Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | May 15, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | nFusz, Inc. | |
Entity Central Index Key | 1,566,610 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 155,590,443 | |
Trading Symbol | FUSZ | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash | $ 1,604,137 | $ 10,560 |
Prepaid expenses | 35,880 | 40,909 |
Total current assets | 1,640,017 | 51,469 |
Property and equipment, net | 25,249 | 30,554 |
Other assets | 8,780 | 8,780 |
Total assets | 1,674,046 | 90,803 |
Current liabilities: | ||
Accounts payable and accrued expenses | 613,723 | 663,506 |
Accrued interest (including $31,308 and $99,425 payable to related parties) | 31,308 | 248,120 |
Accrued officers' salary | 118,008 | 607,333 |
Note payable | 125,000 | |
Notes payables - related party | 1,964,985 | 1,964,985 |
Convertible note payable, net of discount of $0 and $675,443, respectively | 1,020,315 | |
Derivative liability | 1,735,354 | 1,250,581 |
Total current liabilities | 4,463,378 | 5,879,840 |
Commitments and contingencies | ||
Stockholders' deficit | ||
Preferred stock, $0.0001 par value, 15,000,000 shares authorized, none issued or outstanding | ||
Common stock, $0.0001 par value, 200,000,000 shares authorized, 152,126,287 and 119,118,513 shares issued and outstanding as of March 31, 2018 and December 31, 2017 | 15,213 | 11,912 |
Additional paid in capital | 34,229,846 | 22,738,574 |
Common stock issuable, none as of March 31, 2018 and 4,500,000 shares as of December 31, 2017 | (20) | 430 |
Accumulated deficit | (37,034,371) | (28,539,953) |
Total stockholders' deficit | (2,789,332) | (5,789,037) |
Total liabilities and stockholders' deficit | $ 1,674,046 | $ 90,803 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Accrued interest, related parties | $ 31,308 | $ 99,425 |
Convertible notes payable, discount | $ 0 | $ 675,443 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 15,000,000 | 15,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 152,126,287 | 119,118,513 |
Common stock, shares outstanding | 152,126,287 | 119,118,513 |
Common stock issuable, shares | 4,500,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Net Sales | $ 8,003 | |
Operating Expenses: | ||
Research and development | 130,000 | 89,600 |
General and administrative | 5,269,574 | 617,537 |
Total operating expenses | (5,399,574) | (707,137) |
Loss from operations | (5,391,571) | (707,137) |
Other income (expense) | ||
Change in fair value of derivative liability | (2,624,887) | |
Debt extinguishment | (1,067,242) | (26,000) |
Interest expense - amortization of debt discount | (747,623) | (39,678) |
Interest expense (including $58,142 and $58,142 to related parties) | (203,933) | (84,005) |
Financing costs | (171,739) | |
Other expense | (6,239) | |
Gain on extinguishment of derivative liability | 1,718,816 | |
Total other expense | (3,102,847) | (149,683) |
Net loss | $ (8,494,418) | $ (856,820) |
Loss per share - basic and diluted | $ (0.07) | $ (0.01) |
Weighted average number of common shares outstanding - basic and diluted | 127,358,921 | 95,882,696 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||
Interest expense, related parties | $ 58,142 | $ 58,142 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Stockholders Deficit (Unaudited) - 3 months ended Mar. 31, 2018 - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Common Stock Issuable [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2017 | $ 11,912 | $ 22,738,574 | $ 430 | $ (28,539,953) | $ (5,789,037) |
Balance, shares at Dec. 31, 2017 | 119,118,513 | ||||
Common shares issued upon exercise of warrants | $ 101 | 21,899 | 22,000 | ||
Common shares issued upon exercise of warrants, shares | 1,011,856 | ||||
Derivative liability extinguished upon exercise of warrants | 723,037 | 723,037 | |||
Proceeds from sale of common stock | $ 1,641 | 2,276,859 | $ 2,278,500 | ||
Proceeds from sale of common stock, shares | 16,409,067 | 1,679,276 | |||
Fair value of common shares issued for services | $ 475 | 3,269,722 | (450) | $ 3,269,747 | |
Fair value of common shares issued for services, shares | 4,748,514 | ||||
Fair value of common stock issued upon conversion of debt | $ 738 | 2,276,561 | $ 2,277,299 | ||
Fair value of common stock issued upon conversion of debt, shares | 7,383,006 | 1,026,195 | |||
Fair value of common stock issued upon conversion of accrued officer's salary | $ 41 | 582,292 | $ 582,333 | ||
Fair value of common stock issued upon conversion of accrued officer's salary, shares | 407,226 | ||||
Common shares issued upon exercise of put option | $ 305 | 999,695 | $ 1,000,000 | ||
Common shares issued upon exercise of put option, shares | 3,048,105 | ||||
Fair value of vested stock options | 1,341,207 | $ 1,341,207 | |||
Net loss | (8,494,418) | (8,494,418) | |||
Balance at Mar. 31, 2018 | $ 15,213 | $ 34,229,846 | $ (20) | $ (37,034,371) | $ (2,789,332) |
Balance, shares at Mar. 31, 2018 | 152,126,287 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating Activities: | ||
Net loss | $ (8,494,418) | $ (856,820) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Share-based compensation | 4,610,954 | 264,273 |
Change in fair value of derivative liability | 2,624,887 | |
Debt extinguishment | 1,067,242 | 26,000 |
Amortization of debt discount | 747,623 | 39,678 |
Financing costs | 171,739 | |
Depreciation and amortization | 5,305 | 5,305 |
Gain on extinguishment of derivative liability | (1,718,816) | |
Effect of changes in assets and liabilities: | ||
Accounts payable, accrued expenses, and accrued interest | (11,468) | 214,440 |
Accounts receivable | 8,468 | |
Other assets | 3,977 | |
Prepaid expenses | 5,029 | (23,413) |
Net cash used in operating activities | (991,923) | (318,092) |
Financing Activities: | ||
Proceeds from sale of common stock | 2,278,500 | 170,000 |
Proceeds from exercise of put option | 1,000,000 | |
Proceeds from convertible note payable | 130,000 | |
Proceeds from warrant exercise | 22,000 | |
Proceeds from series A preferred stock | 255,000 | |
Payment of convertible notes payable | (845,000) | |
Net cash provided by financing activities | 2,585,500 | 425,000 |
Net change in cash | 1,593,577 | 106,908 |
Cash - beginning of period | 10,560 | 16,762 |
Cash - end of period | 1,604,137 | 123,670 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 258,627 | 3,750 |
Cash paid for income taxes | ||
Supplemental disclosure of non-cash investing and financing activities: | ||
Conversion of note payable and accrued interest to common stock | 2,277,299 | |
Fair value of derivative liability extinguished upon exercise of warrants | 723,037 | |
Common stock issued to settle accrued officer's salary | 582,333 | |
Fair value of derivative liability from issuance of convertible debt and warrant features | 301,739 | |
Common stock issued to settle accounts payable | $ 30,000 |
Description of Business
