Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 29, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | Dthera Sciences | ||
Entity Central Index Key | 1,586,372 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | Yes | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 96,304,827 | ||
Entity Common Stock, Shares Outstanding | 50,343,367 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS | ||
Cash | $ 323,483 | $ 12,191 |
Prepaid expenses | 95,176 | 0 |
Deposits | 2,500 | 1,000 |
TOTAL CURRENT ASSETS | 421,159 | 13,191 |
LONG TERM ASSETS | ||
Property and equipment, net | 77,365 | 914 |
TOTAL LONG TERM ASSETS | 77,365 | 914 |
TOTAL ASSETS | 498,524 | 14,105 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 429,015 | 272,079 |
Deferred revenues | 1,800 | 0 |
Derivative liabilities | 0 | 234,502 |
Notes payable | 0 | 20,000 |
Related party advances | 7,457 | 0 |
Convertible notes payable, net | 0 | 67,345 |
TOTAL CURRENT LIABILITIES | 438,272 | 593,926 |
TOTAL LIABILITIES | 438,272 | 593,926 |
Preferred stock, 20,000,000 shares authorized. $0.001 par value; redeemable preferred stock series A, 150,000 designated; $0.0001 par value; 0 and 112,690 shares issued and outstanding as at December 31, 2017 and 2016, respectively | 0 | 11 |
STOCKHOLDERS' EQUITY (DEFICIT) | ||
Common stock 600,000,000 shares authorized; $0.001 par value; 47,043,304 and 12,060,395 shares issued and outstanding as of December 31, 2017 and 2016, respectively | 47,043 | 12,060 |
Additional paid in capital | 4,550,156 | 1,386,508 |
Accumulated deficit | (4,536,947) | (1,978,400) |
Total Stockholders' Deficit | 60,252 | (579,832) |
Total Liabilities and Stockholders' Deficit | $ 498,524 | $ 14,105 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Preferred stock, par value | $ 0.001 | $ .0001 |
Preferred stock, authorized/designated | 20,000,000 | 1,000,000 |
Common stock Par value | $ 0.001 | $ 0.001 |
Common stock, Authorized | 600,000,000 | 66,666,667 |
Common stock, Issued | 47,043,304 | 12,060,395 |
Common stock, outstanding | 47,043,304 | 12,060,395 |
Redeemable Preferred Stock [Member] | ||
Preferred stock, authorized/designated | 150,000 | 150,000 |
Preferred stock, shares issued | 112,690 | 112,690 |
Preferred stock, shares outstanding | 112,690 | 112,690 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
REVENUES | ||
Sales | $ 0 | $ 0 |
Cost of services | 0 | 0 |
GROSS PROFIT | 0 | 0 |
OPERATING EXPENSES | ||
Depreciation | 1,165 | 6,159 |
General and administrative | 1,809,076 | 690,248 |
Professional fees | 613,705 | 343,694 |
TOTAL OPERATING EXPENSES | 2,423,946 | 1,040,101 |
OPERATING LOSS | (2,423,946) | (1,040,101) |
OTHER INCOME (EXPENSES) | ||
Interest expense | (185,843) | (126,115) |
Derivative expense | 0 | (37,616) |
Gain on derivative liability | 142,835 | 33,114 |
Gain (loss) on extinguishment of debt | (91,593) | 34,874 |
Impairment of intangible assets | 0 | (58,960) |
TOTAL OTHER INCOME (EXPENSES) | (134,601) | (154,703) |
NET LOSS | $ (2,558,547) | $ (1,194,804) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic and diluted | 25,849,547 | 7,922,544 |
Loss per common share - Basic and diluted | $ (0.10) | $ (0.14) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Deficit - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2015 | 0 | 4,784,392 | |||
Beginning balance, value at Dec. 31, 2015 | $ 0 | $ 4,784 | $ 82,709 | $ (783,596) | $ (696,103) |
Common stock issued for cash, shares | 104,833 | ||||
Common stock issued for cash, value | $ 105 | 62,795 | 62,900 | ||
Common stock issued for services, shares | 146,121 | ||||
Common stock issued for services, value | $ 146 | 41,729 | 41,875 | ||
Common stock issued for patent, shares | 205,378 | ||||
Common stock issued for patent, value | $ 205 | 58,755 | 58,960 | ||
Common stock issued for conversion of debt, shares | 1,462,999 | ||||
Common stock issued for conversion of debt, value | $ 1,463 | 728,711 | 730,174 | ||
Common stock issued in lieu of interest, shares | 23,338 | ||||
Common stock issued in lieu of interest, value | $ 23 | 6,677 | 6,700 | ||
Preferred stock issued for conversion of debt, shares | 112,690 | ||||
Preferred stock issued for conversion of debt, value | $ 11 | 112,679 | 112,690 | ||
Fair value of options vested | 241,433 | 241,433 | |||
Common stock issued for merger agreement, shares | 5,333,334 | ||||
Common stock issued for merger agreement, value | $ 5,335 | 51,020 | 56,354 | ||
Net loss | (1,194,804) | (1,194,804) | |||
Ending balance, shares at Dec. 31, 2016 | 112,690 | 12,060,395 | |||
Ending balance, value at Dec. 31, 2016 | $ 11 | $ 12,060 | 1,386,508 | (1,978,400) | (579,832) |
Redemption of preferred stock for cash, shares | (112,690) | ||||
Redemption of preferred stock for cash, value | $ (11) | (112,679) | (112,690) | ||
Common stock issued for cash, shares | 34,955,141 | ||||
Common stock issued for cash, value | $ 34,955 | 2,900,297 | 2,935,252 | ||
Common stock issued in extinguishment of debt, shares | 27,768 | ||||
Common stock issued in extinguishment of debt, value | $ 28 | 183,241 | 183,269 | ||
Fair value of options vested | 192,789 | 192,789 | |||
Net loss | (2,558,547) | (2,558,547) | |||
Ending balance, shares at Dec. 31, 2017 | 0 | 47,043,304 | |||
Ending balance, value at Dec. 31, 2017 | $ 0 | $ 47,043 | $ 4,550,156 | $ (4,536,947) | $ 60,252 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (2,558,547) | $ (1,194,804) |
Adjustments for non-cash items: | ||
Depreciation | 1,165 | 734 |
Amortization of debt discount | 172,655 | 72,771 |
Impairment of intangible assets | 0 | 58,960 |
Stock issued for services | 0 | 16,750 |
(Gain)/Loss on extinguishment of debt | 91,593 | (34,874) |
Gain on derivative liability | (142,835) | (33,114) |
Initial derivative expense | 0 | 37,616 |
Fair value of options vested | 192,789 | 241,433 |
Operating expense paid in behalf of the company | 46,618 | 20,627 |
Changes in operating assets and liabilities: | ||
Prepaid expenses | (95,176) | 21,390 |
Deposits | (1,500) | 0 |
Accounts payable and accrued liabilities | 156,945 | 291,891 |
Deferred revenue | 1,800 | 58,773 |
NET CASH USED IN OPERATING ACTIVITIES | (2,134,493) | (441,847) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (77,616) | 0 |
NET CASH USED IN INVESTING ACTIVITIES | (77,616) | 0 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of common stock | 2,935,252 | 62,900 |
Proceeds from issuance of notes payable, related parties | 0 | 94,000 |
Proceeds from issuance of notes payable | 50,000 | 20,000 |
Payments on notes payable | (70,000) | 0 |
Proceeds from issuance of convertible notes payable | 0 | 330,000 |
Payments on notes payable, related parties | 0 | (80,100) |
Payments on related party advances | (39,161) | 0 |
Payments on convertible notes payable | (240,000) | 0 |
Redemption of series A preferred stock | (112,690) | 0 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 2,523,401 | 426,800 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 311,292 | (15,047) |
CASH AND CASH EQUIVALENTS - Beginning of period | 12,191 | 27,238 |
CASH AND CASH EQUIVALENTS - End of period | 323,483 | 12,191 |
Cash paid for interest | 19,890 | 0 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Common stock issued for assets | 0 | 58,960 |
Common stock issued for interest | 0 | 6,700 |
Preferred shares issued for debt | 0 | 112,690 |
Shares issued in settlement of debt | 0 | 731,391 |
Assets & liabilities settled in share exchange | 0 | 56,355 |
Debt discount on convertible debt | 0 | 240,000 |
