Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Jun. 30, 2015 | Apr. 14, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | Kaya Holdings, Inc. | ||
Entity Central Index Key | 1,530,746 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 7,411,695 | ||
Entity Common Stock, Shares Outstanding | 100,435,435 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
CURRENT ASSETS: | ||
Cash and equivalents | $ 123,907 | $ 35,194 |
Inventory - Net of Allowance | 105,044 | 5,267 |
Prepaid license fee | 10,500 | 1,667 |
Total Current Assets | 239,451 | 42,128 |
OTHER ASSETS: | ||
Property and equipment, net | 212,983 | 57,379 |
Deposits | 27,915 | 16,200 |
Total Other Assets | 240,898 | 73,579 |
Total Assets | 480,349 | 115,707 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued expense | $ 294,245 | 215,174 |
Accounts payable and accrued expense - related parties | 20,109 | |
Accrued interest | $ 20,929 | $ 28,917 |
Convertible Notes Payable | ||
Convertible Note Payable - net of Discount | $ 40,738 | $ 204,276 |
Derivative liabilities | $ 39,944 | 499,214 |
Convertible Note Payable-related party-net of discount | 250,000 | |
Notes Payable - related party | 250,000 | |
Notes Payable | 200,000 | |
Total Current Liabilities | $ 395,855 | $ 1,667,690 |
Convertible Note Payable - related party - Net of Discount | 100,000 | |
Derivative liabilities | 4,575,866 | $ 1,432,545 |
Convertible Notes Payable - net of discount | 32,601 | $ 0 |
Notes Payable | 57,210 | |
Note Payable - Related Party | 250,000 | |
Total Long Term Liabilities | 5,015,677 | $ 1,432,545 |
Total Liabilities | 5,411,532 | 3,100,235 |
STOCKHOLDERS' EQUITY (DEFICIT): | ||
Convertible Preferred Stock, 10,000,000 shares authorized: par value $0.001: Series C, 55,120 and 55,120 issued and outstanding at December 31, 2015 and 2014 | 55 | 55 |
Common stock , par value $.001; 250,000,000 shares authorized; 88,855,991 shares issued as of December 31, 2015 and 76,289,325 shares issued as of December 31, 2014 | 88,856 | 76,289 |
Additional paid in capital | 4,618,475 | 3,600,608 |
Subscriptions payable | 369,975 | 214,500 |
Accumulated Deficit | (9,797,497) | (6,774,669) |
Non-controlling Interest | (211,048) | (101,312) |
Net Stockholders' Equity/(Deficit) | (4,931,183) | (2,984,528) |
Total Liabilities and Stockholders' Equity/(Deficit) | $ 480,349 | $ 115,707 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred Stock Series C Par Value | $ .001 | $ 0.001 |
Preferred Stock Series C Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock Series C Shares Issued | 55,120 | 55,120 |
Preferred Stock Series C Shares Outstanding | 55,120 | 55,120 |
Common Stock Par Value | $ 0.001 | $ 0.001 |
Common Stock Shares Authorized | 250,000,000 | 250,000,000 |
Common Stock Shares Issued | 88,855,991 | 76,289,325 |
Common Stock Shares Outstanding | 88,855,991 | 76,289,325 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Statement [Abstract] | ||
Net Sales | $ 323,918 | $ 74,527 |
Cost of Sales | 161,161 | 49,038 |
Gross Profit | 162,757 | 25,489 |
Operating Expenses: | ||
Salaries and wages | 135,786 | 18,826 |
General and administrative | 1,406,406 | 1,073,729 |
Total Operating Expenses | 1,542,192 | 1,092,555 |
Operating Loss | (1,379,435) | (1,067,067) |
Other Income (Expense) | ||
Interest expense | (239,640) | (23,962) |
Derivative liabilities expense | (4,648,253) | $ (946,070) |
Gain (Loss) on Extinguishment of Debt | 4,680,953 | |
Change in derivative liabilities expense | $ 3,518 | $ (149,198) |
Inventory Valuation | (28,000) | |
Asset Valuation | $ (44,500) | 0 |
Other income | 20,369 | |
Amortization of debt discount | $ (1,505,207) | (429,276) |
Forgiveness of debts | 86,495 | |
Total Other Income(Expense) | $ (1,753,129) | (1,469,642) |
Net Income (Loss) Before Income Taxes | $ (3,132,564) | $ (2,536,709) |
Provision for income taxes | ||
Net Income (loss) | $ (3,132,564) | $ (2,536,709) |
Net Income (Loss) attributed to non-controlling interest | (109,736) | (101,312) |
Net Income (Loss) attributed to Kaya Holdings, Inc. | $ (3,022,828) | $ (2,435,397) |
Basic and diluted net loss per common share | $ (0.04) | $ (0.03) |
Weighted average number of common shares outstanding | 85,994,348 | 74,246,804 |
Shareholders Equity
Shareholders Equity - USD ($) | Common Stock | Additional Paid-In Capital | Subscribed Shares Not Issued | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning Balance, Shares at Dec. 31, 2013 | 68,449,325 | |||||
Beginning Balance, Value at Dec. 31, 2013 | $ 68,449 | $ 2,956,948 | $ (4,339,272) | $ (1,313,820) | ||
Common stock issued for services, Shares | 4,115,000 | |||||
Common stock issued for services, Value | $ 4,115 | 261,385 | 265,500 | |||
Common stock issued for payment of interest, Amount | 100,000 | $ 100 | 8,400 | 8,500 | ||
Common stock Issued for cash, Shares | 3,100,000 | |||||
Common stock Issued for cash, Value | $ 3,100 | 306,900 | 310,000 | |||
Common stock issued as charitable contribution, Shares | 500,000 | |||||
Common stock issued as charitable contribution, Value | $ 500 | 42,000 | 42,500 | |||
Common stock issued for payment of inventory | 25,000 | 25 | 2,475 | 2,500 | ||
Imputed Interest | 22,500 | 22,500 | ||||
Common stock for cash not issued | 189,500 | 189,500 | ||||
Net Loss | (2,435,397) | $ (101,312) | (2,536,709) | |||
Ending Balance, Shares at Dec. 31, 2014 | 76,289,325 | |||||
Ending Balance, Value at Dec. 31, 2014 | $ 76,289 | 3,600,608 | 214,500 | (6,774,669) | (101,312) | (2,984,528) |
Common stock issued for services, Shares | 8,350,000 | |||||
Common stock issued for services, Value | $ 8,350 | 587,650 | (114,500) | 481,500 | ||
Common stock issued for payment of interest, Shares | 100,000 | |||||
Common stock issued for payment of interest, Amount | $ 100 | 7,900 | 8,000 | |||
Common stock Issued for cash, Shares | 2,366,666 | |||||
Common stock Issued for cash, Value | $ 2,367 | 127,633 | 130,000 | |||
Common stock issued for equipment, Shares | 550,000 | |||||
Common stock issued for equipment, Value | $ 550 | 43,950 | 44,500 | |||
Warrants issued | 139,785 | 139,785 | ||||
Common stock issued for cash not issued | 20,649 | 20,649 | ||||
Common stock for debt conversion and interest, Shares | 1,200,000 | |||||
Common stock for debt conversion and interest, Amount | $ 1,200 | 90,300 | 91,500 | |||
Conversion of debt | 20,649 | 20,649 | ||||
Common stock for cash not issued | 105,000 | 105,000 | ||||
Common Stock for services not issued | 164,975 | 164,975 | ||||
Net Loss | (3,022,828) | (109,736) | (3,132,564) | |||
Ending Balance, Shares at Dec. 31, 2015 | 88,855,991 | |||||
Ending Balance, Value at Dec. 31, 2015 | $ 88,856 | $ 4,618,475 | $ 369,975 | $ (9,797,497) | $ (211,048) | $ (4,931,183) |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
OPERATING ACTIVITIES: | ||
Net loss | $ (3,132,564) | $ (2,536,709) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Net Loss Attributable to non-controlling interest | (109,736) | (101,312) |
Depreciation | $ 33,604 | 10,172 |
Gain from restructure of stockholder loan | $ (86,495) | |
(Gain) Loss on Extinguishment of Debt | $ (4,680,953) | |
Derivative Expense | 4,648,253 | $ 946,070 |
Change in derivative liabilities | (3,518) | 149,198 |
Amortization of debt discount | $ 1,698,273 | $ 392,612 |
Imputed interest | ||
Inventory allowance | $ 28,000 | |
Asset Valuation | $ 44,500 | |
Stock issued for services | 481,500 | $ 455,000 |
Stock to be issued for services | 164,975 | |
Stock issued for interest | $ 8,000 | |
Stock issued as contribution | $ 42,500 | |
Changes in operating assets and liabilities: | ||
Prepaid expense | $ (8,833) | (1,667) |
Inventory | (99,777) | (2,767) |
Other assets | (11,715) | (16,200) |
Accrued Interest | (7,988) | 28,917 |
Accounts payable and accrued expenses | 123,319 | (179,092) |
Net cash used in operating activities | (742,924) | (770,461) |
INVESTING ACTIVITIES: | ||
Purchase of property and equipment | $ (189,208) | $ (64,730) |
Proceeds for equipment | ||
Net cash used in investing activities | $ (189,208) | $ (64,730) |
FINANCING ACTIVITIES: | ||
Payments on installment agreement | (5,000) | |
Payments on related party debt | (24,800) | |
Proceeds from convertible debt | $ 600,000 | $ 365,000 |
Payment on convetible debt | (5,000) | |
Proceeds from Note Payable | 210,000 | $ 200,000 |
Payment on Note Payable | (19,155) | |
Stock Subscription Received | 105,000 | |
Proceeds from sales of common stock | 130,000 | $ 335,000 |
Net cash provided by (used in) financing activities | 1,020,845 | 870,200 |
NET INCREASE IN CASH | 88,713 | 35,009 |
CASH BEGINNING BALANCE | 35,194 | 185 |
CASH ENDING BALANCE | $ 123,907 | $ 35,194 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Taxes paid | ||
Interest paid | ||
NON-CASH TRANSACTIONS AFFECTING OPERATING, INVESTING AND FINANCING ACTIVITIES: | ||
Value of convertible preferred shares of subsidiary issued | $ 96,000 | |
Value of common shares issued as payment of debt | $ 60,000 | |
Value of common shares issued as payment for equipment | $ 44,500 | |
Value of shares issued to settle accrued expenses | $ 35,000 | |
Value of shares issued to settle accounts payable | 100,000 | |
Value of shares issued to settle interest expenses | $ 38,000 | $ 4,000 |
1. ORGANIZATION AND NATURE OF T
1. ORGANIZATION AND NATURE OF THE BUSINESS | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
1. ORGANIZATION AND NATURE OF THE BUSINESS | NOTE 1 ORGANIZATION AND NATURE OF THE BUSINESS Organization Kaya Holdings, Inc. FKA (Alternative Fuels Americas, Inc.) is a holding company. The Company was incorporated in 1993 and has engaged in a number of businesses. Its name was changed on May 11, 2007 to NetSpace International Holdings, Inc. (a Delaware corporation) (NetSpace). NetSpace acquired 100% of Alternative Fuels Americas, Inc. (a Florida corporation) in January 2010 in a stock-for-member interest transaction and issued 6,567,247 shares of common stock and 100,000 shares of Series C convertible preferred stock to existing shareholders. Certificate of Amendment to the Certificate of Incorporation was filed in October 2010 changing the Companys name from NetSpace International Holdings, Inc. to Alternative Fuels Americas, Inc. (a Delaware corporation). Certificate of Amendment to the Certificate of Incorporation was filed in March 2015 changing the Companys name from Alternative Fuels Americas, Inc. (a Delaware corporation) to Kaya Holdings, Inc. The Company has four subsidiaries: Alternative Fuels Americas, Inc. (a Florida corporation) which is wholly owned, Marijuana Holdings Americas, Inc. a Florida corporation, (MJAI) which is a majority owned subsidiary, MJAI Oregon 1 LLC. , and MJAI Oregon 2 LLC both 100% owned LLCs. Nature of the Business The Company operates a subsidiary, Marijuana Holdings Americas, Inc., a Florida corporation, that pursues medical and/or recreational licenses for the growing, processing and/or sale of marijuana in jurisdictions where it is legal and permissible under local laws. The subsidiary was formed in March 2014. In March 2014 Marijuana Holdings Americas, Inc. (through local Oregon subsidiaries) began the application process to obtain licenses to operate medical marijuana dispensaries in Oregon. On March 21, 2014 the Company received notice from the Oregon Health Authority that MJAI Oregon 1 had been granted provisional licensing approval to operate their first Medical Marijuana Dispensary in Portland, Oregon and subsequently received full licensing approval for the first Kaya ShackTM retail medical marijuana dispensary, which we began operating July 3, 2014. In April 2015 KAYS announced that it has commenced with its own medical marijuana grow operations for the cultivation and harvesting of legal marijuana. |