Description of Business | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Description of Business | 1. DESCRIPTION OF BUSINESS Organization Cutaia Media Group, LLC (“CMG”) was a limited liability company formed on December 12, 2012 under the laws of the State of Nevada. On May 19, 2014, bBooth, Inc. was incorporated under the laws of the State of Nevada. On May 19, 2014, CMG was merged into bBooth, Inc. and bBooth, Inc. changed its name to bBooth (USA), Inc. The operations of CMG and bBooth (USA), Inc. became known as, and are referred to in this Report as, “bBoothUSA”. On October 16, 2014, bBoothUSA completed a Share Exchange Agreement with Global System Designs, Inc. (“GSD”) which was accounted for as a reverse merger transaction. In connection with the closing of the Share Exchange Agreement, GSD management was replaced by bBoothUSA management, and GSD changed its name to bBooth, Inc. Effective April 21, 2017, we changed our corporate name from bBooth, Inc. to nFüsz, Inc. The name change was effected through a parent/subsidiary short-form merger of nFüsz, Inc., our wholly-owned Nevada subsidiary, formed solely for the purpose of the name change, with and into us. We were the surviving entity. To effectuate the merger, we filed Articles of Merger with the Secretary of State of the State of Nevada on April 4, 2017 and a Certificate of Correction with the Secretary of State of the State of Nevada on April 17, 2017. The merger became effective on April 21, 2017. Our board of directors approved the merger, which resulted in the name change on that date. In accordance with Section 92A.180 of the Nevada Revised Statutes, stockholder approval of the merger was not required. On the effective date of the name change merger, our name was changed to “nFüsz, Inc.” and our Articles of Incorporation, as amended (the “Articles”), were further amended to reflect our new legal name. With the exception of the name change, there were no other changes to our Articles. Nature of Business We have developed proprietary interactive video technology which serves as the basis for certain products and services that we market under the brand name “notifi”. Our notifiCRM, notifiADS, notifiLINKS, and notifiWEB products are cloud-based, software-as-a-service (“SaaS”), customer relationship management (“CRM”), sales lead generation, advertising and social engagement software, accessible on mobile and desktop platforms, that we license to individual consumers, sales-based organizations, consumer brands, marketing and advertising agencies, as well as to artists and social influencers. Our notifiCRM platform is an enterprise scalable, subscription-based customer relationship management program that incorporates proprietary, interactive audio/video messaging and interactive on-screen “virtual salesperson” communications technology. Our notifiCRM is distinguished from other CRM programs because it utilizes interactive video as the primary means of communication between our subscribers and their clients or prospects. Such clients and prospects can respond to notifiCRM subscribers’ calls to action in real time by clicking on links embedded in the video, all without leaving or stopping the video. Subscribers also have access to detailed analytics that reflect when the videos were viewed, by whom, how many times, for how long, and what items were clicked-on in the video to assist subscribers in determining the possible interest level of that particular client or prospect in the subject matter of the video. Our notifiTV and notifiLIVE products are also part of our proprietary interactive video platform that allows viewers to interact with pre-recorded as well as live broadcast video content by clicking on links embedded in on-screen people, objects, graphics or sponsors’ signage. Viewers can experience our notifiTV and notifiLIVE interactive content and capabilities on most devices available in the market today without the need to download special software or proprietary video players. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2017 included herein was derived from the audited consolidated financial statements as of that date. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results. Principles of Consolidation The consolidated financial statements include the accounts of nFüsz, Inc., (formerly bBooth, Inc.) and Songstagram, Inc. (“Songstagram”) our wholly owned subsidiary. All intercompany transactions and balances have been eliminated in consolidation. Going Concern We have incurred operating losses since inception and have negative cash flows from operations. We had a stockholders’ deficit of $2,789,332 as of March 31, 2018, and incurred a net loss of $8,494,418 and utilized $991,923 of cash during the period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2017 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flows from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations. There is no assurance that we will ever be profitable or that debt or equity financing will be available to us. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Significant estimates include assumptions made in valuing derivative liabilities, valuation of debt and equity instruments, share-based compensation arrangements and realization of deferred tax assets. Amounts could materially change in the future. Revenue Recognition We generate substantially all of our revenue from subscription services, which are comprised of subscription fees from customer accounts. Subscription service arrangements are generally non-cancelable and do not provide for refunds to customers in the event of cancellations or any other right of return. We record revenue net of sales or excise taxes. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (ASC 606). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer. The Company adopted the guidance of ASC 606 on January 1, 2018. The implementation of ASC 606 had no impact on the prior period financial statements and no cumulative effect adjustment was recognized. Derivative Financial Instruments The Company evaluates its financial instruments 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 in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The Company uses Level 2 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. Share Based Payments The Company issues stock options, common stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718 “Compensation – Stock Compensation.” Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. The Company accounts for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 “ .” a b The Company values stock compensation based on the market price on the measurement date. As described above, for employees this is the date of grant, and for non-employees, this is the date of performance completion. The Company values stock options and warrants using the Black-Scholes option pricing model. Net Loss Per Share Basic net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental common shares issuable upon exercise of stock options. No dilutive potential common shares were included in the computation of diluted net loss per share because their impact was anti-dilutive. As of March 31, 2018, the Company had a total of 22,447,225 options and 30,107,413 warrants outstanding, and the potential issuance of approximately 11.2 million shares of common stock upon conversion of notes payable. These shares were excluded from the computation of net loss per share because they are anti-dilutive. As of March 31, 2017, the Company had total of 17,530,953 options and 18,455,264 warrants which were excluded from the computation of net loss per share because they are anti-dilutive. Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). ASU 2016-02 requires a lessee to record a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, on the balance sheet for all leases with terms longer than 12 months, as well as the disclosure of key information about leasing arrangements. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. ASU 2016-02 requires classification of all cash payments within operating activities in the statement of cash flows. Disclosures are required to provide the amount, timing and uncertainty of cash flows arising from leases. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company has not yet evaluated the impact of the adoption of ASU 2016-02 on the Company’s financial statement presentation or disclosures. In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” (“ASU 2017-11”). ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered, and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common stockholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The guidance in ASU 2017-11 can be applied using a full or modified retrospective approach. The Company is currently evaluating the impact of the adoption of ASU 2017-11 on the Company’s financial statement presentation or disclosures. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 3. PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of March 31, 2018 and December 31, 2017. March 31, 2018 December 31, 2017 (Unaudited) Furniture and fixtures $ 56,890 $ 56,890 Office equipment 50,669 50,669 107,559 107,559 Less: accumulated depreciation (82,310 ) (77,005 ) $ 25,249 $ 30,554 Depreciation expense amounted to $5,305 for three months ended March 31, 2018 and 2017, respectively. |
Notes Payable
Notes Payable | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable | 4. NOTE PAYABLE On March 21, 2015, the Company entered into an agreement with DelMorgan Group LLC (“DelMorgan”), pursuant to which DelMorgan agreed to act as the Company’s exclusive financial advisor. In connection with the agreement, the Company paid DelMorgan $125,000, which was advanced by a third-party lender in exchange for an unsecured note payable issued by the Company bearing interest at the rate of 12% per annum payable monthly beginning on April 20, 2015. Effective March 20, 2017, for no additional consideration the Company entered into an extension agreement with the third-party lender to extend the maturity date of the Note to March 21, 2018. All other terms of the Note remain unchanged. As of December 31, 2017, the balance due under the note was $125,000. On January 29, 2018, the Company settled the debt of $125,000 in exchange for 1,250,000 shares of its Common Stock. There was no gain or loss recognized as the fair value of the common shares issued approximates the note payable settled. |
Notes Payable - Related Parties
Notes Payable - Related Parties | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable - Related Parties | 5. NOTES PAYABLE – RELATED PARTIES The Company has the following related parties notes payable as of March 31, 2018 and December 31, 2017: Note Issuance Date Maturity Date Interest Rate Original Borrowing Balance at March 31, 2018 Balance at December 31, 2017 (Unaudited) Note 1 (A) December 1, 2015 August 1, 2018 12.0 % $ 1,203,242 $ 1,198,883 $ 1,198,883 Note 2 December 1, 2015 August 1, 2018 12.0 % 189,000 189,000 189,000 Note 3 (B) December 1, 2015 April 1, 2017 12.0 % 111,901 111,901 111,901 Note 4 (C) August 4, 2016 December 4, 2018 12.0 % 343,326 343,326 343,326 Note 5 August 4, 2016 December 4, 2018 12.0 % 121,875 121,875 121,875 Total notes payable – related parties, net $ 1,964,985 $ 1,964,985 (A) Per the terms of the agreement, at Mr. Cutaia’s discretion (majority stockholder and Chief Executive Officer (CEO)), he may convert up to $374,665 of outstanding principal, plus accrued interest thereon, into shares of common stock at a conversion rate of $0.07 per share. (B) As of March 31, 2018, and the date of this report, the note is past due. The Company is currently in negotiations with the note holder to settle the note payable. (C) A total of 30% of the note principal can be converted to shares of common stock at a conversion price $0.07 per share. Total interest expense for notes payable to related parties for the three months ended March 31, 2018 and 2017 was $58,142, respectively. |
Convertible Notes Payable
Convertible Notes Payable | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable | 6. CONVERTIBLE NOTES PAYABLE The Company has the following convertible notes payable as of March 31, 2018 and December 31, 2017: Note Note Date Maturity Date Interest Rate Original Borrowing Balance at March 31, 2018 Balance at December 31, 2017 (Unaudited) Note payable April 3, 2016 April 4, 2018 12 % $ 600,000 $ - $ 680,268 Note payable June and August 2017 February and March 2018 5 % $ 220,500 - 220,500 Note payable Various Various 5 % $ 320,000 - 320,000 Note payable December 8, 2017 December 8, 2018 8 % $ 370,000 - 370,000 Note payable December 13, 2017 September 20, 2018 8 % $ 105,000 - 105,000 Total notes payable - 1,695,768 Debt discount - (675,453 ) Total notes payable, net of debt discount $ - $ 680,268 During 2016 through 2017, the Company issued convertible notes payable to unrelated, third party creditors/investors totaling $1,695,768. The notes bear an average interest rate of 8% per annum, secured by the Company’s assets, matures starting February 2018 through January 2019 and convertible to shares of common stock based upon a discounted market price. As of December 31, 2017, outstanding balance of the notes payable amounted $1,695,768 and unamortized debt discount of $675,453. During the period ended March 31, 2018, the Company issued similar convertible notes payable totaling $150,000 in exchange for cash of $130,000. The Company determined that since the conversion floor had no limit to the conversion price, that the Company could no longer determine if it had enough authorized shares to fulfil the conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of the notes created a derivative with a fair value of $252,778 at the date of issuance. The Company accounted for the fair value of the derivative up to the face amount of the note of $150,000 as a valuation discount amortized over the life of the note, and the excess of $102,778 being recorded as financing cost (see Note 8 for discussion of derivative liability). In addition, the Company also recorded the notes’ original issue discount of $20,000 as financing costs. As part of the offering, the Company also granted a five-year warrant to acquire 1,000,000 shares of the Company’s common stock with an exercise price of $0.14 per share. A total of 500,000 warrants that were granted included full ratchet reset provision in case a future offering at a price below $0.14 per share and a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder and a reset. As such, pursuant to current accounting guidelines, the Company determined that the warrant exercise price and fundamental transaction clause created a derivative with a fair value of $48,961 at the date of issuance. The Company accounted for the fair value of the derivative as financing cost. See Note 8 for discussion of derivative liability. During the period ended March 31, 2018 the Company paid $845,000 to settle certain outstanding convertible notes and converted outstanding convertible notes payable and accrued interest of $2,139,005 thru the issuance of 6,133,006 shares of common stock. As the fair value of the common shares issued of $1,679,276 exceeded the recorded amount of the convertible notes and accrued interest settled, the Company recorded a loss on debt extinguishment $1,090,056 on the settlement. The Company amortized the remaining debt discount of $675,453 to interest expense during the period. As of March 31, 2018, all convertible notes payable had been settled or paid. Total interest expense for convertible notes payable for the three months ended March 31, 2018 and 2017 was $144,541 and $20,128, respectively. |