Common stock issued in extinguishment of debt | $ 183,260 | $ 0 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Description of Business Dthera Sciences (formerly Knowledge Machine International, Inc.) is a Nevada corporation. The Company, based in San Diego, CA, is a digital therapeutics company focused on developing innovative quality of life therapies for the elderly and those suffering from cognitive decline. The Company’s lead product, ReminX, is an artificial-intelligence-powered consumer health product designed to digitally deliver reminiscence therapy to individuals suffering from neurodegenerative diseases such as Dementia and Alzheimer’s disease, as well as seniors experiencing limited social interaction with others (“Social Isolation”). Additional products are under development that are expected to directly target the symptoms of Alzheimer’s disease and other dementias, such as anxiety, depression, and cognitive decline, and for which Company may seek FDA clearance or approval as well as reimbursement. The Company was incorporated in the State of Nevada on December 27, 2012, to engage in the distribution of high end edged tools produced outside the United States. On October 22, 2014, we acquired an operating subsidiary, Knowledge Machine, Inc., a Nevada corporation, (“Knowledge Machine”), which focused on new technologies, acquiring licensing rights to those technologies, and marketing the licensed technologies, and the Company sold off its edged tools business. Subsequently, on September 21, 2016, the Company acquired a new operating subsidiary, EveryStory, Inc., a Delaware corporation (“EveryStory”). In connection with the EveryStory transaction, the Company dissolved the Knowledge Machine subsidiary, terminated the technology licensing and marketing operations, and changed the Company’s name to Dthera Sciences. Effective July 25, 2017, a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-3 (one share of new common stock for each three shares of old common stock) (the “Reverse Split”), took effect in the market, following a filing of a Certificate of Change with the State of Nevada and authorization from the Financial Industry Regulatory Authority (“FINRA”). Effective October 17, 2017, the Company filed its Certificate of Amendment (the “Amendment”) with the Secretary of State of Nevada to increase authorized common shares from 66,666,667 shares to 600,000,000 shares, and to increase the authorized preferred stock from 1,000,000 to 20,000,000 shares. Effective October 17, 2017, the Company filed its Certificate of Amendment (the “Amendment”) with the Secretary of State of Nevada to increase authorized common shares from 66,666,667 shares to 600,000,000 shares, and to increase the authorized preferred stock from 1,000,000 to 20,000,000 shares. Accounting Basis The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company has a December 31 fiscal year end. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates are made in relation to the allowance for doubtful accounts and the fair value of certain financial instruments. Principles of Consolidation The consolidated financial statements include the accounts of Dthera Sciences and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. Cash and Cash Equivalents Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less. As of December 31, 2017 and 2016, the Company’s cash balances were within the FDIC insurance coverage limits. 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 Company's 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 Company's 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 and non-employee stock options, at fair value, on a recurring basis under level 2. Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under Accounting Standards Codification 815, Derivatives and Hedging Debt with Conversion and Other Options 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 options and convertible debt, 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 convertible debt with embedded derivatives, the Company uses the Binomial Lattice model to value the embedded derivatives. Debt Issuance Costs and Debt Discount The Company may record debt issuance 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. 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. Concentration of Risk Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash. Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States. The Company occasionally maintains amounts on deposit with a financial institution that are in excess of the federally insured limits. The risk is managed by maintaining all deposits in high quality financial institutions. For the year ended December 31, 2017 and 2016, there were no customers that accounted for a material portion of total revenues. Property and Equipment Property and equipment is recorded at cost less accumulated depreciation. Depreciation and amortization is calculated using the straight-line method over the expected useful life of the asset, after the asset is placed in service. The Company generally uses the following depreciable lives for its major classifications of property and equipment: Description Useful Lives Office Equipment and Computers 2 to 3 years Expenditures associated with upgrades and enhancements that improve, add functionality, or otherwise extend the life of property and equipment are capitalized, while expenditures that do not, such as repairs and maintenance, are expensed as incurred. Valuation of Long-Lived Assets Long-lived tangible assets and definite-lived intangible assets are reviewed for possible impairment annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses both an estimate of undiscounted future net cash flows of the assets over the remaining useful lives and a replacement cost method when determining their fair values. If the carrying values of the assets exceed the fair value of the assets, the Company recognizes an impairment loss equal to the difference between the carrying values of the assets and their fair values. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets. The evaluation of long-lived assets requires the Company to use estimates of future cash flows. However, actual cash flows may differ from the estimated future cash flows used in these impairment tests. Revenue Recognition The Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered to the customer, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. Where arrangements have multiple elements, revenue is allocated to the elements based on the relative selling price method and revenue is recognized based on the Company’s policy for each respective element. Software Development The Company accounts for internal use software development costs in accordance with authoritative guidance related to accounting for the costs of app and web software developed or obtained for internal use. Software development costs that are incurred in the preliminary development stage are expensed as incurred. Once certain criteria have been met (“application development stage”), direct costs incurred in developing or obtaining computer software are capitalized. Costs in the post-implementation/operation stage, including costs related to training and software maintenance, are expensed as incurred. Research and Development The Company engages in new software development efforts. Research and development expenses relating to possible future software are expensed as incurred. Research and development expenses were approximately $0 for the years ended December 31, 2017 and 2016. Advertising Expenses The Company expenses advertising costs as incurred. Advertising may consist of media or online advertising and marketing. As such, advertising expenses were approximately $395,446 and $86,037 for the years ended December 31, 2017 and 2016, respectively. Stock-Based Compensation The Company accounts for share based payments in accordance with ASC 718, Compensation - Stock Compensation Measurement Objective – Fair Value at Grant Date Compensation cost is recognized over the requisite service period, which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock. ASC 505, Compensation-Stock Compensation Loss Per Common Share Basic loss per Common Share is computed by dividing losses attributable to Common shareholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted loss per Common Share is computed by dividing loss attributable to Common shareholders by the weighted-average number of Shares of Common Stock outstanding during the period increased to include the number of additional Shares of Common Stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding convertible Preferred Stock, stock options, warrants, and convertible debt. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s Common Stock can result in a greater dilutive effect from potentially dilutive securities. For the years ended December 31, 2017 and 2016, all of the Company’s potentially dilutive securities (options and convertible debt) were excluded from the computation of diluted earnings per share as they were anti-dilutive. The total number of potentially dilutive Common Shares that were excluded were 6,883,388 and 1,198,733 at the years ended December 31, 2017 and 2016, respectively. Income Taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. The Company follows ASC 740 Income Taxes The Company’s policy is to recognize both interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties on unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest and penalties since its inception. The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The tax years for 2013 to 2017 remain open for federal and/or state tax jurisdictions. The Company is currently not under examination by any other tax jurisdictions for any tax years. Recent Accounting Pronouncements Management has considered all other recent accounting pronouncements issued since the last audit of the Company’s consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements. |
2. Going Concern
2. Going Concern | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | The Company’s consolidated financial statements are presented on the accrual basis of accounting and accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has sustained substantial losses from operations since commencement of operations and at December 31, 2017, the Company had an accumulated deficit of $4,536,947 and a working capital deficit of $17,113, and no revenues to cover its operating costs. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. As of the date of this Report, the Company had not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The future of the Company as an operating business will depend on its ability to (1) obtain sufficient capital contributions and/or financing as may be required to sustain its operations, and (2) to achieve adequate revenues from its operations. Management's plan to address these issues includes, (a) continued exercise of tight cost controls to conserve cash, (b) obtaining additional financing, (c) placing revenue producing services into place, and (d) identifying and executing on additional revenue generating opportunities. There is a risk that the Company will be unable to achieve the above results or obtain adequate financing on terms considered satisfactory to the Company, or at all. |
3. Property and Equipment
3. Property and Equipment | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | The Company’s property and equipment were comprised of the following as of December 31, 2017 and 2016: December 31, December 31, Computer and Equipment 10,237 2,816 Assets Used to Fulfill Contract Obligations 70,195 – Less: Accumulated Depreciation (3,067 ) (1,902 ) Net Property and Equipment $ 77,365 $ 914 |
4. Loans Payable
4. Loans Payable | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Loans Payable | Related Party Advances Notes payable due to related parties consisted of the following as of December 31, 2017 and 2016: Balance December 31, 2016 $ – Cash additions – Expense additions 46,618 Cash payments (39,161 ) Balance December 31, 2017 $ 7,457 In 2017, the Company’s CEO had expense additions of $46,618, and was repaid $39,161. Notes Payable Notes payable consisted of the following as of December 31, 2017 and 2016: Balance December 31, 2016 $ 20,000 Cash additions 50,000 Expense additions – Cash payments (70,000 ) Balance December 31, 2017 $ – On August 3, 2016, the Company entered into a promissory note purchase agreement with an unrelated individual for $20,000. This note was due on demand. On April 13, 2017, the Company repaid the balance in full. On February 3, 2017, the Company issued a short-term note to an unrelated third-party individual for $50,000 due on demand. The note bore an interest rate of 10% per annum interest within the 90-day period and would increase to 20% interest if not fully paid back within 90 days. On April 9, 2017, the Company repaid the balance in full. Convertible Notes Payable Notes payable due to non-related parties consisted of the following as of December 31, 2017, and December 31, 2016: Balance December 31, 2016, net of discount $ 67,345 Conversions – Cash payments (240,000 ) Amortization of debt discount 172,655 Balance December 31, 2017 $ – Effective September 22, 2016, the Company conducted a private offering of convertible notes (the “Note Offering”) to raise additional capital that would remain in the Company following the Closing of the EveryStory Transaction. In the convertible note offering, the Company raised an aggregate of $240,000, which was to be a component of the post-Closing capitalization of the Company. In the Note Offering, investors entered into a securities purchase agreement (the “Note SPA”) and were issued a convertible redeemable promissory note (collectively, the “Convertible Notes”). Pursuant to the terms of the Note SPA, each investor represented and warranted that it was an accredited investor and that he or she was purchasing the Convertible Notes for his or her own account, and not with a view to distribution, as well as other standard representations made in private transactions. Also pursuant to the Note SPA, the Company had the right to put an additional Convertible Note (in the same principal amount as purchased by the applicable investor) beginning on January 3, 2017, subject to certain conditions. The Convertible Notes bore interest at a rate of 10%, and were to mature on September 13, 2017, if not converted or prepaid prior to that. The Convertible Notes could convert into shares of the Company's common stock at a price for each share of Common Stock equal to 65% of the lowest closing bid price of the Common Stock as reported on the OTC Market platform on which the Company’s shares are quoted or any exchange upon which the Common Stock may be traded in the future ("Exchange"), on the date of the closing of the EveryStory Transaction. Up to 50% of the Convertible Notes could be repaid by the Company any time prior to 180 days after the issuance of the Convertible Notes, with a 30% premium to be paid in connection with the prepayment. As a result of this transaction a debt discount of $240,000 was recorded against the note. As of December 31, 2017, interest expense of $172,655 was recorded as part of the amortization of the debt discount, leaving a debt discount balance of $0 at December 31, 2017. In March 2017, the Company modified the interest rate on the Convertible Notes to 15% per annum and repaid the Convertible Notes in the original principal amount of $240,000. In connection with the repayment of the Convertible Notes, the Company repaid a total of $240,000 in principal and $18,000 in interest, and agreed to issue 83,300 pre-split/27,768 post-split shares of the Company’s common stock to the holders of the Convertible Notes. The shares of common stock were issued pursuant to Section 4(a)(2) of the Securities Act of 1933 and regulations promulgated thereunder. Each of the holders of the Convertible Notes represented to the Company that it was an accredited investor, that it was acquiring the shares for its own account and for investment purposes, and not with an intent to distribute. The Company evaluated the amendment under ASC 470-50, Debt - Modification and Extinguishment |
