Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 12, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Dthera Sciences | |
Entity Central Index Key | 1,586,372 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Small Business | true | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 2,667,602 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash | $ 1,567,877 | $ 303,483 |
Restricted cash | 20,000 | 20,000 |
Inventory | 70,945 | 0 |
Prepaid expenses | 608,483 | 95,176 |
Deferred cost of revenue | 9,655 | 0 |
Deposits | 4,270 | 2,500 |
TOTAL CURRENT ASSETS | 2,281,230 | 421,159 |
LONG TERM ASSETS | ||
Property and equipment, net | 45,599 | 77,365 |
Software development costs, net | 245,292 | 0 |
TOTAL LONG TERM ASSETS | 290,891 | 77,365 |
TOTAL ASSETS | 2,572,121 | 498,524 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 984,424 | 436,472 |
Deferred revenue | 12,287 | 1,800 |
Notes payable, net | 559,582 | 0 |
Convertible notes payable, net | 1 | 0 |
Derivative liabilities | 1,106,711 | 0 |
TOTAL CURRENT LIABILITIES | 2,663,005 | 438,272 |
TOTAL LIABILITIES | 2,663,005 | 438,272 |
STOCKHOLDERS' EQUITY (DEFICIT) | ||
Common stock 600,000,000 shares authorized; $0.001 par value; 2,667,602 and 2,352,166 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively | 2,668 | 2,352 |
Additional paid in capital | 7,583,279 | 4,594,847 |
Accumulated deficit | (7,676,831) | (4,536,947) |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | (90,884) | 60,252 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 2,572,121 | $ 498,524 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock Par value | $ 0.001 | $ 0.001 |
Common stock, Authorized | 600,000,000 | 600,000,000 |
Common stock, Issued | 2,667,602 | 2,352,166 |
Common stock, outstanding | 2,667,602 | 2,352,166 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
REVENUES | $ 6,485 | $ 0 | $ 6,485 | $ 0 |
COST OF REVENUES | ||||
Cost of revenues | 95,885 | 0 | 95,885 | 0 |
Impairment of inventory | 16,019 | 0 | 16,019 | 0 |
TOTAL COST OF REVENUES | 111,904 | 0 | 111,904 | 0 |
GROSS PROFIT | (105,419) | 0 | (105,419) | 0 |
OPERATING EXPENSES | ||||
General and administrative | 912,161 | 97,259 | 1,994,319 | 1,584,466 |
Sales and marketing | 273,545 | 93,240 | 609,692 | 188,415 |
Research and development | 64,377 | 66,940 | 142,565 | 158,274 |
TOTAL OPERATING EXPENSES | 1,250,083 | 257,439 | 2,746,576 | 1,931,155 |
OPERATING LOSS | (1,355,502) | (257,439) | (2,851,995) | (1,931,155) |
OTHER INCOME (EXPENSES) | ||||
Interest expense | (49,323) | 0 | (51,440) | (185,847) |
Change in fair value of derivative liabilities | 75,309 | 0 | 75,309 | 142,835 |
Loss on extinguishment of debt | 0 | 0 | 0 | (91,593) |
Loss on disposal of fixed assets | 0 | 0 | (6,170) | 0 |
Derivative expense | (305,398) | 0 | (305,398) | 0 |
TOTAL OTHER EXPENSES | (279,412) | 0 | (287,699) | (134,605) |
NET LOSS | $ (1,634,914) | $ (257,439) | $ (3,139,694) | $ (2,065,760) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic and diluted | 2,572,762 | 1,510,462 | 2,500,169 | 954,805 |
Loss per common share - Basic and diluted | $ (0.64) | $ (0.17) | $ (1.23) | $ (2.16) |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (3,139,694) | $ (2,065,760) |
Adjustments for non-cash items: | ||
Amortization of debt discount | 41,118 | 172,655 |
Depreciation and amortization | 31,079 | 766 |
Loss on disposal of fixed assets | 6,170 | 0 |
Impairment of inventory | 16,019 | 0 |
Loss on extinguishment of debt | 0 | 91,593 |
Derivative expense | 305,398 | 0 |
Gain on derivative liability | (75,309) | (142,835) |
Common stock issued for services | 123,632 | 0 |
Fair value of options vested | 388,855 | 399,049 |
Changes in operating assets and liabilities: | ||
Deferred cost of revenue | (9,655) | 0 |
Inventory | (1,901) | 0 |
Prepaid expenses | (513,307) | (10,167) |
Deposits | (1,770) | 0 |
Accounts payable and accrued liabilities | 547,954 | (45,482) |
Deferred revenue | 10,487 | 646 |
NET CASH USED IN OPERATING ACTIVITIES | (2,270,924) | (1,599,535) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (76,117) | (49,866) |
Development of software | (259,721) | 0 |
NET CASH USED IN INVESTING ACTIVITIES | (335,838) | (49,866) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Common stock issuance | 2,024,350 | 1,215,750 |
Exercise of stock options | 31,806 | 0 |
Proceeds from notes payable | 900,000 | 50,000 |
Proceeds from convertible notes | 915,000 | 0 |
Payments on convertible notes | 0 | (240,000) |
Payments on notes payable | 0 | (70,000) |
Payments on notes payable, related party | 0 | (209) |
Redemption of preferred stock | 0 | (82,690) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 3,871,156 | 1,786,853 |
NET CHANGE IN CASH | 1,264,394 | 137,452 |
CASH AT BEGINNING OF PERIOD | 303,483 | 12,191 |
CASH AT END OF PERIOD | 1,567,877 | 149,643 |
Cash paid for interest | 2,063 | 19,890 |
Cash received for interest earned | 25 | 0 |
Cash paid for taxes | 800 | 800 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Transfer of property and equipment to inventory | 85,063 | 0 |
Adoption of ASU 2018-07 | 190 | 0 |
Debt discounts recorded on notes payable | 456,535 | 0 |
Debt discounts recorded on convertible notes | 1,100,000 | 0 |
Common stock issued with convertible notes | 38,378 | 0 |
Common stock issued in extinguishment of debt | $ 0 | $ 183,260 |
1. Condensed Financial Statemen
1. Condensed Financial Statements | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Condensed Financial Statements | NOTE 1– CONDENSED FINANCIAL STATEMENTS Organization and Description of Business Dthera Sciences, a Nevada corporation (“the Company”), is a leading digital therapeutic company focusing on the elderly. The San Diego-based company is working to improve the lives of seniors and individuals suffering from neurodegenerative diseases, as well as those who care for them. Dthera has two core products: DTHR-ALZ, a development-stage product that has been granted Breakthrough Device designation by the FDA for the mitigation of the symptoms of agitation and depression associated with major neurocognitive disorder of the Alzheimer's type; and ReminX™, a consumer health product and general wellness device exempt from FDA regulations available for purchase for individuals suffering from social isolation and dementia. Consolidated Financial Statements The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2018, and for all periods presented herein, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2017, audited financial statements. The results of operations for the periods ended September 30, 2018 and 2017, are not necessarily indicative of the operating results for the full years. |