Derivative Liability
Derivative Liability | 3 Months Ended |
Mar. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Liability | 7. DERIVATIVE LIABILITY Under authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The Company has issued certain convertible notes whose conversion price contains reset provisions based on a future offering price and/or whose conversion price is based on a future market price. However, since the number of shares to be issued is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to share settle the conversion option. In addition, the Company also granted certain warrants which included a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder. As a result, the conversion option and warrants are classified as a liability and bifurcated from the debt host and accounted for as a derivative liability in accordance with ASC 815 and will be re-measured at the end of every reporting period with the change in value reported in the statement of operations. The derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following average assumptions: March 31, 2018 Upon Issuance December 31, 2017 Stock Price $ 1.45 $ 0.10 $ 0.10 Exercise Price $ 0.13 $ 0.08 $ 0.06 Expected Life 4.75 2.33 1.26 Volatility 228 % 193 % 189 % Dividend Yield 0 % 0 % 0 % Risk Free Interest Rate 1.93 % 1.18 % 1.72 % Fair Value $ 1,735,354 $ 301,739 $ 1,250,581 The expected life of the conversion feature of the notes and warrants was based on the remaining contractual term of the notes and warrants. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected dividend yield was based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future. The risk-free interest rate was based on rates established by the Federal Reserve Bank. As of December 31, 2017, the Company had recorded a derivative liability of $1,250,581. During the period ended March 31, 2018, the Company recorded an additional derivative liability totaling $301,739 as a result of the issuance of convertible notes and warrants. During the period ending March 31, 2018, the Company extinguished a derivative liability of $1,718,816 upon the conversion and payment of outstanding convertible notes payable, which was recorded as a gain on extinguishment, and $723,072 from exercise of warrants that was accounted for as a charge to additional paid in capital. During the period ended March 31, 2018 the Company recorded a change in fair value of $2,624,887 up to the dates of the extinguishment which has been reflected as a cost in the accompanying statement of operations. At March 31, 2018, the fair value of the derivative liability amounted to $1,735,354. |
Equity Transactions
Equity Transactions | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Equity Transactions | 8. EQUITY TRANSACTIONS The Company’s common stock activity for the three months ended March 31, 2018 is as follows: Common Stock Shares Issued for Services Shares Issued from Stock Subscription Shares Issued from Conversion of Note Payable Shares Issued Upon Exercise of Put Option Shares Issued for Accrued Salary Shares Issued from Exercise of Warrants Stock Options Effective October 16, 2014, the Company adopted the 2014 Stock Option Plan (the “Plan”) under the administration of the board of directors to retain the services of valued key employees and consultants of the Company. At its discretion, the Company grants share option awards to certain employees and non-employees, as defined by ASC 718, Compensation—Stock Compensation, under the 204 Stock Option Plan (the “Plan”) and accounts for its share-based compensation in accordance with ASC 718. A summary of option activity for the three months ended March 31, 2018 is presented below. Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years) Aggregate Intrinsic Value Outstanding at December 31, 2017 21,840,953 $ 0.33 1.21 Granted 906,272 0.26 Exercised - - Forfeited or expired (300,000 ) 1.30 Outstanding at March 31, 2018 22,447,225 $ 0.25 1.83 $ 26,926,862 Vested and deemed vested at March 31, 2018 12,229,135 $ 0.30 $ 14,435,999 Exercisable at March 31, 2018 9,692,428 $ 0.35 $ 10,693,296 During the three months ended March 31, 2018, the Company granted stock options to employees and consultants to purchase a total 906,272 shares of common stock for services rendered. The options have an average exercise price of $0.26 per share, expire in five years and vest on grant date or over a period of three years from grant date. Total fair value of these options at grant date was $164,165 using the Black-Scholes Option Pricing model with the following average assumptions: life of 5 years; risk free interest rate of 2.56%; volatility of 184% and dividend yield of 0%. The total stock compensation expense recognized relating to vesting of these stock options for the three months ended March 31, 2018 amounted to $1,341,207. As of March 31, 2018, total unrecognized stock-based compensation expense was $3,549,739 which is expected to be recognized as an operating expense through February 2021. The fair value of share option award is estimated using the Black-Scholes method based on the following weighted-average assumptions: 3 Months Ended March 31, 2018 2017 Risk-free interest rate 2.25% - 2.66 % 1.93 % Average expected term (years) 5 years 5 years Expected volatility 184.45 % 160 % Expected dividend yield - - The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based upon the Company’s current dividend rate and future expectations. Warrants The Company has the following warrants outstanding as of March 31, 2018 all of which are exercisable: Weighted- Weighted- Average Average Remaining Aggregate Exercise Contractual Intrinsic Warrants Price Life (Years) Value Outstanding at December 31, 2017 28,436,413 $ 0.13 2.79 $ - Granted 3,000,000 0.21 - - Forfeited (48,000 ) 0.10 - - Exercised (1,281,000 ) 0.17 - - Outstanding at March 31, 2018 30,107,413 $ 0.14 3.15 $ 39,553,468 Vested March 31, 2018 30,107,413 $ 39,553,468 Exercisable at March 31, 2018 30,107,413 $ 39,553,468 For the three months ended March 31, 2018, the Company issued warrants to note holders to purchase a total of 1,000,000 shares of common stock. The warrants are exercisable at an average price of $0.14 per share and will expire in January 2023. A total of 500,00 warrants issued were accounted as derivative liability (see Note 6). On February 21, 2018, the Company issued 2,000,000 warrants as part of the exercise of our put option with Kodiak. The exercise price of the 2,000,000 warrants is $0.25 per share and expire on February 20, 2023. During the three months ended March 31, 2018, a total of 1,281,000 warrants were exercised and converted into 1,011,856 common shares at a weighted average exercise price of $0.17. The Company received $22,000 upon exercise of the warrants. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 9. COMMITMENTS AND CONTINGENCIES Litigation We know of no material proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 10. SUBSEQUENT EVENTS Subsequent to March 31, 2018, the Company issued 1,050,000 common shares for net proceeds of $700,000. In addition, 41,667 shares of common stock that were subject to vesting schedules and previously accounted for were issued. On April 16, 2018, the Company and Kodiak Capital Group, LLC “Kodiak” agreed that all notes payable between the parties shall be deemed satisfied and cancelled. Further, all registered shares held by Kodiak shall be subject to the following amended more restrictive leak-out provision: the number of shares Kodiak may sell in any given week is hereby limited to not more than the greater of (a) 400,000 shares per week or (b) five percent of the prior week’s reported trading volume, proportionately adjusted for weeks with fewer than five trading days. On April 19, 2018, 487,620 options were exercised and converted into 487,620 common shares at $.07. The Company received $34,133 upon exercise of the options. On April 27, 2018, a total of 2,000,000 warrants were exercised in a cashless exercise in exchange for 1,884,869 common shares. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC. The condensed consolidated balance sheet as of December 31, 2017 included herein was derived from the audited consolidated financial statements as of that date. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of nFüsz, Inc., (formerly bBooth, Inc.) and Songstagram, Inc. (“Songstagram”) our wholly owned subsidiary. All intercompany transactions and balances have been eliminated in consolidation. |
Going Concern | Going Concern We have incurred operating losses since inception and have negative cash flows from operations. We had a stockholders’ deficit of $2,789,332 as of March 31, 2018, and incurred a net loss of $8,494,418 and utilized $991,923 of cash during the period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2017 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to obtain additional financing until we can generate sufficient cash flows from operations to meet our obligations. We intend to continue to seek additional debt or equity financing to continue our operations. There is no assurance that we will ever be profitable or that debt or equity financing will be available to us. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Significant estimates include assumptions made in valuing derivative liabilities, valuation of debt and equity instruments, share-based compensation arrangements and realization of deferred tax assets. Amounts could materially change in the future. |
Revenue Recognition | Revenue Recognition We generate substantially all of our revenue from subscription services, which are comprised of subscription fees from customer accounts. Subscription service arrangements are generally non-cancelable and do not provide for refunds to customers in the event of cancellations or any other right of return. We record revenue net of sales or excise taxes. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (ASC 606). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer. The Company adopted the guidance of ASC 606 on January 1, 2018. The implementation of ASC 606 had no impact on the prior period financial statements and no cumulative effect adjustment was recognized. |
Derivative Financial Instruments | Derivative Financial Instruments The Company evaluates its financial instruments 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 in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. The Company uses Level 2 inputs for its valuation methodology for the derivative liabilities as their fair values were determined by using a probability weighted average Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. |
Share Based Payment | Share Based Payments The Company issues stock options, common stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718 “Compensation – Stock Compensation.” Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. The Company accounts for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50 “ .” a b The Company values stock compensation based on the market price on the measurement date. As described above, for employees this is the date of grant, and for non-employees, this is the date of performance completion. The Company values stock options and warrants using the Black-Scholes option pricing model. |
Net Loss Per Share | Net Loss Per Share Basic net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental common shares issuable upon exercise of stock options. No dilutive potential common shares were included in the computation of diluted net loss per share because their impact was anti-dilutive. As of March 31, 2018, the Company had a total of 22,447,225 options and 30,107,413 warrants outstanding, and the potential issuance of approximately 11.2 million shares of common stock upon conversion of notes payable. These shares were excluded from the computation of net loss per share because they are anti-dilutive. As of March 31, 2017, the Company had total of 17,530,953 options and 18,455,264 warrants which were excluded from the computation of net loss per share because they are anti-dilutive. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (Topic 842). ASU 2016-02 requires a lessee to record a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, on the balance sheet for all leases with terms longer than 12 months, as well as the disclosure of key information about leasing arrangements. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. ASU 2016-02 requires classification of all cash payments within operating activities in the statement of cash flows. Disclosures are required to provide the amount, timing and uncertainty of cash flows arising from leases. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company has not yet evaluated the impact of the adoption of ASU 2016-02 on the Company’s financial statement presentation or disclosures. In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” (“ASU 2017-11”). ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered, and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common stockholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The guidance in ASU 2017-11 can be applied using a full or modified retrospective approach. The Company is currently evaluating the impact of the adoption of ASU 2017-11 on the Company’s financial statement presentation or disclosures. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consisted of the following as of March 31, 2018 and December 31, 2017. March 31, 2018 December 31, 2017 (Unaudited) Furniture and fixtures $ 56,890 $ 56,890 Office equipment 50,669 50,669 107,559 107,559 Less: accumulated depreciation (82,310 ) (77,005 ) $ 25,249 $ 30,554 |
Notes Payable - Related Parti20
