful life | 20 years | ||
Preferred Stock [Member] | |||
Antidilutive securities excluded from computation of earnings per share, amount | 4,382,730 | 4,106,170 | |
Stock Options [Member] | |||
Antidilutive securities excluded from computation of earnings per share, amount | 29,438,270 | 7,498,271 | |
Warrant [Member] | |||
Antidilutive securities excluded from computation of earnings per share, amount | 14,382,380 | 14,831,069 |
LIQUIDITY AND GOING CONCERN (De
LIQUIDITY AND GOING CONCERN (Details Narrative) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Liquidity And Going Concern | ||||
Cash | $ 438,164 | $ 50,053 | $ 632,970 | $ 13,502 |
Working capital deficit | 392,253 | |||
Accumulated deficit | $ (36,533,519) | $ (33,400,345) |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Line Items] | |||
Subtotal | $ 323,331 | $ 322,831 | |
Accumulated depreciation | (41,717) | (31,485) | |
Property and equipment, net | $ 281,614 | 291,346 | |
Tooling & Testing Equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Subtotal | $ 319,000 | 319,000 | |
Warehouse Equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Subtotal | 3,831 | 3,831 | |
Website Development [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Subtotal | $ 500 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Accumulated depreciation | $ 41,717 | $ 31,485 |
Depreciation expense | $ 10,232 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Total | $ 1,612,149 | $ 1,612,149 | |
Accumulated amortization | (276,723) | (237,302) | |
Net amortized intangibles | 1,335,426 | 1,374,847 | |
Goodwill | 147,092 | 147,092 | |
Trademarks | 11,912 | 9,072 | |
Total intangible assets | $ 1,494,430 | 1,531,011 | |
Customer Relationships [Member] | |||
Estimated Life | 10 years | ||
Total | $ 100,000 | 100,000 | |
Proprietary Technology [Member] | |||
Estimated Life | 10 years | ||
Total | 610,000 | 610,000 | |
Tradename And Brand [Member] | |||
Estimated Life | 10 years | ||
Total | 610,000 | 610,000 | |
Patents [Member] | |||
Estimated Life | 20 years | ||
Total | 242,149 | 242,149 | |
Patents [Member] | Minimum [Member] | |||
Estimated Life | 6 years | ||
Patents [Member] | Maximum [Member] | |||
Estimated Life | 20 years | ||
Noncompete [Member] | |||
Estimated Life | 5 years | ||
Total | $ 50,000 | $ 50,000 |
INTANGIBLE ASSETS (Details 1)
INTANGIBLE ASSETS (Details 1) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2019 | $ 118,263 | |
2020 | 157,684 | |
2021 | 157,684 | |
2022 | 157,684 | |
2023 & thereafter | 744,111 | |
Total | $ 1,335,426 | $ 1,374,847 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Apr. 30, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | May 07, 2018 | |
Amortization of intangible assets | $ 39,421 | $ 3,920 | ||
NHS Holdings, LLC [Member] | Restricted Stock [Member] | ||||
Stock issued in acquisition | $ 1,110,780 | |||
Stock issued in acquisition (shares) | 27,769,500 | |||
UV Flu Technologies, Inc [Member] | ||||
Purchase price | $ 1,814,670 |
NOTES PAYABLE AND LOAN FACILI_3
NOTES PAYABLE AND LOAN FACILITY (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Debt Disclosure [Abstract] | ||
Shareholder convertible notes | $ 200,695 | $ 338,195 |
Contingent convertible notes | 354,500 | 204,333 |
Accrued interest | 18,082 | 35,140 |
Debt discount | (73,519) | |
Total notes and accrued interest | 573,278 | 504,149 |
Less: current portion | (353,643) | (504,149) |
Total long-term debt | $ 219,634 | $ 0 |
NOTES PAYABLE AND LOAN FACILI_4