5. Derivative Liabilities
5. Derivative Liabilities | 12 Months Ended |
Dec. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Liabilities | The Company evaluates its fair value hierarchy disclosures each quarter. The Company has convertible notes with embedded conversion features, which is accounted for as a derivative liability and measured at fair value on a recurring basis. At December 31, 2017, this derivative liability had an estimated fair value of $0. The following table presents information about the derivative liability, which was our only financial instrument measured at fair value on a recurring basis using significant inputs other than level one inputs that are either directly or indirectly observable (Level 3) as of December 31, 2017: Balance at December 31, 2016 $ 234,502 Conversion (91,667 ) Change in Fair Value of Derivative (142,835 ) Balance at December 31, 2017 $ – The fair value of this derivative liability was calculated using the multinomial lattice models that value the derivative liability within the notes based on a probability weighted discounted cash flow model. These models are based on future projections of the various potential outcomes. The features in the notes that were analyzed and incorporated into the model included the conversion feature with the reset provisions; redemption provisions; and the default provisions. Assumptions used to calculate the fair value of the derivative liability were as follows: December 31, 2017 Expected term in years 0.51 years Risk-free interest rates 0.89% Volatility 48.05% Dividend yield 0% In addition to the assumptions above, the Company also takes into consideration whether or not the Company would participate in another round of financing, if that financing is registered or not, and what that stock price would be for the financing at that time. The Company notes that the notes have matured, and that the Company is no longer calculating a derivative value for these notes. |
6. Preferred Stock
6. Preferred Stock | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Preferred Stock | The Company has authorized 20,000,000 Preferred Stock, of which it has designated 150,000 shares of $0.0001 par value per share Series A Redeemable Preferred Stock (“Series A Preferred Stock”). The Series A Preferred Stock has a stated value of $1.00 per share, of which 0 and 112,690 shares were issued and outstanding as of December 31, 2017 and 2016, respectively. During the year ended December 31, 2017, the Company redeemed 112,690 shares of Series A Preferred Stock with a stated value of $1.00 per share for $112,690. Series A Redeemable Preferred Stock The Series A Preferred Stock have the following rights and preferences: · Redeemable at any time at the option of the holder for cash on a dollar-per-dollar basis at a redemption of $1.00 per share. · Convertible into shares of Common Stock using a conversion price of $0.10 per share. · No general voting rights until converted into Common Stock. · Entitled to receive dividends at a rate per annum of 8%. · Liquidation preference upon a liquidation event. On October 17, 2017, the Company filed a Certificate of Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State of Nevada to increase authorized preferred stock from 1,000,000 to 20,000,000 shares. |
7. Common Stock
7. Common Stock | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Common Stock | As of December 31, 2017, the Company was authorized to issue 600,000,000 shares of $0.001 par value per share Common Stock, of which 47,043,268 and 12,060,367 shares were issued outstanding as of December 31, 2017 and 2016, respectively. On October 17, 2017, the Company filed the Amendment with the Secretary of State of Nevada, which also increased the authorized common shares from 66,666,667 shares to 600,000,000 shares. Year Ended December 31, 2017 The Company conducted three private offerings which closed during the year ended December 31, 2017 as summarized below. Investor Offering The first private offering was offered to investors (the “Investor Offering”), in which the Company sold units (the “Units”) which consisted of four (4) shares of the Company’s common stock and warrants to purchase one (1) additional share of common stock. The per Unit price was $0.12, and the exercise price for the warrants is $0.45. The warrants cannot be exercised until two years from the purchase date (subject to certain conditions), and expire four years after the purchase date. As of the closing of the Investor Offering, the Company had sold an aggregate of 26,215,499 post-split shares of its common stock in the Investor Offering and issued warrants to purchase an additional 6,553,860 post-split shares of its common stock. Employee/Consultant Offering The second private offering was offered to employees and consultants of the Company (the “Employee Offering”), in which the Company sold shares of its common stock at a purchase price of $0.03 per share, the same price as in the Investor Offering; however, there were no warrants in the Employee Offering. The shares sold in the Employee Offering include restrictions on their resale, and the Company reserved the right to repurchase the shares (the “Repurchase Right”) on terms as agreed between the Company and the employee or consultant. Per the Employee and Consultant Share Purchase Agreement, the Company’s Repurchase Rights will terminate (subject to certain conditions) following a term of not less than 5 months or more than 36 months from the purchase date. As of the date of the closing of the Employee Offering, the Company had sold an aggregate of 5,201,333 shares of its common stock in the Employee Offering. The aggregate amount raised by the Company in the Investor Offering and the Employee Offering as of the closing of the two offerings was $942,502. The foregoing summary of the terms and conditions of the Employee Offering does not purport to be complete, and is qualified in its entirety by reference to the full text of the Employee and Consultant Share Purchase Agreement which was filed as an exhibit to a Current Report on Form 8-K filed on July 25, 2017. The securities offered and sold and to be sold by the Company in the Investor Offering and the Employee Offering were not and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Investor Offering and the Employee Offering were made in reliance on the private offering exemption of Section 4(a)(2) of the Securities Act and/or the private offering safe harbor provisions of Rule 506 of Regulation D based on the following factors: (i) the number of offerees or purchasers, as applicable, (ii) the absence of general solicitation, (iii) investment representations obtained from the security holders in each of the transactions, (iv) the provision of appropriate disclosure, and (v) the placement of restrictive legends on the certificates reflecting the securities. Prior Private Offering Also, during year ended December 31, 2017, pursuant to another private placement offering conducted and closed earlier in the calendar year (the “Prior Private Offering”). The Company issued 2,342,924 post-split shares of common stock for gross proceeds of $1,215,750. On March 10, 2017, the Company issued 83,300 pre-split shares/27,768 post-split shares of the Company’s common stock to the holders of the Convertible Notes as part of the modification and settlement of the notes, fair-valued at $183,260. Pre-Launch Offering The Company commenced a private placement offering of shares of its common stock (the “Pre-launch Offering”) in the fourth quarter of 2017. As of year-end the Company had sold a total of 1,195,385 shares of the Company's Common Stock for net proceeds of $777,000 in the Pre-launch Offering. Year Ended December 31, 2016 On June 5, 2016, EveryStory issued 88,000 shares of its common stock, which were exchanged for 616,133 shares of Dthera common stock for the purchase agreement for an SIT Patent for a value of $58,960. On August 3, 2016, EveryStory issued On September 15, 2016, EveryStory issued 25,000 shares of its common stock, which were exchanged for 175,038 shares of Dthera common stock valued at $16,750 for services . On September 16, 2016, EveryStory issued 37,500 shares of its common stock, which were exchanged for 263,325 shares of Dthera common stock valued at $25,125 in settlement of $60,000 of accrued consulting fees . This resulted in a gain on settlement of $34,874. On September 21, 2016, as part of the A&R Agreement, EveryStory issued 625,033 shares of its common stock, which were exchanged for 4,388,997 shares of Dthera common stock, for the conversion of debt for a value of $730,174. In connection with the A&R Agreement, the parties agreed that the prior shareholders of the Company would own an aggregate of 16,000,000 post-split shares of the Company’s common stock as part of the agreement totaling $56,354. The reverse stock split is discussed in more detail in Note 1 above. From November to December 2016 the Company issued 314,500 shares of common stock at $0.20 per share for cash proceeds of $62,900, pursuant to the private placement offering. |