Notes Payable - Related Parties (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable to Related Parties | The Company has the following related parties notes payable as of March 31, 2018 and December 31, 2017: Note Issuance Date Maturity Date Interest Rate Original Borrowing Balance at March 31, 2018 Balance at December 31, 2017 (Unaudited) Note 1 (A) December 1, 2015 August 1, 2018 12.0 % $ 1,203,242 $ 1,198,883 $ 1,198,883 Note 2 December 1, 2015 August 1, 2018 12.0 % 189,000 189,000 189,000 Note 3 (B) December 1, 2015 April 1, 2017 12.0 % 111,901 111,901 111,901 Note 4 (C) August 4, 2016 December 4, 2018 12.0 % 343,326 343,326 343,326 Note 5 August 4, 2016 December 4, 2018 12.0 % 121,875 121,875 121,875 Total notes payable – related parties, net $ 1,964,985 $ 1,964,985 (A) Per the terms of the agreement, at Mr. Cutaia’s discretion (majority stockholder and Chief Executive Officer (CEO)), he may convert up to $374,665 of outstanding principal, plus accrued interest thereon, into shares of common stock at a conversion rate of $0.07 per share. (B) As of March 31, 2018, and the date of this report, the note is past due. The Company is currently in negotiations with the note holder to settle the note payable. (C) A total of 30% of the note principal can be converted to shares of common stock at a conversion price $0.07 per share. |
Convertible Notes Payable (Tabl
Convertible Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Convertible Notes Payable | The Company has the following convertible notes payable as of March 31, 2018 and December 31, 2017: Note Note Date Maturity Date Interest Rate Original Borrowing Balance at March 31, 2018 Balance at December 31, 2017 (Unaudited) Note payable April 3, 2016 April 4, 2018 12 % $ 600,000 $ - $ 680,268 Note payable June and August 2017 February and March 2018 5 % $ 220,500 - 220,500 Note payable Various Various 5 % $ 320,000 - 320,000 Note payable December 8, 2017 December 8, 2018 8 % $ 370,000 - 370,000 Note payable December 13, 2017 September 20, 2018 8 % $ 105,000 - 105,000 Total notes payable - 1,695,768 Debt discount - (675,453 ) Total notes payable, net of debt discount $ - $ 680,268 |
Derivative Liability (Tables)
Derivative Liability (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Liability Using Weighted Average Black-Scholes-Merton Pricing Model | The derivative liabilities were valued using a probability weighted average Black-Scholes-Merton pricing model with the following average assumptions: March 31, 2018 Upon Issuance December 31, 2017 Stock Price $ 1.45 $ 0.10 $ 0.10 Exercise Price $ 0.13 $ 0.08 $ 0.06 Expected Life 4.75 2.33 1.26 Volatility 228 % 193 % 189 % Dividend Yield 0 % 0 % 0 % Risk Free Interest Rate 1.93 % 1.18 % 1.72 % Fair Value $ 1,735,354 $ 301,739 $ 1,250,581 |
Equity Transactions (Tables)
Equity Transactions (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Schedule of Stock Option Activity | A summary of option activity for the three months ended March 31, 2018 is presented below. Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in Years) Aggregate Intrinsic Value Outstanding at December 31, 2017 21,840,953 $ 0.33 1.21 Granted 906,272 0.26 Exercised - - Forfeited or expired (300,000 ) 1.30 Outstanding at March 31, 2018 22,447,225 $ 0.25 1.83 $ 26,926,862 Vested and deemed vested at March 31, 2018 12,229,135 $ 0.30 $ 14,435,999 Exercisable at March 31, 2018 9,692,428 $ 0.35 $ 10,693,296 |
Schedule of Fair Value Assumptions Using Black-Scholes Method | The fair value of share option award is estimated using the Black-Scholes method based on the following weighted-average assumptions: 3 Months Ended March 31, 2018 2017 Risk-free interest rate 2.25% - 2.66 % 1.93 % Average expected term (years) 5 years 5 years Expected volatility 184.45 % 160 % Expected dividend yield - - |
Schedule of Warrants Outstanding | The Company has the following warrants outstanding as of March 31, 2018 all of which are exercisable: Weighted- Weighted- Average Average Remaining Aggregate Exercise Contractual Intrinsic Warrants Price Life (Years) Value Outstanding at December 31, 2017 28,436,413 $ 0.13 2.79 $ - Granted 3,000,000 0.21 - - Forfeited (48,000 ) 0.10 - - Exercised (1,281,000 ) 0.17 - - Outstanding at March 31, 2018 30,107,413 $ 0.14 3.15 $ 39,553,468 Vested March 31, 2018 30,107,413 $ 39,553,468 Exercisable at March 31, 2018 30,107,413 $ 39,553,468 |
Summary of Significant Accoun24
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Stockholders' deficit | $ 2,789,332 | $ 5,789,037 | |
Net loss | 8,494,418 | $ 856,820 | |
Cash | $ 991,923 | ||
Outstanding Options [Member] | |||
Antidilutive securities | 22,447,225 | 17,530,953 | |
Outstanding Warrants [Member] | |||
Antidilutive securities | 30,107,413 | 18,455,264 | |
Common Stock Upon Conversion Of Notes Payable [Member] | |||
Antidilutive securities | 11,200,000 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 5,305 | $ 5,305 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 107,559 | $ 107,559 |
Less: accumulated depreciation | (82,310) | (77,005) |
Property and equipment, net | 25,249 | 30,554 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 56,890 | 56,890 |
Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 50,669 | $ 50,669 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | Jan. 29, 2018 | Mar. 20, 2017 | Mar. 21, 2015 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 |
Notes payable | $ 845,000 | $ 125,000 | ||||
Debt conversion amount | $ 125,000 | $ 2,277,299 | ||||
Debt conversion, shares issued | 1,250,000 | 1,026,195 | ||||
DelMorgan Group LLC [Member] | ||||||
Payment advanced by related party | $ 125,000 | |||||
Interest rate | 12.00% | |||||
Maturity date | Mar. 20, 2018 | |||||
Third - Party Lender [Member] | Extension Agreement [Member] | ||||||
Maturity date | Mar. 21, 2018 |
Notes Payable - Related Parti28
Notes Payable - Related Parties (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Debt Disclosure [Abstract] | ||
Interest expense for notes payable | $ 58,142 | $ 58,142 |
Notes Payable - Related Parti29
Notes Payable - Related Parties - Schedule of Notes Payable to Related Parties (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Dec. 31, 2017 | ||
Notes payable - related parties, net | $ 1,964,985 | $ 1,964,985 | |
Note 1 [Member] | |||
Issuance Date | [1] | Dec. 1, 2015 | |
Maturity Date | [1] | Aug. 1, 2018 | |
Interest Rate | [1] | 12.00% | |
Original Borrowing | [1] | $ 1,203,242 | |
Notes payable - related parties, net | [1] | $ 1,198,883 | 1,198,883 |
Note 2 [Member] | |||
Issuance Date | Dec. 1, 2015 | ||
Maturity Date | Aug. 1, 2018 | ||
Interest Rate | 12.00% | ||
Original Borrowing | $ 189,000 | ||
Notes payable - related parties, net | $ 189,000 | 189,000 | |
Note 3 [Member] | |||
Issuance Date | [2] | Dec. 1, 2015 | |
Maturity Date | [2] | Apr. 1, 2017 | |
Interest Rate | [2] | 12.00% | |
Original Borrowing | [2] | $ 111,901 | |
Notes payable - related parties, net | [2] | $ 111,901 | 111,901 |
Note 4 [Member] | |||
Issuance Date | [3] | Aug. 4, 2016 | |
Maturity Date | [3] | Dec. 4, 2018 | |
Interest Rate | [3] | 12.00% | |
Original Borrowing | [3] | $ 343,326 | |
Notes payable - related parties, net | [3] | $ 343,326 | 343,326 |
Note 5 [Member] | |||
Issuance Date | Aug. 4, 2016 | ||
Maturity Date | Dec. 4, 2018 | ||
Interest Rate | 12.00% | ||