NOTES PAYABLE AND LOAN FACILITY (Details 1) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Amount converted | $ 63,000 |
Convertible Notes Payable [Member] | |
Issue Date | Jan. 29, 2018 |
Issuer name | EMA |
Face Amount | $ 80,000 |
Interest Rate | 12.00% |
Maturity | Jan. 29, 2019 |
Net Cash Proceeds | $ 72,300 |
Amount converted | $ 80,000 |
Convertible Notes Payable [Member] | |
Issue Date | Feb. 14, 2018 |
Issuer name | Auctus |
Face Amount | $ 80,000 |
Interest Rate | 12.00% |
Maturity | Nov. 14, 2018 |
Net Cash Proceeds | $ 72,500 |
Amount converted | $ 80,000 |
Convertible Notes Payable [Member] | |
Issue Date | Feb. 13, 2018 |
Issuer name | FirstFire Global |
Face Amount | $ 76,500 |
Interest Rate | 5.00% |
Maturity | Nov. 13, 2018 |
Net Cash Proceeds | $ 72,500 |
Amount converted | $ 81,500 |
Convertible Notes Payable [Member] | |
Issue Date | May 2, 2018 |
Issuer name | Power Up |
Face Amount | $ 83,000 |
Interest Rate | 12.00% |
Maturity | May 23, 2019 |
Net Cash Proceeds | $ 80,000 |
Amount converted | $ 83,000 |
Convertible Notes Payable [Member] | |
Issue Date | Oct. 10, 2018 |
Issuer name | Power Up |
Face Amount | $ 103,000 |
Interest Rate | 12.00% |
Maturity | Oct. 10, 2019 |
Net Cash Proceeds | $ 103,000 |
Amount converted | $ 103,000 |
Convertible Notes Payable [Member] | |
Issue Date | Jan. 3, 2019 |
Face Amount | $ 4,500 |
Interest Rate | 5.00% |
Maturity | Jan. 3, 2021 |
Net Cash Proceeds | $ 4,500 |
Convertible Notes Payable [Member] | |
Issue Date | Jan. 3, 2019 |
Face Amount | $ 93,750 |
Interest Rate | 5.00% |
Maturity | Jan. 3, 2021 |
Net Cash Proceeds | $ 93,750 |
Convertible Notes Payable [Member] | |
Issue Date | Jan. 3, 2019 |
Face Amount | $ 102,200 |
Interest Rate | 5.00% |
Maturity | Jan. 3, 2021 |
Net Cash Proceeds | $ 102,200 |
Convertible Notes Payable [Member] | |
Issue Date | Feb. 4, 2019 |
Face Amount | $ 18,750 |
Interest Rate | 5.00% |
Maturity | Feb. 4, 2021 |
Net Cash Proceeds | $ 18,750 |
NOTES PAYABLE AND LOAN FACILI_5
NOTES PAYABLE AND LOAN FACILITY (Details Narrative) | Aug. 06, 2018USD ($) | Jul. 17, 2018USD ($) | Jun. 10, 2018USD ($)$ / sharesshares | Jan. 02, 2018USD ($)Number$ / shares | Nov. 02, 2012USD ($) | Feb. 09, 2018USD ($)Number | Mar. 31, 2019USD ($)Number$ / sharesshares | Dec. 31, 2018USD ($) | Nov. 13, 2018USD ($) | Sep. 14, 2018USD ($) | Jul. 31, 2018USD ($) |
Number of closing price days | Number | 180 | ||||||||||
Number of Warrants granted | shares | 411,875 | ||||||||||
Amount of debt converted | $ 63,000 | ||||||||||
Accrued interest payable | 18,082 | $ 35,140 | |||||||||
Initial derivative liabilities | 0 | 235,085 | |||||||||
Payment of note | 146,176 | ||||||||||
Shareholder convertible notes | 200,695 | 338,195 | |||||||||
Change in fair value | 1,279,335 | ||||||||||
Change in fair value of derivative liabilities | $ (1,044,250) | ||||||||||
Number of common shares exchange | shares | 227,000,000 | ||||||||||
Fidelity [Member] | |||||||||||
Credit Facility, Maximum Borrowing Capacity | $ 500,000 | ||||||||||
Credit Facility, Borrowing Capacity outstanding | $ 500,000 | ||||||||||
Credit Facility, interest rate | 4.50% | ||||||||||
Guarantee of credit facility by each investor | $ 100,000 | ||||||||||
Balloon payment | 500,000 | ||||||||||
CMA Investments, LLC [Member] | |||||||||||
Debt face amount | $ 1,500,000 | ||||||||||
CMA Note [Member] | |||||||||||
Credit Facility, Maximum Borrowing Capacity | $ 1,500,000 | ||||||||||
Variable rate basis | LIBOR | ||||||||||
