| EQUITY TRANSACTIONS | Recapitalization and Change in Control On February 29, 2016, the
Company consummated the Share Exchange, which resulted in a change in control of the Company. As part of this transaction, the
Company acquired a $50,000 license agreement and $1,292 in cash and assumed liabilities of $51,000. The Company initially reported
an issuance of 32 million shares of newly designated Series B-1 Preferred Stock to the shareholders of Exactus BioSolutions in
the Share Exchange. Due to an anticipated pre-acquisition investment in Exactus BioSolutions that was not made, the final total
issued shares of Series B-1 Preferred Stock was 30 million. The Company has considered
the guidance pursuant to Rule 11-01(d) of Regulation S-X and related interpretations and has concluded the acquisition of Exactus BioSolutions
pursuant to the Share Exchange is the acquisition of an asset and not of a business. The license agreement and shareholder
loans have been accounted for and recorded at historical cost. Concurrently with the closing
of the Share Exchange, the Company closed a private offering of Series B-2 Preferred Stock. The Company sold a total
of 2,084,000 shares of Series B-2 Preferred Stock at an offering price of $0.25 per share, for an aggregate subscription price
of $521,000. The Company originally reported a total of 2,884,000 shares of Series B-2 preferred stock being issued in the offering.
Due to: (i) an anticipated investment for 1,000,000 shares which was not made, and (ii) an additional subscription for 200,000
shares for which documentation had not been completed at that time, however, the final total issued shares of Series B-2 Preferred
Stock was 2,084,000. The shares sold in the offering included 400,000 shares of Series B-2 preferred stock issued to extinguish
a $100,000 loan and 204,000 shares of Series B-2 preferred stock issued to former creditors of Exactus BioSolutions in exchange
for their release of $51,000 in debt owed by Exactus. After accounting for these issuances, net cash proceeds from the
offering were $370,000. No underwriting discounts or commissions have been or will be paid in connection with the sale
of Series B-2 Preferred Stock. Also on February 29, 2016,
the Company entered into Exchange Agreements with certain holders of common stock holding an aggregate of 393,314 post-split (11,636,170
pre-split) shares of common stock. Under the Exchange Agreements, these shareholders exchanged their common stock for
a total of 4,558,042 shares of Series A Preferred Stock. These exchanges consisted of: (i) thirteen common stock holders holding
10,894,070 (pre-split) shares of common stock who exchanged their common stock for 3,458,042 shares Series A Preferred Stock, resulting
in a (pre-split) exchange ratio of approximately 1 for 3.15, and (ii) one shareholder who, under a separately negotiated agreement,
exchanged 742,100 (pre-split) shares common stock for 1,100,000 shares of Series A Preferred Stock, resulting at a (pre-split)
exchange ratio of approximately 1.48 for 1. Immediately following such share exchanges, the Company repurchased 50,000
shares of Series A Preferred Stock from a shareholder for a total price of $50,000. Reverse Stock Split Effective March 22, 2016,
the Company performed a reverse split of common stock on a 1 for 29.5849 basis, pursuant to the prior approval by the Board of
Directors and a majority of shareholders. On March 22, 2016, the effective date of the reverse split, the Company had
approximately 3,608,715 shares of common stock issued and outstanding, which were split into 121,978 shares of common stock. The
par value of the common stock was unchanged at $0.0001 per share, post-split. All per share information in the condensed financial
statements gives retroactive effect to the 1 for 29.5849 reverse stock split that was effected on March 22, 2016. Preferred Stock The Company’s authorized
preferred stock consists of 50,000,000 shares with a par value of $0.0001. On February 17, 2016, the Board of Directors
voted to designate a class of preferred stock entitled Series A Preferred Stock, consisting of up to five million (5,000,000) shares,
par value $0.0001. The shares of Series A Preferred Stock were automatically converted to 4,508,042 shares of common
stock on March 30, 2016, thirty (30) days after the closing of the Share Exchange and offering of Series B-2 Preferred Stock. As
a result, there are no Series A preferred stock issued and outstanding as of September 30, 2016. Also on February 17, 2016,
the Company’s Board of Directors voted to designate a class of preferred stock entitled Series B-2 Convertible Preferred
Stock (“Series B-2 Preferred Stock”), consisting of up to six million (6,000,000) shares, par value $0.0001, with a