Original Borrowing | $ 121,875 | ||
Notes payable - related parties, net | $ 121,875 | $ 121,875 | |
[1] | Per the terms of the agreement, at Mr. Cutaia's discretion (majority stockholder and Chief Executive Officer (CEO)), he may convert up to $374,665 of outstanding principal, plus accrued interest thereon, into shares of common stock at a conversion rate of $0.07 per share. | ||
[2] | As of March 31, 2018, and the date of this report, the note is past due. The Company is currently in negotiations with the note holder to settle the note payable. | ||
[3] | A total of 30% of the note principal can be converted to shares of common stock at a conversion price $0.07 per share. |
Notes Payable - Related Parti30
Notes Payable - Related Parties - Schedule of Notes Payable to Related Parties (Details) (Parenthetical) - USD ($) | Jan. 29, 2018 | Mar. 31, 2018 | Mar. 31, 2017 |
Debt conversion amount | $ 125,000 | $ 2,277,299 | |
Note 1 [Member] | Mr. Cutaia [Member] | |||
Debt conversion amount | $ 374,665 | ||
Debt conversion price per share | $ 0.07 | ||
Note 4 [Member] | |||
Debt conversion price per share | $ 0.07 | ||
Debt instrument, conversion percentage | 30.00% |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | ||||
Mar. 31, 2018 | Mar. 31, 2017 | Feb. 21, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Notes payable | $ 845,000 | $ 125,000 | |||
Fair value of derivatives | $ 48,961 | ||||
Number of warrant purchase shares | 500,000 | 2,000,000 | |||
Exercise price of warrants | $ 0.14 | $ 0.25 | |||
Number of common stock issued for accrued interest | $ 2,139,005 | ||||
Number of common stock shares issued, shares | 1,679,276 | ||||
Loss on debt extinguishment | $ (1,067,242) | $ (26,000) | |||
Interest expenses | $ 675,453 | ||||
Common Stock [Member] | |||||
Warrant term | 5 years | ||||
Number of warrant purchase shares | 1,000,000 | ||||
Exercise price of warrants | $ 0.14 | ||||
Common stock issued exceeded convertible notes and accrued | $ 1,641 | ||||
Convertible Note Payable [Member] | |||||
Outstanding balance of debt | $ 150,000 | 1,695,768 | $ 1,695,768 | ||
Interest rate | 8.00% | ||||
Maturity date | February 2018 through January 2019 | ||||
Notes payable | 1,695,768 | ||||
Unamortized debt discount | 675,453 | ||||
Exchange for cash | $ 130,000 | ||||
Fair value of derivatives | 150,000 | $ 252,778 | |||
Financing costs | 102,778 | ||||
Original issue discount | 20,000 | ||||
Common stock issued exceeded convertible notes and accrued | 1,679,276 | ||||
Loss on debt extinguishment | 1,090,056 | ||||
Interest expenses | $ 144,541 | $ 20,128 |
Convertible Notes Payable - Sch
Convertible Notes Payable - Schedule of Convertible Notes Payable (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Dec. 31, 2017 | ||
Note 1 [Member] | |||
Note Date | [1] | Dec. 1, 2015 | |
Maturity Date | [1] | Aug. 1, 2018 | |
Interest Rate | [1] | 12.00% | |
Original Borrowing | [1] | $ 1,203,242 | |
Note 2 [Member] | |||
Note Date | Dec. 1, 2015 | ||
Maturity Date | Aug. 1, 2018 | ||
Interest Rate | 12.00% | ||
Original Borrowing | $ 189,000 | ||
Note 3 [Member] | |||
Note Date | [2] | Dec. 1, 2015 | |
Maturity Date | [2] | Apr. 1, 2017 | |
Interest Rate | [2] | 12.00% | |
Original Borrowing | [2] | $ 111,901 | |
Note 4 [Member] | |||
Note Date | [3] | Aug. 4, 2016 | |
Maturity Date | [3] | Dec. 4, 2018 | |
Interest Rate | [3] | 12.00% | |
Original Borrowing | [3] | $ 343,326 | |
Note 5 [Member] | |||
Note Date | Aug. 4, 2016 | ||
Maturity Date | Dec. 4, 2018 | ||
Interest Rate | 12.00% | ||
Original Borrowing | $ 121,875 | ||
Convertible Notes Payable [Member] | |||
Total notes payable | $ 1,695,768 | ||
Debt discount | (675,453) | ||
Total notes payable, net of debt discount | 680,268 | ||
Convertible Notes Payable [Member] | Note 1 [Member] | |||
Note Date | Apr. 3, 2016 | ||
Maturity Date | Apr. 4, 2018 | ||
Interest Rate | 12.00% | ||
Original Borrowing | $ 600,000 | ||
Total notes payable | 680,268 | ||
Convertible Notes Payable [Member] | Note 2 [Member] | |||
Note Date Description | June and August 2017 | ||
Maturity Date, Description | February and March 2018 | ||
Interest Rate | 5.00% | ||
Original Borrowing | $ 220,500 | ||
Total notes payable | 220,500 | ||
Convertible Notes Payable [Member] | Note 3 [Member] | |||
Note Date Description | Various | ||
Maturity Date, Description | Various | ||
Interest Rate | 5.00% | ||
Original Borrowing | $ 320,000 | ||
Total notes payable | 320,000 | ||
Convertible Notes Payable [Member] | Note 4 [Member] | |||
Note Date | Dec. 8, 2017 | ||
Maturity Date | Dec. 8, 2018 | ||
Interest Rate | 8.00% | ||
Original Borrowing | $ 370,000 | ||
Total notes payable | 370,000 | ||
Convertible Notes Payable [Member] | Note 5 [Member] | |||
Note Date | Dec. 13, 2017 | ||
Maturity Date | Sep. 20, 2018 | ||
Interest Rate | 8.00% | ||
Original Borrowing | $ 105,000 | ||
Total notes payable | $ 105,000 | ||
[1] | Per the terms of the agreement, at Mr. Cutaia's discretion (majority stockholder and Chief Executive Officer (CEO)), he may convert up to $374,665 of outstanding principal, plus accrued interest thereon, into shares of common stock at a conversion rate of $0.07 per share. | ||
[2] | As of March 31, 2018, and the date of this report, the note is past due. The Company is currently in negotiations with the note holder to settle the note payable. | ||
[3] | A total of 30% of the note principal can be converted to shares of common stock at a conversion price $0.07 per share. |
Derivative Liability (Details N
Derivative Liability (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||
Derivative liability | $ 1,735,354 | $ 1,250,581 | |
Derivative liability from issuance of convertible debt and warrant | 301,739 | ||
Gain on derivative liability | 1,718,816 | ||
Adjustments to additional paid in capital, exercise of stock options | 723,072 | ||
Change in fair value of derivative liability | $ (2,624,887) |
Derivative Liability - Schedule
Derivative Liability - Schedule of Derivative Liability Using Weighted Average Black-Scholes-Merton Pricing Model (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
Stock Price | $ 1.45 | |
Exercise Price | $ 0.13 | |
Expected Life | 4 years 9 months | |
Volatility | 228.00% | |
Dividend Yield | 0.00% | |
Risk Free Interest Rate | 1.93% | |
Fair Value | $ 1,735,354 | |
Upon Issuance [Member] | ||
Stock Price | $ 0.10 | |
Exercise Price | $ 0.08 | |
Expected Life | 2 years 3 months 29 days | |
Volatility | 193.00% | |
Dividend Yield | 0.00% | |
Risk Free Interest Rate | 1.18% | |
Fair Value | $ 301,739 | |
Derivative Liability [Member] | ||
Stock Price | $ 0.10 | |
Exercise Price | $ 0.06 | |
Expected Life | 1 year 3 months 4 days | |
Volatility | 189.00% | |
Dividend Yield | 0.00% | |
Risk Free Interest Rate | 1.72% | |
Fair Value | $ 1,250,581 |
Equity Transactions (Details Na
Equity Transactions (Details Narrative) - USD ($) | Mar. 28, 2018 | Feb. 21, 2018 | Jan. 29, 2018 | Feb. 28, 2018 | Jan. 31, 2018 | Mar. 31, 2018 |
Number of common stock shares issued for service, value | $ 3,269,747 | |||||
Number of common stock shares issued, shares | 1,679,276 | |||||
Number of common stock shares issued, value | $ 2,278,500 | |||||
Number of common stock shares issued upon conversion | 1,250,000 | 1,026,195 | ||||