Basis Spread on Variable Rate, During Period | 5.25% | 8.22% | |||||||||
Weighted Average Interest Rate | 7.99% | ||||||||||
Amount of debt converted | $ 142,000 | ||||||||||
CMA Note [Member] | CMA Investments, LLC [Member] | Loan Payoff And Share Payment Agreement [Member] | |||||||||||
Related party transaction | $ 1,500,000 | $ 1,300,000 | |||||||||
Number of shares issued (in shares) | shares | 2,512,900 | ||||||||||
Decrease in related party transaction | $ 144,000 | ||||||||||
CMA Note [Member] | CMA Investments, LLC [Member] | Loan Payoff And Share Payment Agreement [Member] | Restricted Stock [Member] | |||||||||||
Number of shares issued (in shares) | shares | 15,000,000 | ||||||||||
Shares closing price (in dollars per share) | $ / shares | $ 0.034 | ||||||||||
Shares closing price | $ 510,000 | ||||||||||
CMA Note [Member] | CMA Investments, LLC [Member] | Loan Payoff And Share Payment Agreement [Member] | Restricted Stock [Member] | Escrow Agent [Member] | |||||||||||
Share price | $ / shares | $ 0.035 | ||||||||||
Maturity term of sale of shares | Jul. 1, 2022 | ||||||||||
Shareholders Convertible Promissory Notes [Member] | |||||||||||
Interest rate during period | 5.00% | ||||||||||
Number of trailing days prior to conversion | Number | 20 | ||||||||||
Discount to stocks closing price in debt conversion | 50.00% | ||||||||||
Shareholder notes payable | 555,195 | 200,695 | |||||||||
Notes expense reimbursement | $ 200,695 | ||||||||||
Net note payable | $ 212,537 | ||||||||||
Note payable maturity term | 1 year | ||||||||||
Convertible And Contingently Convertible Notes Payable [Member] | |||||||||||
Weighted Average Interest Rate | 12.00% | ||||||||||
Debt face amount | $ 710,000 | ||||||||||
Number of closing price days | Number | 2 | ||||||||||
Number of trailing days prior to conversion | Number | 20 | ||||||||||
Number of Warrants granted | shares | 411,875 | ||||||||||
Exercise price of warrants | $ / shares | $ 0.40 | ||||||||||
Percentage of conversion debt | 35.00% | ||||||||||
Debt conversion term | At any time after 180 days from the issue date, the holder, at its option, may convert the outstanding principal balance and accrued interest into shares of common stock of the Company. | ||||||||||
Initial derivative liabilities | $ 465,905 | 235,085 | |||||||||
Convertible And Contingently Convertible Notes Payable [Member] | Maximum [Member] | |||||||||||
Conversion Price | $ / shares | $ 0.05 | ||||||||||
Convertible And Contingently Convertible Notes Payable [Member] | Minimum [Member] | |||||||||||
Conversion Price | $ / shares | $ 0.10 | ||||||||||
Notes Payable [Member] | Peak One Opportunity Fund, L.P [Member] | Financing Agreement [Member] | |||||||||||
Percentage of conversion debt | 65.00% | ||||||||||
Receive original issue discount notes | 435,000 | ||||||||||
Notes Payable [Member] | Peak One Opportunity Fund, L.P [Member] | Financing Agreement [Member] | Tranche First [Member] | |||||||||||
Debt face amount | $ 85,000 | ||||||||||
Imputed interest rate | 6.00% | ||||||||||
Legal fees | $ 5,000 | ||||||||||
Net note payable | $ 71,500 | ||||||||||
Percetange of debt discount | 10.00% | ||||||||||
Notes Payable [Member] | Peak One Opportunity Fund, L.P [Member] | Financing Agreement [Member] | Tranche Second [Member] | |||||||||||
Debt face amount | $ 150,000 | ||||||||||
Net note payable | $ 135,000 | ||||||||||
Notes Payable [Member] | Peak One Opportunity Fund, L.P [Member] | Financing Agreement [Member] | Tranche Third [Member] | |||||||||||