2. LIQUIDITY AND GOING CONCERN
2. LIQUIDITY AND GOING CONCERN | 12 Months Ended |
Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
2. LIQUIDITY AND GOING CONCERN | NOTE 2 - LIQUIDITY AND GOING CONCERN The Companys consolidated financial statements as of and for the year ended December 31, 2015 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company incurred a net loss of $2,767,311 for the year ended December 31, 2015 and a net loss of $1,414,520 for the year ended December 31, 2014. At December 31, 2015 the Company has a working capital deficiency of $102,154 and is totally dependent on its ability to raise capital. The Company has a plan of operations and acknowledges that its plan of operations may not result in generating positive working capital in the near future. Even though management believes that it will be able to successfully execute its business plan, which includes third-party financing and capital issuance, and meet the Companys future liquidity needs, there can be no assurances in that regard. These matters raise substantial doubt about the Companys ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this material uncertainty. Management recognizes that the Company must generate additional funds to successfully develop its operations and activities. Management plans include: the sale of additional equity and debt securities, alliances and/or partnerships with entities interested in and having the resources to support the further development of the Companys business plan, other business transactions to assure continuation of the Companys development and operations, development of a unified brand and the pursuit of licenses to operate medical marijuana facilities under the branded name. |
3. SUMMARY OF SIGNIFICANT ACCOU
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION | NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION Basis of Presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates. Risks and Uncertainties The Companys operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at other locations where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales. Fiscal Year The Companys fiscal year-end is December 31. Principles of Consolidation The consolidated financial statements include the accounts of Kaya Holdings, Inc. and its subsidiary, Alternative Fuels Americas, Inc. (a Florida corporation) and Marijuana Holdings Americas, Inc. (a Florida corporation) which is a majority owned subsidiary. All inter-company accounts and transactions have been eliminated in consolidation. Non-Controlling Interest The company owns 55% of Marijuana Holdings Americas, Inc. Cash and Cash Equivalents Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents Inventory Inventory consists of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company periodically reviews historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. Total Value of Finished goods inventory as of December 31, 2015 is $60,184 and $5,267 net of $28,000 allowance as of December 31, 2014. No allowance as necessary as of December 31, 2015. Property and Equipment Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. Long-lived assets The Company reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flows. In 2014 the Company terminated its agreement to purchase 40,000 Jatropha trees and will not be acquiring the trees or retaining those trees already purchased. Earnings Per Share In accordance with ASC 260, Earnings per Share, the Company calculates basic earnings per share by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed if the Company has net income; otherwise it would be antidilutive, and would result from the conversion of a convertible note. Income Taxes The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the more likely than not criteria of ASC 740. ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: Level 1 Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Unobservable inputs reflecting the Companys assumptions . incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant .assumptions that are reasonably available. The carrying amounts of the Companys financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable related party, approximate their fair values because of the short maturity of these instruments. The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 6. Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815 Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 Debt with Conversion and Other Options for consideration of any beneficial conversion feature. Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Beneficial Conversion Feature For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount. When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt. Debt Issue Costs and Debt Discount The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. Original Issue Discount For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt. Extinguishments of Liabilities The Company accounts for extinguishments of liabilities in accordance with ASC 860-10 (formerly SFAS 140) Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. Stock-Based Compensation - Employees The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Companys most recent private placement memorandum (based on sales to third parties) (PPM), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. Expected volatility of the entitys shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Companys current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards grant date, based on estimated number of awards that are ultimately expected to vest. The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations. Stock-Based Compensation Non Employees Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (Sub-topic 505-50). Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Companys most recent private placement memorandum (PPM), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holders expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holders expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. Expected volatility of the entitys shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Companys current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. Revenue Recognition Revenue is recorded when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) asset is transferred to the customer without further obligation, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured. Cost of Sales Cost of sales represents costs directly related to the purchase of goods and third party testing of the Companys products. Related Parties The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 8251015, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Contingencies The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Companys financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Companys business, consolidated financial position, and consolidated results of operations or consolidated cash flows. Subsequent Events The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. Recently Issued Accounting Pronouncements In May 2014, the FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, IntangiblesGoodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We do not believe the adoption of this update will have a material impact on our financial statements. Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. Re-Classifications Certain amounts in 2014 were reclassified to conform to the 2015 presentation. These reclassifications had no effect on consolidated net loss for the periods presented. The fair value of the warrants on the date of issuance and on each re-measurement date of those warrants classified as liabilities is estimated using the Black-Scholes option pricing model using the following assumptions: contractual life according to the remaining terms of the warrants, no dividend yield, weighted average risk-free interest rate of 1.80% at December 31, 2015 and weighted average volatility of 98.99%. For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Company's various classes of preferred stock, stock price volatility, the contractual term of the warrants, risk free interest rates and dividend yields. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3 measurement. The warrant liability is recorded in other liabilities on the Company's Consolidated Balance Sheets. The warrant liability is marked-to-market each reporting period with the change in fair value recorded on the Consolidated Statement of Operations and Comprehensive Loss until the warrants are exercised, expire or other facts and circumstances lead the warrant |
4. NOTES PAYABLE
4. NOTES PAYABLE | 12 Months Ended |
Dec. 31, 2015 | |
Payables and Accruals [Abstract] | |
4. NOTES PAYABLE | NOTE 4 NOTE PAYABLE December 31, 2015 December 31, 2014 Loan payable - Stockholder, 0%, Due December 31, 2015, unsecured (1) $ 250,000 $ 250,000 Loan payable - Stockholder, due on Nov 1, 2014, unsecured -0- 25,000 Note Payable - 10% due March 15, 2015 (3) -0- 100,000 Note Payable - 10% due December 31, 2014 (2) -0- 100,000 Note Payable 10% due September 9, 2017 (4) 95,422 Note Payable 10% due September 9, 2017(5) 95,422 $ 440,845 $ 475,000 (1) At December 31, 2013 the Company was indebted to an affiliated shareholder of the Company for $840,955, which consisted of $737,100 principal and $103,895 accrued interest, with interest accruing at 10%. On January 2, 2014 the Company entered into a Debt Modification Agreement whereby the total amount of the debt was reduced to $750,000 and there is no accrued interest or principal due until December 31, 2015. On June 29, 2015 the $500,000 convertible portion of the debt was extended to December 31, 2017. $500,000 of the debt is convertible into 50,000 Series C Convertible Preferred Shares of AFAI, which if converted are subject to resale restrictions through December 31, 2017. The two-year note in the aggregate amount of $500,000 is convertible into the Companys preferred stock at a conversion rate of $10.00 per share of preferred. At a conversion rate of 433.9297 common shares to 1 preferred share, this would result in a total of 21,696,485 common shares issued if all debt was converted. The market value of the stock at the date of issuance of the debt was $0.04. The debt issued is a result of a financing transaction and contain a beneficial conversion feature valued at $367,859 to be amortized over the life of the debt. Total amortization for the year ended December 31, 2014 was $183,928. As of December 31, 2014, the balance of the debt principal was $500,000. The net balance reflected on the balance sheet is $303,213. The remaining $250,000 is not convertible. The company has imputed interest on both the convertible debt and the non-convertible debt. The company used an imputed interest rate of 4% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet. This note was modified and restated as of June 20, 2015, see Footnote 9. For the year-ended December 31, 2015 and 2014, the Company has recorded imputed interest of $10,000 each year. (2) On August 11, 2014 the Company received a total of $100,000 from an accredited investor in exchange for a senior promissory note due May 25, 2015 in the aggregate amount of $100,000. Interest rate is stated at 12%. As of June 30, 2015, this note balance along with $10,000 of interest was renegotiated into a convertible note with a face value of $110,000. This note was modified and restated as of June 20, 2015, see Footnote 9. And December 31, 2015 it was restated and amended. (3) On November 25, 2014 the Company received a total of $100,000 from an accredited investor in exchange for a senior promissory note due May 31, 2015 in the aggregate amount of $100,000. Interest rate is stated at 10%. As of June 30, 2015, this note balance along with $10,000 of interest was renegotiated into a convertible note with a face value of $110,000. This note was modified and restated as of June 20, 2015, see Footnote 9. And December 31, 2015 it was restated and amended. (4) On September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a senior promissory note due September 9, 2017 in the aggregate amount of $100,000. Interest rate is stated at 10%. This note includes an agreement to repay the interest and principal, based on 5% of gross reveneues. As of December 31, 2015, the company has repaid $4,578 in principal and $2,302 in accrued interest. (5) On September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a senior promissory note due September 9, 2017 in the aggregate amount of $100,000. Interest rate is stated at 10%. This note includes an agreement to repay the interest and principal, based on 5% of gross reveneues. As of December 31, 2015, the company has repaid $4,578 in principal and $2,302 in accrued interest. |
5. CONVERTIBLE DEBT
5. CONVERTIBLE DEBT | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
5. CONVERTIBLE DEBT | NOTE 5 CONVERTIBLE DEBT December 31, 2015 December 31, 2015 Convertible note - related party, Due December 31, 2017 unsecured (2) 500,000 500,000 Convertible note - 10% due June 9, 2015 (3) -0- 50,000 Convertible note - 10% due June 13, 2015 (4) -0- 25,000 Convertible note - 10% due July 11, 2015 (5) -0- 160,000 Convertible note - 10% due June 13, 2015 (6) -0- 100,000 Convertible note - 10% due June 30, 2015 (7) -0- 30,000 Convertible note - 12% due January 1, 2017 (9) 58,556 -0- Convertible note - 12% due January 1, 2017 (9) 29,278 -0- Convertible note - 12% due January 1, 2017 (9) 186,316 -0- Convertible note - 12% due January 1, 2017 (9) 126,000 -0- Convertible note - 12% due January 1, 2017 (9) 117,113 -0- Convertible note - 12% due January 1, 2017 (9) 117,113 -0- Convertible note - 12% due January 1, 2017 (9) 55,895 -0- Convertible note - 12% due January 1, 2017 (9) 67,074 -0- Convertible note - 12% due January 1, 2017 (9) 23,442 -0- Convertible note - 12% due January 1, 2017 (9) 23,442 -0- Convertible note - 12% due January 1, 2017 (9) 27,116 Convertible note - 12% due January 1, 2017 (9) 116,966 -0- Convertible note 10% due January 1, 2017 (10) 25,000 -0- Convertible note 10% due September 21, 2017 (11) 50,000 Convertible note 10% due September 21, 2017 (11) 100,000 Convertible note 10% due September 21, 2017 (11) 50,000 Convertible note due April 1, 2016 (12) 23,500 -0- Convertible note - stockholder, 10%, due April 30, 2013, unsecured (1) 25,000 25,000 $ 1,673,311 $ 890,000 (1) At the option of the holder the convertible note may be converted into shares of the Companys common stock at the lesser of $0.40 or 20% discount to the market price, as defined, of the Companys common stock. The Company is currently in discussions with the lender on a payment schedule. The outstanding balance of this note is convertible into a variable number of the Companys common stock. Therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.018% to .02%, volatility ranging from 160% of 336%, trading prices ranging from $.105 per share to $0.105 per share and a conversion price ranging from $0.084 per share to $0.40 per share. Accrued interest on this note that was charged to operations for the year ended December 31, 2014 totaled approximately $8,705. Amortization of the discounts for the year ended December 31, 2014 totaled $25,000, which was charged to interest expense. The balance of the convertible note at December 31, 2014 including accrued interest and net of the discount amounted to $33,705. The Company valued the derivative liabilities at December 31, 2014 at $27,198. The Company recognized a change in the fair value of derivative liabilities for the year ended December 31, 2015 of $(629), which were charged to operations.. In determining the indicated values at December 31, 2015, since the debt is in default, the company used the maximum value these embedded options represent, with a trading price of $.087, and conversion prices ranging from $.05 per share. (2) At December 31, 2013 the Company was indebted to an affiliated shareholder of the Company for $840,955, which consisted of $737,100 principal and $103,895 accrued interest, with interest accruing at 10%. On January 2, 2014 the Company entered into a Debt Modification Agreement whereby the total amount of the debt was reduced to $750,000.00 and there is no accrued interest or principal due until December 31, 2015. $500,000 of the debt is convertible into 50,000 Series C Convertible Preferred Shares of AFAI, which if converted are subject to resale restrictions through December 31, 2015. The two-year note in the aggregate amount of $500,000 is convertible into the Companys preferred stock at a conversion rate of $10.00 per share of preferred. At a conversion rate of 433.9297 common shares to 1 preferred share, this would result in a total of 21,696,485 common shares issued if all debt was converted. The market value of the stock at the date of issuance of the debt was $0.04. The debt issued is a result of a financing transaction and contains a derivative liability, due to tainting of the shares for no reserve being of shares with the transfer agent in case of a conversion. As of December 31, 2014, the balance of the debt was $500,000. Imputed interest of $20,000 has been recorded for December 31, 2015 and 2014. The remaining $250,000 is not convertible. The company has imputed interest on both the convertible debt and the non-convertible debt. The company used an imputed interest rate of 4% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet. The remaining $250,000 is not convertible. The company has imputed interest on both the convertible debt and the non-convertible debt. The company used an imputed interest rate of 4% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, causing a restatement of the previous beneficial conversion feature has been removed and reclassified as a derivative liability. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (3) On June 9, 2014 the Company received a total of $50,000 from an accredited investor in exchange for one year notes in the aggregate amount of $50,000. The note is convertible after December 9, 2014 and is convertible into the Companys common stock at a conversion rate of $0.04 per share. The market value of the stock at the date (December 9, 2014) when the debt becomes convertible was $0.09. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. As of December 31, 2014, the balance was $50,000. The beneficial conversion feature in the amount of $50,000 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $17,551. As of June 30, 2015, the balance was $50,000. The beneficial conversion feature in the amount of $50,000 is being expensed as interest over the term of the note. At June 30, 2015 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $31,250. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, causing a restatement of the previous beneficial conversion feature has been removed and reclassified as a derivative liability. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (4) On June 15, 2014, the Company received a total of $25,000 from an accredited investor in exchange for one year notes in the aggregate amount of $25,000. The note is convertible after December 13, 2014 and is convertible into the Companys common stock at a conversion rate of $0.04 per share. The market value of the stock at the date (December 13, 2014) when the debt becomes convertible was $0.085. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. As of December 31, 2014, the balance was $25,000. The beneficial conversion feature in the amount of $25,000 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $13,767. As of June 30, 2015, the balance was $25,000. The beneficial conversion feature in the amount of $25,000 is being expensed as interest over the term of the note. At June 30, 2015 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $25,000. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, causing a restatement of the previous beneficial conversion feature has been removed and reclassified as a derivative liability. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (5) On July 11, 2014 the Company received a total of $160,000 from an accredited investor in exchange for one year note in the aggregate amount of $160,000. The note is convertible after January 13, 2015 and is convertible into the Companys common stock at a conversion rate of $0.04 per share. The market value of the stock at the date (January 13, 2015) when the debt becomes convertible was $0.077. The debt issued is a result of a financing transaction and contains a beneficial conversion feature when the debt becomes convertible as of January 13, 2015. As of December 31, 2014, the balance was $160,000 The beneficial conversion feature in the amount of $160,000 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $75,836. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, causing a restatement of the previous beneficial conversion feature has been removed and reclassified as a derivative liability. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (6) On September 19, 2014 the Company received a total of $100,000 from an accredited investor in exchange for a six month note in the aggregate amount of $100,000. The note is convertible after December 13, 2014 and is convertible into the Companys common stock at a conversion rate of $0.04 per share. The market value of the stock at the date (December 13, 2014) when the debt becomes convertible was $0.085. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. As of December 31, 2014, the balance was $100,000. The beneficial conversion feature in the amount of $100,000 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $56,906. As of June 30, 2015, the balance was $100,000. The beneficial conversion feature in the amount of $100,000 is being expensed as interest over the term of the note. At June 30, 2015 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $100,000. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (7) On November 14, 2014 the Company received a total of $30,000 from an accredited investor in exchange for a six month note in the aggregate amount of $30,000. The note is convertible after December 15, 2014 and is convertible into the Companys common stock at a conversion rate of $0.07 per share. The market value of the stock at the date (December 15, 2014) when the debt becomes convertible was $0.085. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. As of December 31, 2014, the balance was $30,000. The beneficial conversion feature in the amount of $8,250 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $30,000. As of June 30, 2015, the balance was $-0-. The note was converted into 450,000 shares common stock. (9) On December 31, 2015 the Company renegotiated twelve (12) convertible and non-convertible notes payable. The Total face value of the notes issued was $888,500 the six month notes were due on December 31, 2015 The new notes are convertible after January 1, 2016 and are convertible into the Companys common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.087. All these amended debts have a price adjustment provision. Therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $2,274,934 at December 31, 2015 and $nil at December 31, 2014, respectively. (10) On October 1, 2015, the Company renegotiated a convertible notes payable. The original note was issued March 13, 2015 and due September 30, 2015, with conversion rate of $0.06 per share. The new notes has extended the due date to January 1, 2017 and are convertible into the Companys common stock at a conversion rate of $0.045 per share. (11) On September 23, 2015 the Company received a total of $50,000 from an accredited investor in exchange for a two year note in the aggregate amount of $50,000 with interest accruing at 10%. The note is convertible after September 23, 2015 and is convertible into the Companys common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.078. The debt issued is a result of a financing transaction the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $140,344 at December 31, 2015 and $nil at December 31, 2014, respectively. (11) On September 23, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note is convertible after September 23, 2015 and is convertible into the Companys common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.078. The debt issued is a result of a financing transaction and . Due to a recognition of tainting, due to shares not being held in reserve the notes are considered to have a derivative liability, therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $245,038 at December 31, 2015 and $nil at December 31, 2014, respectively. (11) On September 23, 2015 the Company received a total of $50,000 from an accredited investor in exchange for a two year note in the aggregate amount of $50,000 with interest accruing at 10%. The note is convertible after September 23, 2015 and is convertible into the Companys common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.078. The debt issued is a result of a financing transaction.. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $140,344 at December 31, 2015 and $nil at December 31, 2014, respectively. On September 8, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per share (the Warrant Exercise Price) for a period of five (5) years commencing from the earlier of such time as that certain $100K, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period as defined in The Note or September 9, 2017. See Note 4 above for more information on the promissory note and payment terms. On September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per share (the Warrant Exercise Price) for a period of five (5) years commencing from the earlier of such time as that certain $100K, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period as defined in The Note or September 9, 2017. See Note 4 above for more information on the promissory note and payment terms. (12) On July 27, 2015 the company issued a note payable for $28,500 The Company agrees to pay to the Holder $28,500 plus accrued interest pursuant to the following schedule: An initial payment of $5,000 is due no later than December 1, 2015. This amount represents the balance of the security deposit due for the lease of Commercial/Manufacturing Space occupied by MJAI Oregon 1, LLC, a majority-owned subsidiary of the company. A final payment of $23,500 principal, plus any accrued Interest at 10% is due no later than April 1, 2016. This amount represents the balance of accrued rent due for the initial monthly lease payments from August 1, 2015 through March 31, 2016 The note is convertible after March 31, 2016 and is convertible into the Companys common stock at a conversion rate of $0.10 per share or 20% discount to the thirty day moving average stock price. . The notes are considered to have a derivative liability, therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $2,640,030 at December 31, 2015 and $nil at December 31, 2014, respectively. |
6. DERIVATIVE LIABILITIES
6. DERIVATIVE LIABILITIES | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
6. DERIVATIVE LIABILITIES | Note 6 Derivative Liabilities The Company identified conversion features embedded within convertible debt and issued in 2013 and subsequent periods. The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is summarized as follow: The fair value at the commitment and re-measurement dates for the Companys derivative liabilities were based upon the following management assumptions as December 31, 2015: December 31, 2015 December 31, 2014 Fair value at the commitment date - convertible debt $ 4,612,292 $ 1,782,561 Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability (-0- ) (-0- ) Fair value mark to market adjustment - convertible debt (3,518 ) 149,198 Totals $ 4,615,810 $ 1,931,759 Commitment Dates Re-measurement Date Expected dividends 0 % 0 % Expected volatility 150 % 192.90 % Expected term 1 2 years 0.00 2.00 years Risk free interest rate 0.29% - 1.68 % 0.49% - 1.76 % |
7. DEBT DISCOUNT
7. DEBT DISCOUNT | 12 Months Ended |
Dec. 31, 2015 | |
Notes to Financial Statements | |
7. DEBT DISCOUNT | Note 7 Debt Discount The Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note. The Company recorded a derivative expense of $4,648,253 and $946,070 for years ended December 31, 2015 and 2014. Accumulated amortization of derivative discount amounted to $1,505,207 as of December 31, 2015 and $429,276 for the year ended December 31, 2014. The Company recorded a change in the value of embedded derivative liabilities income/(expense) of ($3,518) and $149,198 for the years ended December 31, 2015 and 2014, respectively. |
8. STOCKHOLDERS EQUITY
8. STOCKHOLDERS EQUITY | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
8. STOCKHOLDERS EQUITY | NOTE 8 STOCKHOLDERS EQUITY The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001, of which 100,000 shares have been designated as Series C convertible preferred stock (Series C or Series C preferred stock). The Board has the authority to issue the shares in one or more series and to fix the designations, preferences, powers and other rights, as it deems appropriate. Each share of Series C has 433.9297 votes on any matters submitted to a vote of the stockholders of the Company and is entitled to dividends equal to the dividends of 433.9297 shares of common stock. Each share of Series C preferred stock is convertible at any time at the option of the holder into 433.9297 shares of common stock. The Company has 250,000,000 shares of common stock authorized with a par value of $0.001. Each share of common stock has one vote per share for the election of directors and all other items submitted to a vote of stockholders. The common stock does not have cumulative voting rights, preemptive, redemption or conversion rights. In January 2014 the Company authorized the issuance of 2,400,000 shares of common stock to consultants. The shares were valued at $96,000, the fair value of the stock at the time. Also during January, 2014 Marijuana Holdings Americas, Inc. agreed to issue 55 shares of Convertible Preferred shares to the Company, and 15 shares each to the Company's president and BMN Consultants, a company controlled by a shareholder. These shares are convertible to a number of shares which once issued will provide the shareholder an ownership interest in the outstanding common shares of 55%, 15% and 15%, for the Company, its president and a shareholder, respectively. Although none of the preferred shares have been converted at the date of this filing, the Company maintains effective majority control over the subsidiary. In the first six months of 2014, the Company raised funds $310,000 from the sale of units comprised of shares of the Companys stock and shares of its majority owned subsidiary, Marijuana Holdings Americas, Inc. (MJAI). Total issuances were 3,100,000 shares of common stock of AFAI and 3,100,000 shares of common stock of MJAI. In the first six months of 2014, the company issued 100,000 shares of common stock valued at $0.04 per share for a total value of $4,000 due a shareholder per loan modification agreement reached October 31, 2013 as detailed in Note 4, Item 2 above. In the first six months of 2014 the company issued a charitable organization, 500,000 shares of common stock valued at $0.085 per share for a total value given of $42,500 and agreed to issue a consultant, 1,000,000 shares of common stock valued at $0.065 per share for a total value of $65,000 in settlement of all fees and compensation for management services rendered due through June 30, 2014. The shares have a three year restriction. In the third quarter of 2014 the company authorized the issuance of 1,740,000 shares of common stock valued at $0.10 per share to consultants. At the end of December 31, 2014 the company had authorized the issuance of 1,500,000 shares of common stock to be issued. 250,000 shares for cash received of $25,000 and the remaining 1,250,000 shares to be issued for consulting services. The consulting shares were approved to be issued on January 27, 2015 for the period ended December 31, 2014 and we valued at $0.07 per share for a total value of services rendered of $87,500. Total Stock subscriptions payable of $112,500 as of December 31, 2014 During January 2015 the company issued 8,200,000 shares of common stock valued in a range of $0.05 to $0.07 per share. Total cash received was $114,000. Total interest paid with shares was $1,500. Total value of debt paid was $30,000. Total value of assets acquired was $17,500. Total consulting services were $444,500. During the quarter ended September 30, 2015 the Company issued 800,000 shares of common stock valued in a range of $0.05 to $0.09 per share Total value of assets acquired was $27,000. Total consulting services were 37,000 During the quarter ended September 30, 2015 the Company issued 100,000 shares of common stock valued at $0.08 as payment for interest of $8,000 On August 12, 2015 the Company received $20,000 from the sale of 400,000 restricted common shares of stock to an accredited investor that is a current shareholder of the company. On August 15, 2015 the Company received $20,000 from the sale of 400,000 restricted common shares of stock to an accredited investor that is a current shareholder of the company. On April 27, 2015 the Company received a total of $30,000 from an accredited investor in exchange for a six month note in the aggregate amount of $30,000. The note is convertible after April 27, 2015 and is convertible into the Companys common stock at a conversion rate of $0.05 per share. On September 23, 2015 the balance was converted into 600,000 shares of common stock... The company issued 150,000 shares of common stock as interest. The value of the shares as of the date of issuance as $0.08. On September 10, 2015 the Company received $25,000 from the sale of 416,666 restricted common shares of Kaya Holdings, Inc. stock to an accredited investor that is a current shareholder of the company. On September 29, 2015 the Company received $5,000 from the sale of 100,000 restricted common shares of Kaya Holdings, Inc. stock to an accredited investor. On October 13, 2015 the Company received $100,000 from the sale of 2,222,222 restricted common shares of Kaya Holdings, Inc. stock to an accredited investor that is a current shareholder of the company. |