8. Stock Purchase Options
8. Stock Purchase Options | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Purchase Options | Stock Purchase Options During the year ended December 31, 2017, the Company did not issue any stock purchase options. As the holders of the Company’s outstanding options are employees and non-employees, the values attributable to non-employee options are remeasured on a quarterly basis and amortized over the service period and until they have fully vested over a 3 year vesting period. Stock options issued to employees are valued on the date of issuance and amortized over the service period until they have fully vested over a 3 year vesting period. The Company believes that the fair value of the stock options is more reliably measurable than the fair value of the services received. The fair value of the non-employee stock options granted was revalued at each reporting date using the Black-Scholes valuation model. As of December 31, 2017, the Company remeasured the options at a value of $960,518 to be recognized over the vesting period, of which $468,280 has been recognized. The following table summarizes the changes in options outstanding of the Company during the year ending December 31, 2017: Number of Weighted Average Exercise Price $ Outstanding, December 31, 2016 1,382,351 0.29 Outstanding, December 31, 2017 1,382,351 0.29 Exercisable, December 31, 2017 1,299,808 0.29 As of December 31, 2017, the Company had $492,238 in unrecognized expense related to future vesting of stock options. Stock Purchase Warrants In 2017, the Company issued warrants to purchase a total of as part of the Investor Offering discussed above. The following table summarizes the changes in Warrants outstanding of the Company during the year ended December 31, 2017: Number of Weighted Average Exercise Price $ Outstanding, December 31, 2016 – – Outstanding, December 31, 2017 6,553,860 0.45 Exercisable, December 31, 2017 – – |
9. Income Taxes
9. Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The components of the net deferred tax asset as of December 31, 2017 and 2016: December 31, December 31, Operating loss carryforwards $ 1,542,562 $ 672,656 Depreciation & amortization (2,876 ) (2,480 ) Loss on impairment (22,460 ) (22,460 ) Stock-based compensation (182,986 ) (117,416 ) Total Deferred Tax Assets 1,334,240 530,300 Valuation allowance (1,334,240 ) (530,300 ) Net Deferred Tax Asset $ – $ – Federal and state net operating loss carryforwards were $4,536,947 and $1,978,400 as of December 31, 2017 and 2016, respectively. The net operating loss carryforwards expire between 2033 and 2037. The following is a reconciliation of the amount of provision for (benefit from) income taxes that would result from applying the federal statutory rate to pretax loss with the provision for income taxes for the years ended December 31, 2017 and 2016, respectively: December 31, December 31, Tax at statutory rate (34%) $ (869,906 ) $ (406,233 ) Non-deductible expenses 65,966 118,465 Change in valuation allowance 803,940 287,768 State tax benefit, net of federal tax effect – – Provision for Income Taxes $ – $ – The Company adopted FASB ASC 740-10-05-6 on January 1, 2013. Under FASB ASC 740-10-05-6, tax benefits are recognized only for the tax positions that are more likely than not be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the company's tax return that do not meet these recognition and measurement standards. Upon the adoption of FASB ASC 740-10-05-6, the Company had no liabilities for unrecognized tax benefits and, as such, the adoption had no impact on its financial statements, and the Company has recorded no additional interest or penalties. The Adoption of FASB ASC 740-10-05-6 did not impact the Company's effective tax rates. The Company's policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits with the income tax expense. For the years ended December 31, 2017, and 2016, the Company did not recognize any interest or penalties in its Consolidated Statements of Operations, nor did it have any interest or penalties accrued in its Consolidated Balance Sheets at December 31, 2017 and 2016 relating to unrecognized benefits. The tax years 2013 through 2017 remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject. |
10. Fair Value Measurements
10. Fair Value Measurements | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Liabilities measured at fair value on a recurring basis at December 31, 2017, are summarized as follows: Level 1 Level 2 Level 3 Total Fair value of options $ – $ 960,518 $ – $ 960,518 Fair value of derivatives $ – $ – $ – $ – Fair value is calculated using the Black-Scholes options pricing model for the stock options and the Binomial Lattice model for the derivatives. Liabilities measured at fair value on a recurring basis at December 31, 2016, are summarized as follows: Level 1 Level 2 Level 3 Total Fair value of options $ – $ 1,609,699 $ – $ 1,609,699 Fair value of derivatives $ – $ – $ 234,502 $ 234,502 |
11. Subsequent Events
11. Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | In accordance with ASC 855, Company’s management reviewed all material events through the date of this filing and determined that there were the following material subsequent events to report: Common Stock From January 1, 2018, through March 29, 2018, the Company issued 3,200,658 shares of Common Stock for $1,017,925 in cash in connection and $500,000 in subscription receivables with a private placement offering. On January 26, 2018, an option holder exercised 98,955 options for common stock for $10,602. On March 21, 2018, the Company’s Board of Directors voted to grant to sixteen individuals options to purchase up to an aggregate of 1,500,000 shares of the Company’s common stock. The terms of the options are as follows: the options vest one-third on the first anniversary of the date of grant; one-third on the second anniversary of the date of grant; and one-third on the third anniversary of the date of grant; the options have a contractual life of eight years from the date of grant; and the exercise price is $0.65, which was the market price of the options on the date of the grant. The number of options granted ranges from 25,000 to 250,000, depending on the individual. Included in the grants were options to purchase up to 250,000 shares to Edward Cox, the Company’s President and Chief Executive Officer, and options to purchase up to 250,000 shares to David Keene, the Company’s Chief Technical Officer. The options were not issued pursuant to a stock option or stock incentive plan. As of March 28, 2018, 1,500,000 options had been issued. Hatch Agreement On January 20, 2018, the Company entered into a Standard Services Agreement (the “SSA”) with Hatch International Limited relating to the creation and manufacture of the Tablets and related hardware. The Company agreed to pay an aggregate of $602,000 for the setup, creation, and manufacture of the initial 5,000 Tablets. |