Debt face amount | $ 200,000 | ||||||||||
Net note payable | $ 180,000 | ||||||||||
Notes Payable [Member] | Crown Bridge Partners, LLC [Member] | Financing Agreement [Member] | |||||||||||
Percentage of conversion debt | 65.00% | ||||||||||
Receive original issue discount notes | $ 100,000 | ||||||||||
Notes Payable [Member] | Crown Bridge Partners, LLC [Member] | Financing Agreement [Member] | Tranche First [Member] | |||||||||||
Interest rate during period | 8.00% | ||||||||||
Debt face amount | $ 50,000 | ||||||||||
Legal fees | 2,000 | ||||||||||
Net note payable | $ 43,000 | ||||||||||
Percetange of debt discount | 10.00% | ||||||||||
Convertible Notes [Member] | |||||||||||
Number of shares issued | shares | 303,000,000 |
DERIVATIVE LIABILITIES (Details
DERIVATIVE LIABILITIES (Details) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative liabilities at beginning | $ 235,085 |
Change in fair value | 1,044,250 |
Reclassification due to conversion | (1,279,335) |
Derivative liabilities at ending | $ 0 |
DERIVATIVE LIABILITIES (Detai_2
DERIVATIVE LIABILITIES (Details Narrative) | 3 Months Ended | |
Mar. 31, 2019USD ($)Number | Dec. 31, 2018USD ($) | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Derivative liability | $ 0 | $ 235,085 |
Derivative fair value adjustments | $ 1,044,250 | |
Number of closing price days | Number | 180 |
STOCKHOLDERS' DEFICIT (Details
STOCKHOLDERS' DEFICIT (Details Narrative) - USD ($) | Feb. 25, 2019 | Jan. 31, 2019 | Jul. 31, 2018 | Feb. 05, 2018 | May 02, 2013 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | Dec. 28, 2018 | Apr. 27, 2018 |
Common stock issued for services, shares | 147,704,875 | 1,498,000 | ||||||||
Allocated share based | $ 1,612,286 | $ 1,404,889 | ||||||||
Accrued stock based compensation | 297,525 | $ 771,203 | ||||||||
Common stock issued under employment agreement, shares | 721,408 | |||||||||
Accrued expenses and stock payable | 700,000 | |||||||||
Accumulated dividends preferred stock | $ 80,857 | $ 77,447 | ||||||||
Preferred stock, outstanding | 13,828 | 13,828 | ||||||||
Preferred stock, liquidation preference | $ 80,857 | $ 77,447 | ||||||||
Number of shares issuable upon conversion of preferrd stock | 4,382,730 | 4,314,537 | ||||||||
Number of service issued, value | $ 842,000 | 69,048 | $ 69,048 | |||||||
Number of convert payable value | 227,336,218 | $ 1,444,320 | ||||||||
Common stock issued upon conversion of convertible notes and settlement of debt | 1,343,663 | |||||||||
Common stock issued for cash received | 434,800 | |||||||||
Accounts payable | $ 571,349 | $ 538,461 | ||||||||
Common stock, authorized | 1,500,000,000 | 1,500,000,000 | ||||||||
Authorized preferred stock (shares) | 15,000,000 | 15,000,000 | ||||||||
Number of share issued, signing bonus | 34,806 | |||||||||
Stock based compensation | $ 1,612,286 | $ 1,404,889 | ||||||||
Number of shares repurchase (in shares) | 30,000 | |||||||||
Number of shares repurchase, value | $ 30 | |||||||||
Settlement of derivative liabilities | 1,300,000 | |||||||||
Gain on settlement of debt | $ 14,945 | |||||||||
Number of shares issued to related parties (in shares) | 81,664,655 | |||||||||
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 | |||||||||
Director [Member] | ||||||||||
Number of shares issued employee benefit plan (in shares) | 4,000,000 | 24,000,000 | ||||||||
Number of shares issued employee benefit plan, value | $ 1,207,200 | |||||||||
Equity Purchase Agreements [Member] | ||||||||||