9. LEASES
9. LEASES | 12 Months Ended |
Dec. 31, 2015 | |
Leases [Abstract] | |
9. LEASES | NOTE 9 LEASES The Company is obligated under operating lease agreements for its corporate office in Fort Lauderdale, which expires March 2016. The Company concluded an agreement in March 2014 terminating its obligations for leases held for land in Tempate, Costa Rica. The Company concluded the term of its lease agreement for offices maintained in Hollywood, Florida. The Company signed 2 new leases that started in May 2014 and June 2014 for retail locations. In June of 2015 the companies Subsidiary leased an additional retail location. In August 2015 the company signed a lease for warehouse/growing area. Minimum future lease commitments are: Year Amount 2016 182,604 2017 153,864 2018 147,576 2019 48,396 Rent expense was $129,408 for the year ended December 31, 2015, and $65,162 for the year ended December 31, 2014, respectively. In April, 2014 MJAI, through its wholly owned subsidiary, MJAI Oregon 1, LLC (MJAI Oregon 1), entered into a lease for space to operate their first medical marijuana dispensary in Portland, Oregon. The five-year lease requires MJAI Oregon 1 to pay a monthly rental fee of $2,255 the first year with annual lease payment escalations of 4% and a security deposit of $12,000. The dispensary is located are located at 1719 SE Hawthorne Boulevard, Portland, Oregon and will operate under the proprietary brand name of Kaya Shack TM. On June 1, 2015 through its wholly owned subsidiary, MJAI Oregon 2, LLC (MJAI Oregon 2), entered into a lease for space to operate a dispensary in Salem, Oregon. The five-year lease requires MJAI Oregon 2 to pay a monthly rental fee of $3,584 the first year with annual lease payment escalations of 1% and a security deposit of $4,106 and $3,000 for a reservation fee The Salem, Oregon location operates under the proprietary brand name of Kaya Shack TM. On August 1, 2015 the Company announced that it had signed a lease for a 6,000 square foot facility in central Portland to serve as the Company's expanded Marijuana and Cannabis Manufacturing Complex and West Coast Operations Base. |
10. RELATED PARTY TRANSACTIONS
10. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2015 | |
Related Party Transactions [Abstract] | |
10. RELATED PARTY TRANSACTIONS | NOTE 10 RELATED PARTY TRANSACTIONS The Company has agreements covering certain of its management personnel. Such agreements provide for minimum compensation levels and are subject to annual adjustment. The Companys Chief Executive Officer holds 50,000 shares of its Series C preferred stock. These shares can be converted into 21,696,485 shares of the Companys common stock at his option. The Companys largest stockholder has from time to time provided unsecured loans to the Company, See Note 4 for the detail of the convertible and non-convertible debt with a face value of $750,000 |
11. DEBT EXTINGUISHMENT
11. DEBT EXTINGUISHMENT | 12 Months Ended |
Dec. 31, 2015 | |
Debt Extinguishment | |
11. DEBT EXTINGUISHMENT | NOTE 11 DEBT EXTINGUISHMENT During the year-end December 31,, 2015 the Company was indebted on convertible debt to non-affiliated shareholders of the Company as detailed in Note 5. During June and December 2015, the Company entered into a Debt Modification Agreement whereby the total amount of the debt was not changed. However the interest rate was increased to 12% and the debt conversion rate was reduced from $.04 per share to $.03 per share there is no accrued interest or principal due until December 31, 2015. The market value of the stock at the date of issuance exceeded the conversion price. As a result, the Company determined a gain on debt extinguishment of $2,648,168 was recorded to the statement of operations pertaining to a third party as a gain to the statement of operations the Company accounted for this gain on extinguishment as a capital transaction and recorded this amount as a reduction of debt discount. At December 31,, 2015 the Company was indebted on a convertible and non-convertible debt to a related party shareholder of the Company for $750,000During 2015, the Company entered into a Debt Modification Agreement whereby the total amount of the debt was not changed. However, the extension of the payment date and the Company determined a gain on debt extinguishment of $1,693,173. was recorded to the statement of operations pertaining to a related party as a gain to the statement of operations the Company accounted for this gain on extinguishment as a capital transaction and recorded this amount as an increase in additional derivative liablilty. |
12. STOCK OPTION PLAN
12. STOCK OPTION PLAN | 12 Months Ended |
Dec. 31, 2015 | |
Other Liabilities Disclosure [Abstract] | |
12. STOCK OPTION PLAN | NOTE 12 STOCK OPTION PLAN In 2011 the Alternative Fuels America, Inc. 2011 Incentive Stock Plan (the Plan), which provides for equity incentives to be granted to the Companys employees, executive officers or directors or to key advisers or consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying shares as determined pursuant to the 2011 Incentive Stock Plan, restricted stock awards, other stock based awards, or any combination of the foregoing. The 2011 Incentive Stock Plan is administered by the board of directors. 2,500,000 shares of our common stock were reserved for issuance pursuant to the exercise of awards under the 2011 Incentive Stock Plan. In January, 2014 the Companys board of directors approved the issuance of 2,400,000 shares of our common stock to consultants of the company. The remaining 100,000 shares were approved for issuance to consultants in July of 2014. |
13. INCOME TAXES
13. INCOME TAXES | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
13. INCOME TAXES | NOTE 13 INCOME TAXES The Company has a deferred tax asset as shown in the following: 2015 2014 Tax loss carryforward $ 2,616,000 $ 1,864,283 Valuation allowance (2,616,000 ) (1,864,283 ) $ $ A valuation allowance has been recognized to offset the deferred tax assets because realization of such assets is uncertain. The Company has net operating loss carry forwards of approximately $7,848,000 at December 31, 2015 that expire beginning in 2025. However, utilization of these losses may be limited pursuant to Section 382 of the Internal Revenue Code due to a recapitalization in 2007 and subsequent stock issuances. |
14. WARRANTS
14. WARRANTS | 12 Months Ended |
Dec. 31, 2015 | |
Warrants | |
14. WARRANTS | NOTE 14 Warrants On September 8, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per share (the Warrant Exercise Price) for a period of five (5) years commencing from the earlier of such time as that certain $100K, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period as defined in The Note or September 9, 2017. On September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per share (the Warrant Exercise Price) for a period of five (5) years commencing from the earlier of such time as that certain $100K, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period as defined in The Note or September 9, 2017. |
15. COMMITMENTS AND CONTINGENCI
15. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
15. COMMITMENTS AND CONTINGENCIES | NOTE 15 COMMITMENTS AND CONTINGENCIES None. |
16. RESTATEMENT
16. RESTATEMENT | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
16. RESTATEMENT | NOTE 16 RESTATEMENT The Company determined that the December 31, 2014 financial statements require restatement. The Companies Convertible debt contains conversion price protection clauses that create derivative liabilities. These derivative liabilities were not reflected in the original financial statements. The company also corrected the presentation of 1,000,000 of common shares that were reflected as issued and outstanding to subscribed to be issued. The below table presents the changes Balance Sheet Original Change Restated Current Liabilities Accrued Interest 8,705 20,212 28,917 Convertible Notes Payable 189,993 14,283 204,276 Derivative Liabilities 8,434 490,780 499,214 Long Term Liabilities Convertible Notes Payable 303,213 (303,213 ) -0- Derivative Liabilities -0- 1,432,545 1,432,545 Stockholders Equity(Deficit) Common Stock par value 77,289 1,000 76,289 Additional Paid in capital 4,436,217 (835,609 ) 3,600,608 Common Stock to be issued 114,500 100,000 214,500 Accumulated Deficit (5,519,469 ) (1,255,200 ) (6,774,669 ) Non-controlling Interest (234,323 ) (133,011 ) 101,312 Statement of Operations-changes Interest Expense (417,883 ) 399,921 (23,962 ) Derivative liabilities expense (22,298 ) (923,772 ) (946,070 ) Change in Derivative expense 38,864 (188,062 ) (149,198 ) Amortization of debt discount (25,000 ) (404,276 ) (429,276 ) |
17. SUBSEQUENT EVENTS
17. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events [Abstract] | |
17. SUBSEQUENT EVENTS | NOTE 17 SUBSEQUENT EVENTS In January of 2016 the Company received $100,000 from the sale of 2,222,222 restricted common shares of Kaya Holdings, Inc. stock to an accredited investor that is a current shareholder of the company. In January of 2016 the Company received $50,000 from the issuance of convertible debt. Interest is stated at 12% The Note and Interest is convertible into common shares at $0.03 per share. Note is Due in January of 2017 On March 31, we signed two leases for additional retail locations |
3. SUMMARY OF SIGNIFICANT ACC24
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates. |
Risks and Uncertainties | Risks and Uncertainties The Companys operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at other locations where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales. |