1. Summary of Significant Acc18
1. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business Dthera Sciences (formerly Knowledge Machine International, Inc.) is a Nevada corporation. The Company, based in San Diego, CA, is a digital therapeutics company focused on developing innovative quality of life therapies for the elderly and those suffering from cognitive decline. The Company’s lead product, ReminX, is an artificial-intelligence-powered consumer health product designed to digitally deliver reminiscence therapy to individuals suffering from neurodegenerative diseases such as Dementia and Alzheimer’s disease, as well as seniors experiencing limited social interaction with others (“Social Isolation”). Additional products are under development that are expected to directly target the symptoms of Alzheimer’s disease and other dementias, such as anxiety, depression, and cognitive decline, and for which Company may seek FDA clearance or approval as well as reimbursement. The Company was incorporated in the State of Nevada on December 27, 2012, to engage in the distribution of high end edged tools produced outside the United States. On October 22, 2014, we acquired an operating subsidiary, Knowledge Machine, Inc., a Nevada corporation, (“Knowledge Machine”), which focused on new technologies, acquiring licensing rights to those technologies, and marketing the licensed technologies, and the Company sold off its edged tools business. Subsequently, on September 21, 2016, the Company acquired a new operating subsidiary, EveryStory, Inc., a Delaware corporation (“EveryStory”). In connection with the EveryStory transaction, the Company dissolved the Knowledge Machine subsidiary, terminated the technology licensing and marketing operations, and changed the Company’s name to Dthera Sciences. Effective July 25, 2017, a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”), at a ratio of 1-for-3 (one share of new common stock for each three shares of old common stock) (the “Reverse Split”), took effect in the market, following a filing of a Certificate of Change with the State of Nevada and authorization from the Financial Industry Regulatory Authority (“FINRA”). Effective October 17, 2017, the Company filed its Certificate of Amendment (the “Amendment”) with the Secretary of State of Nevada to increase authorized common shares from 66,666,667 shares to 600,000,000 shares, and to increase the authorized preferred stock from 1,000,000 to 20,000,000 shares. Effective October 17, 2017, the Company filed its Certificate of Amendment (the “Amendment”) with the Secretary of State of Nevada to increase authorized common shares from 66,666,667 shares to 600,000,000 shares, and to increase the authorized preferred stock from 1,000,000 to 20,000,000 shares. |
Accounting Basis | Accounting Basis The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The Company has a December 31 fiscal year end. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates are made in relation to the allowance for doubtful accounts and the fair value of certain financial instruments. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Dthera Sciences and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less. As of December 31, 2017 and 2016, the Company’s cash balances were within the FDIC insurance coverage limits. |
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 Company's 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 Company's 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 and non-employee stock options, at fair value, on a recurring basis under level 2. |
Embedded Conversion Features | Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under Accounting Standards Codification 815, Derivatives and Hedging Debt with Conversion and Other Options |
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 options and convertible debt, 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 convertible debt with embedded derivatives, the Company uses the Binomial Lattice model to value the embedded derivatives. |
Debt Issuance Costs and Debt Discount | Debt Issuance Costs and Debt Discount The Company may record debt issuance 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. 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. |
Concentration of Risk | Concentration of Risk Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash. Our cash balances are maintained in accounts held by major banks and financial institutions located in the United States. The Company occasionally maintains amounts on deposit with a financial institution that are in excess of the federally insured limits. The risk is managed by maintaining all deposits in high quality financial institutions. For the year ended December 31, 2017 and 2016, there were no customers that accounted for a material portion of total revenues. |
Property and Equipment | Property and Equipment Property and equipment is recorded at cost less accumulated depreciation. Depreciation and amortization is calculated using the straight-line method over the expected useful life of the asset, after the asset is placed in service. The Company generally uses the following depreciable lives for its major classifications of property and equipment: Description Useful Lives Office Equipment and Computers 2 to 3 years Expenditures associated with upgrades and enhancements that improve, add functionality, or otherwise extend the life of property and equipment are capitalized, while expenditures that do not, such as repairs and maintenance, are expensed as incurred. |
Valuation of Long-Lived Assets | Valuation of Long-Lived Assets Long-lived tangible assets and definite-lived intangible assets are reviewed for possible impairment annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses both an estimate of undiscounted future net cash flows of the assets over the remaining useful lives and a replacement cost method when determining their fair values. If the carrying values of the assets exceed the fair value of the assets, the Company recognizes an impairment loss equal to the difference between the carrying values of the assets and their fair values. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets. The evaluation of long-lived assets requires the Company to use estimates of future cash flows. However, actual cash flows may differ from the estimated future cash flows used in these impairment tests. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered to the customer, (iii) the fee is fixed or determinable, and (iv) collectability is reasonably assured. Where arrangements have multiple elements, revenue is allocated to the elements based on the relative selling price method and revenue is recognized based on the Company’s policy for each respective element. |
Software Development | Software Development The Company accounts for internal use software development costs in accordance with authoritative guidance related to accounting for the costs of app and web software developed or obtained for internal use. Software development costs that are incurred in the preliminary development stage are expensed as incurred. Once certain criteria have been met (“application development stage”), direct costs incurred in developing or obtaining computer software are capitalized. Costs in the post-implementation/operation stage, including costs related to training and software maintenance, are expensed as incurred. |
Research and Development | Research and Development The Company engages in new software development efforts. Research and development expenses relating to possible future software are expensed as incurred. Research and development expenses were approximately $0 for the years ended December 31, 2017 and 2016. |