Common stock issued for cash received | $ 144,933,992 | |||||||||
Common stock issued for cash received, shares (in shares) | 434,800 | |||||||||
Number of shares repurchase (in shares) | 12,999,999 | |||||||||
Number of shares repurchase, value | $ 14,000 | |||||||||
Number of shares issued (in shares) | 54,999,997 | |||||||||
Crown Bridge Partners, LLC [Member] | ||||||||||
Number of shares issued (in shares) | 31,166,667 | |||||||||
Number of shares issued, value | $ 100,000 | |||||||||
Crown Bridge Partners, LLC [Member] | Warrant [Member] | ||||||||||
Common stock issued upon conversion of convertible notes and settlement of debt, shares (in shares) | 125,000 | |||||||||
FirstFire Global Opportunities Fund, LLC [Member] | ||||||||||
Number of shares issued (in shares) | 31,133,333 | |||||||||
Number of shares issued, value | $ 200,000 | |||||||||
FirstFire Global Opportunities Fund, LLC [Member] | Warrant [Member] | ||||||||||
Common stock issued upon conversion of convertible notes and settlement of debt, shares (in shares) | 286,875 | |||||||||
Peak One Opportunity Fund, L.P [Member] | ||||||||||
Common stock issued upon conversion of convertible notes and settlement of debt, shares (in shares) | 14,746,324 | |||||||||
Peak One Opportunity Fund, L.P [Member] | Warrant [Member] | ||||||||||
Common stock issued upon conversion of convertible notes and settlement of debt | $ 33,917 | |||||||||
Common stock issued upon conversion of convertible notes and settlement of debt, shares (in shares) | 600,000 | |||||||||
STILLH20s Financial, LLC [Member] | Consulting Agreement [Member] | ||||||||||
Common stock issued for services, shares | 1,500,000 | |||||||||
Number of service issued, value | $ 75,000 | |||||||||
CMA Investments, LLC [Member] | ||||||||||
Number of shares held in escrow | 15,000,000 | |||||||||
Shares issued price (in dollars per share) | $ 0.035 | |||||||||
Ajustment in debt | $ 143,000 | |||||||||
Debt face value | $ 1,500,000 | |||||||||
Number of common shares issued from escrow (in shares) | 2,512,900 | |||||||||
CEO [Member] | ||||||||||
Accrued stock based compensation | $ 222,173 |
SHARE-BASED COMPENSATION (Detai
SHARE-BASED COMPENSATION (Details) - Stock Option [Member] | 3 Months Ended |
Mar. 31, 2019$ / sharesshares | |
Number of options: | |
Number of Options outstanding, beginning | shares | 29,098,270 |
Number of Options granted | shares | |
Number of Options outstanding, ending | shares | 29,098,270 |
Number of Options exercisable | shares | 27,273,270 |
Weighted Average Exercise Price: | |
Options outstanding, beginning | $ / shares | $ 0.04 |
Options granted | $ / shares | |
Options outstanding, ending | $ / shares | 0.04 |
Options exercisable | $ / shares | $ 0.03 |
SHARE-BASED COMPENSATION (Det_2
SHARE-BASED COMPENSATION (Details 1) - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Number of Warrant: | ||
Number of Warrants outstanding, beginning | 15,488,832 | |
Number of Warrants granted | 411,875 | |
Number of Warrant forfeited | (1,106,452) | |
Number of Warrants outstanding, ending | 14,382,380 | 15,488,832 |
Number of Warrants exercisable | 14,382,380 | 15,488,832 |
Warrant Weighted Average Exercise Price: | ||
Warrant outstanding, beginning | $ 0.12 | |
Warrant forfeited | 0.48 | |
Warrant outstanding, ending | 0.09 | $ 0.12 |
Warrant exercisable | $ 0.09 | $ 0.12 |
Weighted Average Remaining Contractual Life | ||
Warrant outstanding at ending | 2 years 6 months 22 days | 4 years 3 months 7 days |