Fiscal Year | Fiscal Year The Companys fiscal year-end is December 31. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Kaya Holdings, Inc. and its subsidiary, Alternative Fuels Americas, Inc. (a Florida corporation) and Marijuana Holdings Americas, Inc. (a Florida corporation) which is a majority owned subsidiary. All inter-company accounts and transactions have been eliminated in consolidation. |
Non-Controlling Interest | Non-Controlling Interest The company owns 55% of Marijuana Holdings Americas, Inc. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents |
Inventory | Inventory Inventory consists of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company periodically reviews historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. Total Value of Finished goods inventory as of December 31, 2015 is $60,184 and $5,267 net of $28,000 allowance as of December 31, 2014. No allowance as necessary as of December 31, 2015. |
Property and Equipment | Property and Equipment Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. |
Long-lived assets | Long-lived assets The Company reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flows. In 2014 the Company terminated its agreement to purchase 40,000 Jatropha trees and will not be acquiring the trees or retaining those trees already purchased. |
Earnings Per Share | Earnings Per Share In accordance with ASC 260, Earnings per Share, the Company calculates basic earnings per share by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed if the Company has net income; otherwise it would be antidilutive, and would result from the conversion of a convertible note. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the more likely than not criteria of ASC 740. ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: Level 1 Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Unobservable inputs reflecting the Companys assumptions . incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant .assumptions that are reasonably available. The carrying amounts of the Companys financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable related party, approximate their fair values because of the short maturity of these instruments. The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 6. |
Embedded Conversion Features | Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815 Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 Debt with Conversion and Other Options for consideration of any beneficial conversion feature. |
Derivative Financial Instruments | Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. |
Beneficial Conversion Feature | Beneficial Conversion Feature For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount. When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt. |
Debt Issue Costs and Debt Discount | Debt Issue Costs and Debt Discount The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. |
Original Issue Discount | Original Issue Discount For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt. |
Extinguishments of Liabilities | Extinguishments of Liabilities The Company accounts for extinguishments of liabilities in accordance with ASC 860-10 (formerly SFAS 140) Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. |
Stock-Based Compensation - Employees | Stock-Based Compensation - Employees The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Companys most recent private placement memorandum (based on sales to third parties) (PPM), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. Expected volatility of the entitys shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Companys current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards grant date, based on estimated number of awards that are ultimately expected to vest. The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations. |
Stock-Based Compensation - Non Employees | Stock-Based Compensation Non Employees Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (Sub-topic 505-50). Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Companys most recent private placement memorandum (PPM), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows: Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holders expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holders expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. Expected volatility of the entitys shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Companys current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments. Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments. Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. |
Revenue Recognition | Revenue Recognition Revenue is recorded when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) asset is transferred to the customer without further obligation, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured. |
Cost of Sales | Cost of Sales Cost of sales represents costs directly related to the purchase of goods and third party testing of the Companys products. |
Related Parties | Related Parties The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 8251015, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. |
Contingencies | Contingencies The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Companys financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Companys business, consolidated financial position, and consolidated results of operations or consolidated cash flows. |
Subsequent Events | Subsequent Events The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In May 2014, the FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this update supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, IntangiblesGoodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We do not believe the adoption of this update will have a material impact on our financial statements. Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
Re-Classifications | Re-Classifications Certain amounts in 2014 were reclassified to conform to the 2015 presentation. These reclassifications had no effect on consolidated net loss for the periods presented. The fair value of the warrants on the date of issuance and on each re-measurement date of those warrants classified as liabilities is estimated using the Black-Scholes option pricing model using the following assumptions: contractual life according to the remaining terms of the warrants, no dividend yield, weighted average risk-free interest rate of 1.80% at December 31, 2015 and weighted average volatility of 98.99%. For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value. This method of valuation involves using inputs such as the fair value of the Company's various classes of preferred stock, stock price volatility, the contractual term of the warrants, risk free interest rates and dividend yields. Due to the nature of these inputs, the valuation of the warrants is considered a Level 3 measurement. The warrant liability is recorded in other liabilities on the Company's Consolidated Balance Sheets. The warrant liability is marked-to-market each reporting period with the change in fair value recorded on the Consolidated Statement of Operations and Comprehensive Loss until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. |
4. NOTES PAYABLE (Tables)
4. NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Payables and Accruals [Abstract] | |
Notes Payable | December 31, 2015 December 31, 2014 Loan payable - Stockholder, 0%, Due December 31, 2015, unsecured (1) $ 250,000 $ 250,000 Loan payable - Stockholder, due on Nov 1, 2014, unsecured -0- 25,000 Note Payable - 10% due March 15, 2015 (3) -0- 100,000 Note Payable - 10% due December 31, 2014 (2) -0- 100,000 Note Payable 10% due September 9, 2017 (4) 95,422 Note Payable 10% due September 9, 2017(5) 95,422 $ 440,845 $ 475,000 (1) At December 31, 2013 the Company was indebted to an affiliated shareholder of the Company for $840,955, which consisted of $737,100 principal and $103,895 accrued interest, with interest accruing at 10%. On January 2, 2014 the Company entered into a Debt Modification Agreement whereby the total amount of the debt was reduced to $750,000 and there is no accrued interest or principal due until December 31, 2015. On June 29, 2015 the $500,000 convertible portion of the debt was extended to December 31, 2017. $500,000 of the debt is convertible into 50,000 Series C Convertible Preferred Shares of AFAI, which if converted are subject to resale restrictions through December 31, 2017. The two-year note in the aggregate amount of $500,000 is convertible into the Companys preferred stock at a conversion rate of $10.00 per share of preferred. At a conversion rate of 433.9297 common shares to 1 preferred share, this would result in a total of 21,696,485 common shares issued if all debt was converted. The market value of the stock at the date of issuance of the debt was $0.04. The debt issued is a result of a financing transaction and contain a beneficial conversion feature valued at $367,859 to be amortized over the life of the debt. Total amortization for the year ended December 31, 2014 was $183,928. As of December 31, 2014, the balance of the debt principal was $500,000. The net balance reflected on the balance sheet is $303,213. The remaining $250,000 is not convertible. The company has imputed interest on both the convertible debt and the non-convertible debt. The company used an imputed interest rate of 4% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet. This note was modified and restated as of June 20, 2015, see Footnote 9. For the year-ended December 31, 2015 and 2014, the Company has recorded imputed interest of $10,000 each year. (2) On August 11, 2014 the Company received a total of $100,000 from an accredited investor in exchange for a senior promissory note due May 25, 2015 in the aggregate amount of $100,000. Interest rate is stated at 12%. As of June 30, 2015, this note balance along with $10,000 of interest was renegotiated into a convertible note with a face value of $110,000. This note was modified and restated as of June 20, 2015, see Footnote 9. And December 31, 2015 it was restated and amended. (3) On November 25, 2014 the Company received a total of $100,000 from an accredited investor in exchange for a senior promissory note due May 31, 2015 in the aggregate amount of $100,000. Interest rate is stated at 10%. As of June 30, 2015, this note balance along with $10,000 of interest was renegotiated into a convertible note with a face value of $110,000. This note was modified and restated as of June 20, 2015, see Footnote 9. And December 31, 2015 it was restated and amended. (4) On September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a senior promissory note due September 9, 2017 in the aggregate amount of $100,000. Interest rate is stated at 10%. This note includes an agreement to repay the interest and principal, based on 5% of gross reveneues. As of December 31, 2015, the company has repaid $4,578 in principal and $2,302 in accrued interest. (5) On September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a senior promissory note due September 9, 2017 in the aggregate amount of $100,000. Interest rate is stated at 10%. This note includes an agreement to repay the interest and principal, based on 5% of gross reveneues. As of December 31, 2015, the company has repaid $4,578 in principal and $2,302 in accrued interest. |