stated value of $0.25 per share. With respect to rights on liquidation, winding up and dissolution, holders of Series
B-2 Preferred Stock will be paid in cash in full, before any distribution is made to any holder of common or other classes of capital
stock, an amount of $0.25 per share. Shares of Series B-2 Preferred Stock have no dividend rights except as may be declared by
the Board in its sole and absolute discretion, out of funds legally available for that purpose. Shares of Series B-2 Preferred
Stock are convertible, at the option of the holder, into shares of common stock on a one (1) for one (1) basis. Holders
of Series B-2 Preferred Stock have the right to vote as-if-converted to common stock on all matters submitted to a vote of the
holders of the Company’s common stock. On February 29, 2016, the Company issued 2,084,000 shares of Series B-2 Preferred
Stock. On August 1, 2016,
the Company closed a private offering of Series B-2 Preferred Stock. The Company sold a total of 500,000 shares of Series
B-2 Preferred Stock to accredited investors at an offering price of $0.25 per share, for an aggregate subscription price of $125,000. No
underwriting discounts or commissions have been paid in connection with the sale of the Series B-2 Preferred Stock . On February 29, 2016, the
Company’s Board of Directors voted to designate a class of preferred stock entitled Series B-1 Convertible Preferred Stock
(“Series B-1 Preferred Stock”), consisting of up to thirty-two million (32,000,000) shares, par value $0.0001. With
respect to rights on liquidation, winding up and dissolution, the Series B-1 Preferred Stock ranks pari passu to the
class of common stock. Shares of Series B-1 Preferred Stock have no dividend rights except as may be declared by the Board in its
sole and absolute discretion, out of funds legally available for that purpose. Shares of Series B-1 Preferred Stock are convertible,
at the option of the holder, into shares of common stock on a one (1) for one (1) basis. Holders of Series B-1 Preferred Stock
have the right to vote as-if-converted to common stock on all matters submitted to a vote of holders of the Company’s common
stock. On February 29, 2016, the Company issued 30,000,000 shares of Series B-1 Preferred Stock, of which 2,800,000 remain outstanding
as of September 30, 2016. On June 30, 2016, pursuant
to the MSA summarized in Note 4, the Company’s Board of Directors approved a Certificate of Designation authorizing 1,733,334
shares of new Series C Preferred Stock, par value $0.0001. The Series C Preferred Stock ranks equally with our common
stock with respect to liquidation rights and is convertible to common stock on a 1 for 1 basis. The conversion rights
of holders of the Series C Preferred Stock are limited such that no holder may convert any shares of preferred stock to the extent
that such holder, immediately following the conversion, would own in excess of 4.99% of our issued and outstanding shares of common
stock. This limitation may be increased to 9.99% upon 61 days written notice by a holder of the Series C Preferred Stock
to the Company. On June 30, 2016, the Company issued 1,733,334 shares of Series C Preferred Stock to PoC Capital valued
at $511,334. As of December 31, 2015,
no shares of Preferred Stock were issued or outstanding. Common Stock The Company’s authorized
common stock consists of 200,000,000 shares with a par value of $0.0001. The Company automatically
converted all outstanding shares of Series A Preferred Stock to common stock on March 30, 2016. As a result, 4,508,042
shares of common stock were issued in exchange of 4,508,042 shares of Series A Preferred Stock. Certain shareholders converted
their shares of Series B-1 Preferred Stock to common stock on June 15, 2016. As a result, 27,200,000 shares of common
stock were issued in exchange of 27,200,000 shares of Series B-1 Preferred Stock. On June 30, 2016, pursuant
to the MSA summarized in Note 4, the Company issued 1,600,000 shares of common stock to PoC Capital valued at $480,000. There were 33,430,018 and
515,290 common shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively. Warrants and Options
On June 30, 2016, pursuant to the MSA summarized in Note 4, the Company issued warrants to purchase
1,666,667 common stock shares for a price of $0.60 per share exercisable for three years to PoC Capital. These warrants have a grant
date fair value of $0.0052 per warrant, determined using the Black-Scholes method based on the following assumptions: (1) risk
free interest rate of 0.71%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of
27.2%; and (4) an expected life of the warrants of 3 years. The Company has recorded a prepaid expense on
these warrants of $8,667 as of June 30, 2016. There were 1,666,667 and 0 warrants outstanding
at September 30, 2016 and December 31, 2015, respectively. |