Advertising Expenses | Advertising Expenses The Company expenses advertising costs as incurred. Advertising may consist of media or online advertising and marketing. As such, advertising expenses were approximately $395,446 and $86,037 for the years ended December 31, 2017 and 2016, respectively. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for share based payments in accordance with ASC 718, Compensation - Stock Compensation Measurement Objective – Fair Value at Grant Date Compensation cost is recognized over the requisite service period, which is generally equal to the vesting period. Upon exercise, shares issued will be newly issued shares from authorized common stock. ASC 505, Compensation-Stock Compensation |
Loss Per Common Share | Loss Per Common Share Basic loss per Common Share is computed by dividing losses attributable to Common shareholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted loss per Common Share is computed by dividing loss attributable to Common shareholders by the weighted-average number of Shares of Common Stock outstanding during the period increased to include the number of additional Shares of Common Stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding convertible Preferred Stock, stock options, warrants, and convertible debt. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s Common Stock can result in a greater dilutive effect from potentially dilutive securities. For the years ended December 31, 2017 and 2016, all of the Company’s potentially dilutive securities (options and convertible debt) were excluded from the computation of diluted earnings per share as they were anti-dilutive. The total number of potentially dilutive Common Shares that were excluded were 6,883,388 and 1,198,733 at the years ended December 31, 2017 and 2016, respectively. |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. The Company follows ASC 740 Income Taxes The Company’s policy is to recognize both interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties on unrecognized tax benefits expected to result in payment of cash within one year are classified as accrued liabilities, while those expected beyond one year are classified as other liabilities. The Company has not recorded any interest and penalties since its inception. The Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The tax years for 2013 to 2017 remain open for federal and/or state tax jurisdictions. The Company is currently not under examination by any other tax jurisdictions for any tax years. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Management has considered all other recent accounting pronouncements issued since the last audit of the Company’s consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements. |
3. Property and Equipment (Tabl
3. Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment schedule | December 31, December 31, Computer and Equipment 10,237 2,816 Assets Used to Fulfill Contract Obligations 70,195 – Less: Accumulated Depreciation (3,067 ) (1,902 ) Net Property and Equipment $ 77,365 $ 914 |
4. Loans Payable (Tables)
4. Loans Payable (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of related party advances | Balance December 31, 2016 $ – Cash additions – Expense additions 46,618 Cash payments (39,161 ) Balance December 31, 2017 $ 7,457 |
Schedule of notes payable | Balance December 31, 2016 $ 20,000 Cash additions 50,000 Expense additions – Cash payments (70,000 ) Balance December 31, 2017 $ – |
Schedule of convertible notes payable | Balance December 31, 2016, net of discount $ 67,345 Conversions – Cash payments (240,000 ) Amortization of debt discount 172,655 Balance December 31, 2017 $ – |
5. Derivative Liabilities (Tabl
5. Derivative Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative liability - Level 3 | Balance at December 31, 2016 $ 234,502 Conversion (91,667 ) Change in Fair Value of Derivative (142,835 ) Balance at December 31, 2017 $ – |
Assumptions | December 31, 2017 Expected term in years 0.51 years Risk-free interest rates 0.89% Volatility 48.05% Dividend yield 0% |
8. Stock Purchase Options (Tabl
8. Stock Purchase Options (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Option activity | Number of Weighted Average Exercise Price $ Outstanding, December 31, 2016 1,382,351 0.29 Outstanding, December 31, 2017 1,382,351 0.29 Exercisable, December 31, 2017 1,299,808 0.29 |
Schedule of warrants outstanding | Number of Weighted Average Exercise Price $ Outstanding, December 31, 2016 – – Outstanding, December 31, 2017 6,553,860 0.45 Exercisable, December 31, 2017 – – |
9. Income Taxes (Tables)
9. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Components of net deferred tax assets | December 31, December 31, Operating loss carryforwards $ 1,542,562 $ 672,656 Depreciation & amortization (2,876 ) (2,480 ) Loss on impairment (22,460 ) (22,460 ) Stock-based compensation (182,986 ) (117,416 ) Total Deferred Tax Assets 1,334,240 530,300 Valuation allowance (1,334,240 ) (530,300 ) Net Deferred Tax Asset $ – $ – |
Reconciliation of income taxes | December 31, December 31, Tax at statutory rate (34%) $ (869,906 ) $ (406,233 ) Non-deductible expenses 65,966 118,465 Change in valuation allowance 803,940 287,768 State tax benefit, net of federal tax effect – – Provision for Income Taxes $ – $ – |
10. Fair Value Measurements (Ta
10. Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Liabilities measured at fair value on a recurring basis at December 31, 2017, are summarized as follows: Level 1 Level 2 Level 3 Total Fair value of options $ – $ 960,518 $ – $ 960,518 Fair value of derivatives $ – $ – $ – $ – Liabilities measured at fair value on a recurring basis at December 31, 2016, are summarized as follows: Level 1 Level 2 Level 3 Total Fair value of options $ – $ 1,609,699 $ – $ 1,609,699 Fair value of derivatives $ – $ – $ 234,502 $ 234,502 |
1. Summary of Significant Acc25
1. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||
Reverse stock split | Effective July 25, 2017, at a ratio of 1-for-3 | |
Property and equipment useful lives | 2 to 3 years | |
Research and development | $ 0 | $ 0 |
Advertising expense | $ 395,446 | $ 86,037 |
Antidilutive shares excluded from EPS | 6,883,388 | 1,198,733 |
2. Going Concern (Details Narra
2. Going Concern (Details Narrative) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accumulated deficit | $ (4,536,947) | $ (1,978,400) |
Working capital | $ (17,113) |
3. Property and Equipment (Deta
3. Property and Equipment (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Abstract] | ||
Computer and equipment | $ 10,237 | $ 2,816 |
Assets used to fulfill contract obligations | 70,195 | 0 |
Less: Accumulated depreciation | (3,067) | (1,902) |
Net property and equipment | $ 77,365 | $ 914 |
4. Loans Payable (Details - Rel
4. Loans Payable (Details - Related Parties) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Balance, beginning | $ 0 | |
Cash payments | (39,161) | $ 0 |
Balance, ending | 7,457 | 0 |
Notes Payable Related Party [Member] | ||
Balance, beginning | 0 | |
Cash additions | 0 | |
Expense additions | 46,618 | |
Cash payments | (39,161) | |
Balance, ending | $ 7,457 | $ 0 |
4. Loans Payable (Details - Not
4. Loans Payable (Details - Notes Payable) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Balance, beginning | $ 20,000 | |
Cash payments | (70,000) | $ 0 |
Balance, ending | 0 | 20,000 |
Notes Payable [Member] | ||
Balance, beginning | 20,000 | |
Cash additions | 50,000 | |
Expense additions | 0 | |
Cash payments | (70,000) | |
Balance, ending | $ 0 | $ 20,000 |
4. Loans Payable (Details - Con
4. Loans Payable (Details - Convertible Notes) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Balance, beginning | $ 67,345 | |
Cash payments | (240,000) | $ 0 |
Amortization of debt discount | 172,655 | 72,771 |
Balance, ending | 0 | 67,345 |
Convertible Notes Payable [Member] | ||
Balance, beginning | 67,345 | |