5. CONVERTIBLE DEBT (Tables)
5. CONVERTIBLE DEBT (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Debt Disclosure [Abstract] | |
Convertible Debt | December 31, 2015 December 31, 2015 Convertible note - related party, Due December 31, 2017 unsecured (2) 500,000 500,000 Convertible note - 10% due June 9, 2015 (3) -0- 50,000 Convertible note - 10% due June 13, 2015 (4) -0- 25,000 Convertible note - 10% due July 11, 2015 (5) -0- 160,000 Convertible note - 10% due June 13, 2015 (6) -0- 100,000 Convertible note - 10% due June 30, 2015 (7) -0- 30,000 Convertible note - 12% due January 1, 2017 (9) 58,556 -0- Convertible note - 12% due January 1, 2017 (9) 29,278 -0- Convertible note - 12% due January 1, 2017 (9) 186,316 -0- Convertible note - 12% due January 1, 2017 (9) 126,000 -0- Convertible note - 12% due January 1, 2017 (9) 117,113 -0- Convertible note - 12% due January 1, 2017 (9) 117,113 -0- Convertible note - 12% due January 1, 2017 (9) 55,895 -0- Convertible note - 12% due January 1, 2017 (9) 67,074 -0- Convertible note - 12% due January 1, 2017 (9) 23,442 -0- Convertible note - 12% due January 1, 2017 (9) 23,442 -0- Convertible note - 12% due January 1, 2017 (9) 27,116 Convertible note - 12% due January 1, 2017 (9) 116,966 -0- Convertible note 10% due January 1, 2017 (10) 25,000 -0- Convertible note 10% due September 21, 2017 (11) 50,000 Convertible note 10% due September 21, 2017 (11) 100,000 Convertible note 10% due September 21, 2017 (11) 50,000 Convertible note due April 1, 2016 (12) 23,500 -0- Convertible note - stockholder, 10%, due April 30, 2013, unsecured (1) 25,000 25,000 $ 1,673,311 $ 890,000 (1) At the option of the holder the convertible note may be converted into shares of the Companys common stock at the lesser of $0.40 or 20% discount to the market price, as defined, of the Companys common stock. The Company is currently in discussions with the lender on a payment schedule. The outstanding balance of this note is convertible into a variable number of the Companys common stock. Therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.018% to .02%, volatility ranging from 160% of 336%, trading prices ranging from $.105 per share to $0.105 per share and a conversion price ranging from $0.084 per share to $0.40 per share. Accrued interest on this note that was charged to operations for the year ended December 31, 2014 totaled approximately $8,705. Amortization of the discounts for the year ended December 31, 2014 totaled $25,000, which was charged to interest expense. The balance of the convertible note at December 31, 2014 including accrued interest and net of the discount amounted to $33,705. The Company valued the derivative liabilities at December 31, 2014 at $27,198. The Company recognized a change in the fair value of derivative liabilities for the year ended December 31, 2015 of $(629), which were charged to operations.. In determining the indicated values at December 31, 2015, since the debt is in default, the company used the maximum value these embedded options represent, with a trading price of $.087, and conversion prices ranging from $.05 per share. (2) At December 31, 2013 the Company was indebted to an affiliated shareholder of the Company for $840,955, which consisted of $737,100 principal and $103,895 accrued interest, with interest accruing at 10%. On January 2, 2014 the Company entered into a Debt Modification Agreement whereby the total amount of the debt was reduced to $750,000.00 and there is no accrued interest or principal due until December 31, 2015. $500,000 of the debt is convertible into 50,000 Series C Convertible Preferred Shares of AFAI, which if converted are subject to resale restrictions through December 31, 2015. The two-year note in the aggregate amount of $500,000 is convertible into the Companys preferred stock at a conversion rate of $10.00 per share of preferred. At a conversion rate of 433.9297 common shares to 1 preferred share, this would result in a total of 21,696,485 common shares issued if all debt was converted. The market value of the stock at the date of issuance of the debt was $0.04. The debt issued is a result of a financing transaction and contains a derivative liability, due to tainting of the shares for no reserve being of shares with the transfer agent in case of a conversion. As of December 31, 2014, the balance of the debt was $500,000. Imputed interest of $20,000 has been recorded for December 31, 2015 and 2014. The remaining $250,000 is not convertible. The company has imputed interest on both the convertible debt and the non-convertible debt. The company used an imputed interest rate of 4% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet. The remaining $250,000 is not convertible. The company has imputed interest on both the convertible debt and the non-convertible debt. The company used an imputed interest rate of 4% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, causing a restatement of the previous beneficial conversion feature has been removed and reclassified as a derivative liability. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (3) On June 9, 2014 the Company received a total of $50,000 from an accredited investor in exchange for one year notes in the aggregate amount of $50,000. The note is convertible after December 9, 2014 and is convertible into the Companys common stock at a conversion rate of $0.04 per share. The market value of the stock at the date (December 9, 2014) when the debt becomes convertible was $0.09. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. As of December 31, 2014, the balance was $50,000. The beneficial conversion feature in the amount of $50,000 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $17,551. As of June 30, 2015, the balance was $50,000. The beneficial conversion feature in the amount of $50,000 is being expensed as interest over the term of the note. At June 30, 2015 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $31,250. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, causing a restatement of the previous beneficial conversion feature has been removed and reclassified as a derivative liability. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (4) On June 15, 2014, the Company received a total of $25,000 from an accredited investor in exchange for one year notes in the aggregate amount of $25,000. The note is convertible after December 13, 2014 and is convertible into the Companys common stock at a conversion rate of $0.04 per share. The market value of the stock at the date (December 13, 2014) when the debt becomes convertible was $0.085. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. As of December 31, 2014, the balance was $25,000. The beneficial conversion feature in the amount of $25,000 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $13,767. As of June 30, 2015, the balance was $25,000. The beneficial conversion feature in the amount of $25,000 is being expensed as interest over the term of the note. At June 30, 2015 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $25,000. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, causing a restatement of the previous beneficial conversion feature has been removed and reclassified as a derivative liability. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (5) On July 11, 2014 the Company received a total of $160,000 from an accredited investor in exchange for one year note in the aggregate amount of $160,000. The note is convertible after January 13, 2015 and is convertible into the Companys common stock at a conversion rate of $0.04 per share. The market value of the stock at the date (January 13, 2015) when the debt becomes convertible was $0.077. The debt issued is a result of a financing transaction and contains a beneficial conversion feature when the debt becomes convertible as of January 13, 2015. As of December 31, 2014, the balance was $160,000 The beneficial conversion feature in the amount of $160,000 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $75,836. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, causing a restatement of the previous beneficial conversion feature has been removed and reclassified as a derivative liability. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (6) On September 19, 2014 the Company received a total of $100,000 from an accredited investor in exchange for a six month note in the aggregate amount of $100,000. The note is convertible after December 13, 2014 and is convertible into the Companys common stock at a conversion rate of $0.04 per share. The market value of the stock at the date (December 13, 2014) when the debt becomes convertible was $0.085. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. As of December 31, 2014, the balance was $100,000. The beneficial conversion feature in the amount of $100,000 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $56,906. As of June 30, 2015, the balance was $100,000. The beneficial conversion feature in the amount of $100,000 is being expensed as interest over the term of the note. At June 30, 2015 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $100,000. This note was modified and restated as of June 20, 2015, see Footnote 9. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $-0- at December 31, 2015 and $115,321 at December 31, 2014, respectively. (7) On November 14, 2014 the Company received a total of $30,000 from an accredited investor in exchange for a six month note in the aggregate amount of $30,000. The note is convertible after December 15, 2014 and is convertible into the Companys common stock at a conversion rate of $0.07 per share. The market value of the stock at the date (December 15, 2014) when the debt becomes convertible was $0.085. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. As of December 31, 2014, the balance was $30,000. The beneficial conversion feature in the amount of $8,250 is being expensed as interest over the term of the note. At December 31, 2014 the Company has recorded interest expense from amortization of beneficial conversion feature in the amount of $30,000. As of June 30, 2015, the balance was $-0-. The note was converted into 450,000 shares common stock. (9) On December 31, 2015 the Company renegotiated twelve (12) convertible and non-convertible notes payable. The Total face value of the notes issued was $888,500 the six month notes were due on December 31, 2015 The new notes are convertible after January 1, 2016 and are convertible into the Companys common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.087. All these amended debts have a price adjustment provision. Therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $2,274,934 at December 31, 2015 and $nil at December 31, 2014, respectively. (10) On October 1, 2015, the Company renegotiated a convertible notes payable. The original note was issued March 13, 2015 and due September 30, 2015, with conversion rate of $0.06 per share. The new notes has extended the due date to January 1, 2017 and are convertible into the Companys common stock at a conversion rate of $0.045 per share. (11) On September 23, 2015 the Company received a total of $50,000 from an accredited investor in exchange for a two year note in the aggregate amount of $50,000 with interest accruing at 10%. The note is convertible after September 23, 2015 and is convertible into the Companys common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.078. The debt issued is a result of a financing transaction the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $140,344 at December 31, 2015 and $nil at December 31, 2014, respectively. (11) On September 23, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note is convertible after September 23, 2015 and is convertible into the Companys common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.078. The debt issued is a result of a financing transaction and . Due to a recognition of tainting, due to shares not being held in reserve the notes are considered to have a derivative liability, therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $245,038 at December 31, 2015 and $nil at December 31, 2014, respectively. (11) On September 23, 2015 the Company received a total of $50,000 from an accredited investor in exchange for a two year note in the aggregate amount of $50,000 with interest accruing at 10%. The note is convertible after September 23, 2015 and is convertible into the Companys common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.078. The debt issued is a result of a financing transaction.. Due to a recognition of tainting, due to shares not being held in reserve in 2014 the notes are considered to have a derivative liability, therefore the Company accounted for these Notes under ASC Topic 815-15 Embedded Derivative. The derivative component of the obligation are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have being amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Black Scholes Option Model with a risk-free interest rate of ranging from 0.05% to 1.06%, volatility ranging from 155% of 221%, trading prices ranging from $.078 per share to $0.1 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The total derivative liabilities associated with these notes are $140,344 at December 31, 2015 and $nil at December 31, 2014, respectively. On September 8, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per share (the Warrant Exercise Price) for a period of five (5) years commencing from the earlier of such time as that certain $100K, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period as defined in The Note or September 9, 2017. See Note 4 above for more information on the promissory note and payment terms. On September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per share (the Warrant Exercise Price) for a period of five (5) years commencing from the earlier of such time as that certain $100K, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period as defined in The Note or September 9, 2017. See Note 4 above for more information on the promissory note and payment terms. (12) On July 27, 2015 the company issued a note payable for $28,500 The Company agrees to pay to the Holder $28,500 plus accrued interest pursuant to the following schedule: An initial payment of $5,000 is due no later than December 1, 2015. This amount represents the balance of the security deposit due for the lease of Commercial/Manufacturing Space occupied by MJAI Oregon 1, LLC, a majority-owned subsidiary of the company. |
6. DERIVATIVE LIABILITIES (Tabl
6. DERIVATIVE LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Derivative Liabilities Tables | |
Derivative liabilities | December 31, 2015 December 31, 2014 Fair value at the commitment date - convertible debt $ 4,612,292 $ 1,782,561 Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability (-0- ) (-0- ) Fair value mark to market adjustment - convertible debt (3,518 ) 149,198 Totals $ 4,615,810 $ 1,931,759 Commitment Dates Re-measurement Date Expected dividends 0 % 0 % Expected volatility 150 % 192.90 % Expected term 1 2 years 0.00 2.00 years Risk free interest rate 0.29% - 1.68 % 0.49% - 1.76 % |
9. LEASES (Tables)
9. LEASES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Leases [Abstract] | |
Leases | Year Amount 2016 182,604 2017 153,864 2018 147,576 2019 48,396 |
9. INCOME TAXES (Tables)
9. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | |
Deferred Tax Assets | 2015 2014 Tax loss carryforward $ 2,616,000 $ 1,864,283 Valuation allowance (2,616,000 ) (1,864,283 ) $ $ |
16. RESTATEMENT (Tables)
16. RESTATEMENT (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Restatement Tables | |
Restatement | Balance Sheet Original Change Restated Current Liabilities Accrued Interest 8,705 20,212 28,917 Convertible Notes Payable 189,993 14,283 204,276 Derivative Liabilities 8,434 490,780 499,214 Long Term Liabilities Convertible Notes Payable 303,213 (303,213 ) -0- Derivative Liabilities -0- 1,432,545 1,432,545 Stockholders Equity(Deficit) Common Stock par value 77,289 1,000 76,289 Additional Paid in capital 4,436,217 (835,609 ) 3,600,608 Common Stock to be issued 114,500 100,000 214,500 Accumulated Deficit (5,519,469 ) (1,255,200 ) (6,774,669 ) Non-controlling Interest (234,323 ) (133,011 ) 101,312 Statement of Operations-changes Interest Expense (417,883 ) 399,921 (23,962 ) Derivative liabilities expense (22,298 ) (923,772 ) (946,070 ) Change in Derivative expense 38,864 (188,062 ) (149,198 ) Amortization of debt discount (25,000 ) (404,276 ) (429,276 ) |
2. LIQUIDITY AND GOING CONCERN
2. LIQUIDITY AND GOING CONCERN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net Loss | $ (3,132,564) | $ (2,536,709) |
Working Capital Deficiency | $ 102,154 |
3. SUMMARY OF SIGNIFICANT ACC32
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | ||
Total Cost of Inventory | $ 105,044 | $ 5,267 |
Inventory Allowance | $ 28,000 |
4. NOTES PAYABLE - Notes Payabl
4. NOTES PAYABLE - Notes Payable (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Note Payable | $ 440,845 | $ 475,000 |
Loan Payable 1 | ||
Note Payable | 250,000 | 250,000 |
Loan Payable 2 | ||
Note Payable | 0 | 25,000 |
Loan Payable 3 | ||
Note Payable | 0 | 100,000 |
Loan Payable 4 | ||
Note Payable | 0 | $ 100,000 |
Loan Payable 5 | ||
Note Payable | 95,422 | |
Loan Payable 6 | ||
Note Payable | $ 95,422 |
5. CONVERTIBLE DEBT - Convertib
5. CONVERTIBLE DEBT - Convertible Debt (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Convertible Note | $ 1,673,311 | $ 890,000 |
Accrued interest | 20,929 | 28,917 |
Convertible Note 1 | ||
Convertible Note | 500,000 | 500,000 |
Convertible Note 2 | ||
Convertible Note | 0 | 365,000 |
Convertible Note 3 | ||
Convertible Note | 973,311 | 0 |
Convertible Note 4 | ||
Convertible Note | 200,000 | 0 |
Convertible Note 5 | ||
Convertible Note | $ 48,500 | $ 25,000 |
6. DERIVATIVE LIABILITIES (Deta
6. DERIVATIVE LIABILITIES (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Derivative Liabilities Details | ||
Fair value at the commitment date - convertible debt | $ 4,612,292 | $ 1,782,561 |
Reclassification of derivative liabilities to additional paid in capital related to warrants exercised that ceased being a derivative liability | 0 | 0 |
Fair value mark to market adjustment - convertible debt | (3,518) | 149,198 |
Totals | $ 4,615,810 | $ 1,931,759 |
6. DERIVATIVE LIABILITIES (De36
6. DERIVATIVE LIABILITIES (Details 1) | 12 Months Ended |
Dec. 31, 2015USD ($) | |
CommitmentDates | |
Expected dividends | $ 0 |
Expected volatility | 150.00% |
Expected term, minimum | 1 year |
Expected term, maximum | 2 years |
Risk free interest rate, minimum | 0.29% |
Risk free interest rate, maximum | 1.68% |
Remeasurement Date | |
Expected dividends | $ 0 |
Expected volatility | 192.90% |
Expected term, minimum | 0 years |
Expected term, maximum | 2 years |
Risk free interest rate, minimum | 0.49% |
Risk free interest rate, maximum | 1.76% |
7. LEASES - Leases (Details)
7. LEASES - Leases (Details) | Dec. 31, 2015USD ($) |
Leases [Abstract] | |
2,016 | $ 182,604 |
2,017 | 153,864 |
2,018 | 147,576 |
2,019 | $ 48,396 |
7. LEASES (Details Narrative)
7. LEASES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Leases [Abstract] | ||
Rent Expense | $ 129,408 | $ 65,162 |
Security Deposit | $ 12,000 |
10. INCOME TAXES - Deferred Tax
10. INCOME TAXES - Deferred Tax Assets (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 |
Income Tax Disclosure [Abstract] | ||
Tax loss carryforward | $ 2,616,000 | $ 1,864,283 |
Valuation allowance | (2,616,000) | (1,864,283) |
Deferred Tax Asset | $ 0 | $ 0 |
16. RESTATEMENT (Details)
16. RESTATEMENT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Current Liabilities | ||
Accrued Interest | $ 20,929 | $ 28,917 |
Convertible Notes Payable | ||
Derivative Liabilities | $ 39,944 | $ 499,214 |
Convertible Notes Payable | 32,601 | 0 |
Derivative Liabilities | 4,575,866 | 1,432,545 |
Stockholders Equity(Deficit) | ||
Common Stock –par value | 88,856 | 76,289 |
Additional Paid in capital | 4,618,475 | 3,600,608 |
Accumulated Deficit | (9,797,497) | (6,774,669) |
Non-controlling Interest | (211,048) | (101,312) |
Statement of Operations | ||
Interest Expense | 239,640 | 23,962 |
Derivative liabilities expense | 4,648,253 | 946,070 |
Change in Derivative expense | 3,518 | (149,198) |
Amortization of debt discount | $ (1,505,207) | (429,276) |
Original | ||
Current Liabilities | ||
Accrued Interest | 8,705 | |
Convertible Notes Payable | 189,993 | |
Derivative Liabilities | 8,434 | |
Convertible Notes Payable | 303,213 | |
Derivative Liabilities | 0 | |
Stockholders Equity(Deficit) | ||
Common Stock –par value | 77,289 | |
Additional Paid in capital | 4,436,217 | |
Common Stock to be issued | 114,500 | |
Accumulated Deficit | (5,519,469) | |
Non-controlling Interest | (234,323) | |
Statement of Operations | ||
Interest Expense | 417,883 | |
Derivative liabilities expense | 22,298 | |
Change in Derivative expense | 38,864 | |
Amortization of debt discount | (25,000) | |
Change | ||
Current Liabilities | ||
Accrued Interest | 20,212 | |
Convertible Notes Payable | 14,283 | |
Derivative Liabilities | 490,780 | |
Convertible Notes Payable | (303,213) | |
Derivative Liabilities | 1,432,545 | |
Stockholders Equity(Deficit) | ||
Common Stock –par value | 1,000 | |
Additional Paid in capital | (835,609) | |
Common Stock to be issued | 100,000 | |
Accumulated Deficit | (1,255,200) | |
Non-controlling Interest | (133,011) | |
Statement of Operations | ||
Interest Expense | (399,921) | |
Derivative liabilities expense | 923,772 | |
Change in Derivative expense | (188,062) | |
Amortization of debt discount | (404,276) | |
Restated | ||
Current Liabilities | ||
Accrued Interest | 28,917 | |
Convertible Notes Payable | 204,276 | |
Derivative Liabilities | 499,214 | |
Convertible Notes Payable | 0 | |
Derivative Liabilities | 1,432,545 | |
Stockholders Equity(Deficit) | ||
Common Stock –par value | 76,289 | |
Additional Paid in capital | 3,600,608 | |
Common Stock to be issued | 214,500 | |
Accumulated Deficit | (6,774,669) | |
Non-controlling Interest | 101,312 | |
Statement of Operations | ||
Interest Expense | 23,962 | |
Derivative liabilities expense | 946,070 | |
Change in Derivative expense | (149,198) | |
Amortization of debt discount | $ (429,276) |