Warrant exercisable | 2 years 6 months 22 days | 4 years 3 months 7 days |
SHARE-BASED COMPENSATION (Det_3
SHARE-BASED COMPENSATION (Details Narrative) - USD ($) | 3 Months Ended | |||||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2014 | Apr. 30, 2009 | Jan. 01, 2004 | |
Share-based compensation | $ 1,612,286 | $ 1,404,889 | ||||
Intrinsic value of options outstanding | $ 52,380 | $ 22,000 | ||||
Stock Option Plan [Member] | ||||||
Number of shares authorized under stock option plan | 5,000,000 | 10,000,000 | 4,000,000 | |||
Number of shares reserved for issuance | 2,251,729 | |||||
Vesting period of stock options | 4 years | |||||
Exercisable period of stock options | 10 years | |||||
Employee And Board [Member] | ||||||
Share-based compensation | $ 17,783 | $ 1,404,889 | ||||
Unrecognized compensation cost for non-vested awards | $ 81,938 | |||||
Exercisable period of stock options | 4 years | |||||
Warrant [Member] | Convertible Notes Payable [Member] | ||||||
Number of shares forfeited | 411,875 | |||||
Number of shares issued | 1,011,875 | |||||
Number of shares forfeited for settlement in cashless issuance | 600,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2019USD ($)Numbershares | Mar. 31, 2018USD ($) | Dec. 28, 2018USD ($)shares | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Cash | $ 438,164 | $ 632,970 | $ 50,053 | $ 13,502 | |
Allocated share based | 1,612,286 | 1,404,889 | |||
Share-based compensation | 1,612,286 | 1,404,889 | |||
Number of service issued, value | $ 842,000 | 69,048 | $ 69,048 | ||
Number of shares issued for services | shares | 147,704,875 | 1,498,000 | |||
Revenue | $ 191,667 | 3,944 | |||
Designcenters [Member] | Consulting Agreement [Member] | |||||
Paid in cash | 17,992 | ||||
Montly cash paid | 7,100 | ||||
Share-based compensation | $ 46,122 | ||||
Discount rate | 50.00% | ||||
Number of days to paid in shares | Number | 20 | ||||
Performance bonus | $ 10,000 | ||||
Number of shares issued for services | shares | 20,030,407 | ||||
Accrued stock-based compensation | $ 22,820 | ||||
Blue Oar Consulting, Inc [Member] | Consulting Agreement [Member] | |||||
Paid in cash | 45,000 | ||||
Paid in cash or shares | 12,500 | ||||
Montly cash paid | $ 15,000 | ||||
Number of share issued | shares | 33,618,226 | ||||
Share-based compensation | $ 82,500 | ||||
Discount rate | 50.00% | ||||
Number of days to paid in shares | Number | 20 | ||||
Accrued stock-based compensation | $ 123,002 | ||||
Steven Rotman [Member] | Employment Agreement [Member] | |||||
Montly cash paid | $ 1 | ||||
Number of share issued | shares | 28,016,022 | ||||
Allocated share based | $ 201,000 | ||||
Receivable amount | $ 15,522 | $ 2,254 | |||
Discount rate | 0.00% | ||||
Montly shares based paid | $ 20,833 | ||||
DBA Rotmans Furniture [Member] | |||||
Revenue | 42,000 | ||||
Cost of services per month | 40,000 | 40,000 | |||
Cost of services | $ 120,000 | $ 120,000 | |||
DBA Rotmans Furniture [Member] | Steven Rotmans [Member] | |||||
Percentage of ownership | 42.00% | 42.00% | |||
Board of Directors [Member] | |||||
Accrued Expense | $ 103,000 | ||||
Number of shares issued for services | shares | 4,000,000 |
COMMITMENTS (Details Narrative)
COMMITMENTS (Details Narrative) - EMA Financial, Inc [Member] | Feb. 19, 2019 |
Description of litigation claim | (i) specific performance to enforce a stock conversion and contractual obligations; (ii) breach of contract; (iii) permanent injunction to enforce the stock conversion and contractual obligations; and (iv) legal fees and costs of the litigation. |