Conversions | 0 | |
Cash payments | (240,000) | |
Amortization of debt discount | 172,655 | |
Balance, ending | $ 0 | $ 67,345 |
4. Loans Payable (Details Narra
4. Loans Payable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Operating expense paid in behalf of the company | $ 46,618 | $ 20,627 |
Proceeds from convertible debt | 0 | 330,000 |
Repayment of convertible note | 240,000 | 0 |
Loss on extinguishment of debt | (91,593) | 34,874 |
Convertible Note [Member] | ||
Proceeds from convertible debt | 240,000 | |
Debt discount | 0 | $ 240,000 |
Interest expense | 172,655 | |
Repayment of convertible note | 240,000 | |
Repayment of interest | $ 18,000 | |
Debt converted, shares issued | 27,768 | |
Loss on extinguishment of debt | $ (91,593) | |
Chief Executive Officer [Member] | ||
Operating expense paid in behalf of the company | 46,618 | |
Repayment of operating expenses | $ 39,161 | |
Interest rate | 0.00% |
5. Derivative Liabilities (Deta
5. Derivative Liabilities (Details - Level 3) - Convertible Notes [Member] | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Derivative liability, beginning balance | $ 234,502 |
Conversion | (91,667) |
Change in Fair Value of Derivative | (142,835) |
Derivative liability, ending balance | $ 0 |
5. Derivative Liabilities (De33
5. Derivative Liabilities (Details - Assumptions) | 12 Months Ended |
Dec. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Expected term in years | 0.51 years |
Risk-free interest rates | 0.89% |
Volatility | 48.05% |
Dividend yield | 0.00% |
6. Preferred Stock (Details Nar
6. Preferred Stock (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Preferred stock, par value | $ 0.001 | $ .0001 |
Preferred stock, authorized/designated | 20,000,000 | 1,000,000 |
Payments for repurchase of redeemable preferred stock | $ 112,690 | $ 0 |
Series A Preferred Stock [Member] | August 7, 2017 [Member] | ||
Payments for repurchase of redeemable preferred stock | $ 42,690 | |
Shares of stock redeemed | 42,690 | |
Series A Preferred Stock [Member] | August 18, 2017 [Member] | ||
Payments for repurchase of redeemable preferred stock | $ 20,000 | |
Shares of stock redeemed | 20,000 | |
Series A Preferred Stock [Member] | September 11, 2017 [Member] | ||
Payments for repurchase of redeemable preferred stock | $ 20,000 | |
Shares of stock redeemed | 20,000 | |
Series A Preferred Stock [Member] | October 10, 2017 [Member] | ||
Payments for repurchase of redeemable preferred stock | $ 25,000 | |
Shares of stock redeemed | 25,000 | |
Series A Preferred Stock [Member] | November 16, 2017 [Member] | ||
Payments for repurchase of redeemable preferred stock | $ 5,000 | |
Shares of stock redeemed | 5,000 | |
Redeemable Preferred Stock [Member] | ||
Preferred stock, authorized/designated | 150,000 | 150,000 |
Preferred stock, shares issued | 112,690 | 112,690 |
Preferred stock, shares outstanding | 112,690 | 112,690 |
7. Common Stock (Details Narrat
7. Common Stock (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Common stock Par value | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, Authorized | 600,000,000 | 600,000,000 | 66,666,667 |
Common stock, Issued | 47,043,304 | 47,043,304 | 12,060,395 |
Common stock, outstanding | 47,043,304 | 47,043,304 | 12,060,395 |
Stock issued for patent, value | $ 58,960 | ||
Stock issued for services, value | 41,875 | ||
Gain on settlement of debt | $ (91,593) | $ 34,874 | |
Private Placement [Member] | |||
Stock issued new, shares | 2,342,924 | 314,500 | |
Proceeds from private placement | $ 1,215,750 | $ 62,900 | |
Pre-Launch Offering [Member] | |||
Stock issued new, shares | 1,195,385 | ||
Proceeds from private placement | $ 777,000 | ||
EveryStory [Member] | Common Stock | Pre-Split [Member] | |||
Stock issued for patent, shares | 88,000 | ||
Stock issued for patent, value | $ 58,960 | ||
Conversion of interest, stock issued | 10,000 | ||
Conversion of interest, amount converted | $ 6,700 | ||
Stock issued for services, shares | 25,000 | ||
Stock issued for services, value | $ 16,750 | ||
Stock issued for settlement of accrued consulting fees, shares | 37,500 | ||
Stock issued for settlement of accrued consulting fees, value | $ 25,125 | ||
Gain on settlement of debt | $ 34,874 | ||
Conversion of debt, stock issued | 625,033 | ||
Conversion of debt, amount converted | $ 730,174 | ||
Dthera [Member] | Common Stock | Post-Split [Member] | |||
Stock issued for patent, shares | 616,133 | ||
Stock issued for services, shares | 175,038 | ||
Stock issued for settlement of accrued consulting fees, shares | 263,325 | ||
Conversion of debt, stock issued | 4,388,997 | ||
Shares owned post-split | 16,000,000 | ||
Value of shares owned | $ 56,354 | ||
Convertible Notes Modification [Member] | |||
Stock issued for modification and settlement of notes, shares issued | 27,768 | ||
Stock issued for modification and settlement of notes, value | $ 183,260 | ||
Investor Offering [Member] | |||
Stock issued new, shares | 26,215,499 | ||
Warrants issued | 6,553,848 | ||
Employee Offering [Member] | |||
Stock issued new, shares | 5,201,333 | ||
Investor and Employee Offering [Member] | |||
Proceeds from private placement | $ 942,502 | ||
Prior Private Offering [Member] | |||
Stock issued new, shares | 2,342,924 | ||
Proceeds from private placement | $ 1,215,750 |
8. Stock Purchase Options (Deta
8. Stock Purchase Options (Details - Option activity) - Equity Option [Member] - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Number of Options | ||
Options outstanding | 1,382,351 | 1,382,351 |
Options exercisable | 1,299,808 | |
Weighted Average Exercise Price | ||
Weighted average exercise price, options outstanding | $ 0.29 | $ 0.29 |
Weighted average exercise price, options exercisable | $ 0.29 |
8. Stock Purchase Options (De37
8. Stock Purchase Options (Details - Warrants Ouststanding) - Stock Purchase Warrants [Member] - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Number of Warrants | ||
Warrants outstanding | 6,553,860 | 0 |
Warrants exercisable | 0 | 0 |
Weighted Average Exercise Price | ||
Weighted average exercise price | $ .45 | $ 0 |
Weighted average exercise price - exercisable | $ 0 | $ 0 |
8. Stock Purchase Options (De38
8. Stock Purchase Options (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Options granted, value | $ 960,517 |
Share based compensation | $ 330,486 |
9. Income Taxes (Details - Defe
9. Income Taxes (Details - Deferred Tax) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Operating loss carryforwards | $ 1,542,562 | $ 672,656 |
Depreciation & amortization | (2,876) | (2,480) |
Loss on impairment | (22,460) | (22,460) |
Stock-based compensation | (182,986) | (117,416) |
Total Deferred Tax Assets | 1,334,240 | 530,300 |
Valuation allowance | (1,334,240) | (530,300) |
Net Deferred Tax Asset | $ 0 | $ 0 |
9. Income Taxes (Details - Tax
9. Income Taxes (Details - Tax Reconciliation) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Tax at statutory rate (34%) | $ (869,906) | $ (406,233) |
Non-deductible expenses | 65,966 | 118,465 |
Change in valuation allowance | 803,940 | 287,768 |
State tax benefit, net of federal tax effect | 0 | 0 |
Provision for Income Taxes | $ 0 | $ 0 |
9. Income Taxes (Details Narrat
9. Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 4,536,947 | $ 1,978,400 |
Loss carryforward beginning expiration date | Dec. 31, 2033 |
10. Fair Value Measurements (De
10. Fair Value Measurements (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Fair value of options | $ 960,518 | $ 1,609,699 |
Fair value of derivatives | 0 | 234,502 |
Fair Value, Inputs, Level 1 [Member] | ||
Fair value of options | 0 | 0 |
Fair value of derivatives | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Fair value of options | 960,518 | 1,609,699 |
Fair value of derivatives | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair value of options | 0 | 0 |
Fair value of derivatives | $ 0 | $ 234,502 |