Number of common stock shares issued upon conversion, amount | $ 2,139,005 | |||||
Shares issued upon exercise of put option | ||||||
Shares issued upon exercise of put option, value | $ 1,000,000 | |||||
Warrants to purchase shares of common stock | 2,000,000 | 500,000 | ||||
Warrant exercise price per share | $ 0.25 | $ 0.14 | ||||
Conversion of stock, shares converted | 1,011,856 | |||||
Number of warrants exercised | 1,281,000 | |||||
Number of stock options granted | 906,272 | |||||
Exercise price of common stock granted | $ 0.26 | |||||
Fair value of stock options grants | $ 164,165 | |||||
Expected term | 5 years | |||||
Risk free interest rate | 2.56% | |||||
Volatility rate | 184.00% | |||||
Dividend yield | 0.00% | |||||
Expense recognized relating to stock options | $ 1,340,207 | |||||
Unrecognized stock based compensation expense | $ 3,549,739 | |||||
Warrants expire date | Feb. 20, 2023 | |||||
Warrants issued for derivative liability | 50,000 | |||||
Weighted average exercise price of warrants | $ 0.17 | |||||
Exercise of warrants | $ 22,000 | |||||
Warrants [Member] | ||||||
Shares issued upon exercise of put option | 1,281,000 | |||||
Shares issued upon exercise of put option, value | $ 22,000 | |||||
Number of cashless warrants exercised during period | 1,011,856 | |||||
Weighted average exercise price of warrants | $ 0.21 | |||||
Employees and Vendors [Member] | ||||||
Number of common stock shares issued for service | 4,748,514 | |||||
Number of common stock shares issued for service, value | $ 3,269,747 | |||||
Officers and Directors [Member] | ||||||
Number of common stock shares issued for service | 4,500,000 | |||||
Number of common stock shares issued for service, value | $ 1,539,000 | |||||
Investor [Member] | ||||||
Number of common stock shares issued, shares | 16,409,067 | |||||
Number of common stock shares issued, value | $ 2,278,500 | |||||
Note Holder [Member] | ||||||
Number of common stock shares issued upon conversion | 7,383,006 | |||||
Number of common stock shares issued upon conversion, amount | $ 1,187,243 | |||||
Warrants to purchase shares of common stock | 1,000,000 | |||||
Warrant exercise price per share | $ 0.14 | |||||
Warrants expire date | Jan. 31, 2023 | |||||
Kodiak [Member] | ||||||
Shares issued upon exercise of put option | 3,048,105 | 3,048,105 | ||||
Shares issued upon exercise of put option, value | $ 1,000,000 | $ 1,000,000 | ||||
Warrants to purchase shares of common stock | 2,000,000 | |||||
Warrant exercise price per share | $ 0.25 | |||||
CEO [Member] | ||||||
Conversion of stock, amount converted | $ 582,333 | |||||
Conversion of stock, shares converted | 407,226 | |||||
Fair value of shares issued | $ 582,333 |
Equity Transactions - Schedule
Equity Transactions - Schedule of Stock Option Activity (Details) | 3 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Equity [Abstract] | |
Number of options outstanding beginning balance | shares | 21,840,953 |
Number of options granted | shares | 906,272 |
Number of options exercised | shares | |
Number of options forfeited or expired | shares | (300,000) |
Number of options outstanding ending balance | shares | 22,447,225 |
Number of options vested and expected to vest | shares | 12,229,135 |
Number of options exercisable | shares | 9,692,428 |
Weighted average exercise price outstanding beginning balance | $ 0.33 |
Weighted average exercise price granted | 0.26 |
Weighted average exercise price exercised | |
Weighted average exercise price forfeited or expired | 1.30 |
Weighted average exercise price outstanding ending balance | 0.25 |
Weighted average exercise price vested and expected to vest | 0.30 |
Weighted average exercise price exercisable | $ 0.35 |
Weighted average remaining contractual term outstanding | 1 year 2 months 16 days |
Weighted average remaining contractual term outstanding | 1 year 9 months 29 days |
Aggregate intrinsic value outstanding beginning balance | $ | |
Aggregate intrinsic value granted | |
Aggregate intrinsic value forfeited | |
Aggregate intrinsic value exercised | $ | |
Aggregate intrinsic value outstanding ending balance | $ | 26,926,862 |
Aggregate intrinsic value vested and expected to vest | $ | 14,435,999 |
Aggregate intrinsic value exercisable | $ | $ 10,693,296 |
Equity Transaction - Schedule o
Equity Transaction - Schedule of Fair Value Assumptions Using Black-Scholes Method (Details) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Risk-free interest rate | 1.93% | |
Expected term (years) | 5 years | 5 years |
Expected volatility | 184.45% | 160.00% |
Expected dividend yield | ||
Minimum [Member] | ||
Risk-free interest rate | 2.25% | |
Maximum [Member] | ||
Risk-free interest rate | 2.66% |
Equity Transaction - Schedule38
Equity Transaction - Schedule of Warrants Outstanding (Details) | 3 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Weighted average exercise price granted | $ / shares | $ 0.17 |
Warrants [Member] | |
Number of Warrants outstanding beginning balance | shares | 28,436,413 |
Number of Warrants granted | shares | 3,000,000 |
Number of Warrants forfeited | shares | (48,000) |
Number of Warrants exercised | shares | (1,281,000) |
Number of Warrants outstanding ending balance | shares | 30,107,413 |
Number of Warrants vested | shares | 30,107,413 |
Number of Warrants exercisable | shares | 30,107,413 |
Weighted average exercise price outstanding beginning balance | $ / shares | $ 0.13 |
Weighted average exercise price granted | $ / shares | 0.21 |
Weighted average exercise price forfeited | $ / shares | 0.10 |
Weighted average exercise price exercised | $ / shares | 0.17 |
Weighted average exercise price outstanding ending balance | $ / shares | $ 0.14 |
Weighted average remaining contractual term outstanding | 2 years 9 months 14 days |
Weighted average remaining contractual term outstanding | 3 years 1 month 24 days |
Aggregate intrinsic value outstanding beginning balance | $ | |
Aggregate intrinsic value granted | $ | |
Aggregate intrinsic value exercised | $ | |
Aggregate intrinsic value forfeited | $ | |
Aggregate intrinsic value outstanding ending balance | $ | 39,553,468 |
Aggregate intrinsic value vested | $ | 39,553,468 |
Aggregate intrinsic value exercisable | $ | $ 39,553,468 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Apr. 19, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Apr. 27, 2018 | Feb. 21, 2018 |
Number of common stock shares issued, shares | 1,679,276 | ||||
Proceeds from issuance of common stock | $ 2,278,500 | $ 170,000 | |||
Number of options exercised | |||||
Exercise price | |||||
Warrants exercised | $ 0.14 | $ 0.25 | |||
Common Stock [Member] | |||||
Number of common stock shares issued, shares | 16,409,067 | ||||
Number of options exercised | 3,048,105 | ||||
Warrants exercised | $ 0.14 | ||||
Subsequent Event [Member] | |||||
Number of common stock shares issued, shares | 1,050,000 | ||||
Proceeds from issuance of common stock | $ 700,000 | ||||
Number of shares subject to vest that was previously issued | 41,667 | ||||
Warrants exercised | $ 2,000,000 | ||||
Subsequent Event [Member] | Common Stock [Member] | |||||
Number of options exercised | 487,620 | ||||
Exercise price | $ 0.07 | ||||
Proceeds from exerciseof options | $ 34,133 | ||||
Warrants exercised | $ 1,884,869 |