Description on complaint | (i) a preliminary injunction seeking an immediate resolution of the case through the stock conversion; (ii) a consolidation of the trial with the preliminary injunctive hearing; and (iii) summary judgment on the first and third claims for relief. |
MAJOR CUSTOMERS AND VENDORS (D
MAJOR CUSTOMERS AND VENDORS (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Vytex Licensing [Member] | ||
Concentration, percentage | 100.00% | |
Major customer name | Wurfbian Polymer, Centrotrade and Mast Global | |
Vytex Foam [Member] | ||
Major customer name | Jeffco, King Koil, and Rotmans | |
Vytex Foam [Member] | Rotmans [Member] | ||
Receivable amount | $ 15,522 | $ 2,254 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | May 31, 2019 | Apr. 30, 2019 | Jul. 31, 2018 | Apr. 02, 2019 |
Subsequent Event [Member] | Intellectual Property [Member] | ||||
Subsequent Event [Line Items] | ||||
Number of shares issued in exchange of intellectual property (in shares) | 2,500,000 | |||
Number of shares issued in exchange of intellectual property, value | $ 100,000 | |||
Subsequent Event [Member] | Steven Rotman [Member] | ||||
Subsequent Event [Line Items] | ||||
Percentage of ownership | 42.00% | |||
Subsequent Event [Member] | Steven Rotman [Member] | Promissory Note [Member] | ||||
Subsequent Event [Line Items] | ||||
Face Amount | $ 840,000 | |||
Interest rate | 5.00% | |||
Subsequent Event [Member] | Steven Rotman [Member] | Convertible Promissory Notes [Member] | ||||
Subsequent Event [Line Items] | ||||
Face Amount | $ 840,000 | |||
Interest rate | 5.00% | |||
Debt instrument maturity terms | 9 years | |||
Subsequent Event [Member] | Barry Rotman [Member] | Promissory Note [Member] | ||||
Subsequent Event [Line Items] | ||||
Face Amount | $ 840,000 | |||
Interest rate | 5.00% | |||
Subsequent Event [Member] | Barry Rotman [Member] | Convertible Promissory Notes [Member] | ||||
Subsequent Event [Line Items] | ||||
Face Amount | $ 840,000 | |||
Interest rate | 5.00% | |||
Debt instrument maturity terms | 8 years | |||
Subsequent Event [Member] | Bernard Rotman [Member] | Promissory Note [Member] | ||||
Subsequent Event [Line Items] | ||||
Face Amount | $ 320,000 | |||
Interest rate | 5.00% | |||
Subsequent Event [Member] | Bernard Rotman [Member] | Convertible Promissory Notes [Member] | ||||
Subsequent Event [Line Items] | ||||
Face Amount | $ 320,000 | |||
Interest rate | 5.00% | |||
Debt instrument maturity terms | 5 years | |||
CMA Investments, LLC [Member] | ||||
Subsequent Event [Line Items] | ||||
Shares issued price (in dollars per share) | $ 0.035 | |||
Number of shares held in escrow (in shares) | 15,000,000 | |||
Number of shares held in escrow | $ 1,500,000 | |||
Ajustment in debt | $ 143,000 | |||
Number of common shares issued from escrow (in shares) | 2,512,900 | |||
Face Amount | $ 1,500,000 | |||
CMA Investments, LLC [Member] | Subsequent Event [Member] | ||||
Subsequent Event [Line Items] | ||||
Number of shares issued (in shares) | 30,000,000 | |||
Number of share issued, value | $ 500,000 | |||
Number of shares held in escrow (in shares) | 12,487,100 | |||
Number of shares held in escrow | $ 1,100,000 | |||
DBA Rotmans Furniture [Member] | Subsequent Event [Member] | Stock Purchase Agreement [Member] | ||||
Subsequent Event [Line Items] | ||||
Number of shares issued (in shares) | 20,000 | |||
Number of share issued, value | $ 4,000,000 |