2. Going Concern
2. Going Concern | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | NOTE 2 – GOING CONCERN The Company's financial statements are prepared using U.S. GAAP applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of the date of this Report, the Company had an accumulated deficit of $7,676,831, and to date has only minimal revenues which to date have been insufficient 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) achieve adequate revenues from its operations. Management's plan to address these issues includes, (a) continuing to exercise of tight cost controls to conserve cash, (b) obtaining additional financing, (c) placing revenue producing products into place, and (d) identifying and executing on additional revenue generating opportunities. There can be no guarantee that the Company will be unable to achieve the above results or to obtain adequate financing on terms considered satisfactory to the Company, or at all. |
3. Summary of Significant Accou
3. Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation The Company’s financial statements are prepared using the accrual basis of accounting in accordance with 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 expenses during the reporting periods. Significant estimates are made in relation to 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. Inventory The Company reported inventory related to its ReminX tablets as of September 30, 2018. The Company adopted FIFO as its inventory valuation method and reports inventory at the lower of cost or net realizable value. Software Development The Company accounts for internal use software development costs in accordance with authoritative guidance related to accounting for the costs of application 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. Some costs in post-implementation stage can be capitalized if the modifications add additional functionality in the future. The application development stage begin in the first fiscal quarter of 2018 and the post-implementation/operation stage was reached in the third fiscal quarter of 2018. Research and Development The Company engages in new software and hardware development efforts. Research and development expenses relating to possible future software and hardware are expensed as incurred. Research and development expenses were $64,377 and $142,565 for the three and nine months ended September 30, 2018, respectively, and $66,940 and $158,274 for the three and nine months ended September 30, 2017, respectively. Revenue The Company generates revenue from the sale of device consisting of a digital tablet specifically designed for seniors with proprietary software. As the nature of the Company’s performance obligation to its customers is to provide digital reminiscence therapy, which requires both the tablet and the software, the Company determined it has a single performance obligation. The Company recognizes revenue upon satisfaction of the single performance obligation ratably over the contract period as the customer receives and consumes the benefits derived from the Company’s performance as the Company performs. Derivative Instruments The Company evaluates its convertible notes and warrants to determine whether those contracts, or components of those contracts, qualify as derivatives to be separately accounted for. To the extent the conversion price of notes issued is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 – 40, the fair value of the notes is recognized as a derivative instrument at the issuance date. The classification of derivative instruments is re-assessed at the end of each financial reporting period. Each derivative is measured at the transaction date and will be remeasured by a third-party specialist and reported at fair value with changes reported through profit and loss each financial reporting date until the liabilities are settled. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and the fair value is classified as equity. The Company uses a Monte Carlo simulation to value its derivatives due to the path-dependent nature of certain potential exercise price adjustments. The Company does not use derivative instruments to hedge exposure to cash flow or fair value risks. Reclassification Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation. Professional Fees and Depreciation are presented with General and Administrative expenses. Research and Development costs and Sales and Marketing expenses have been presented separately from General and Administrative expenses. Related Party Advances are presented with Accounts Payable and Accrued Liabilities and Restricted Cash is presented separately from Cash. 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 stock options and warrants. 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 nine months ended September 30, 2018 and 2017, all of the Company’s potentially dilutive securities (options, warrants, and conversion features) were excluded from the computation of diluted earnings per share as they were anti-dilutive. The total numbers of potentially dilutive Common Shares that were excluded were 790,945 and 396,437 for the nine months ended September 30, 2018 and 2017, respectively. Reverse stock split On September 25, 2018, the Company effectuated a reverse stock-split of its issued and outstanding common stock at a ratio of one-for-20 (the “Listing Reverse Split”). The Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada to effectuate the Listing Reverse Split. The Listing Reverse Split did not affect the number of authorized shares of common stock. A proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the exercise or conversion of the Company’s outstanding equity awards, options and warrants to purchase shares of common stock and outstanding convertible notes. The accompanying condensed consolidated financial statements and notes give retroactive effect to the Listing Reverse Split for all periods presented. Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) . In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows, Restricted Cash (“ASU 2016-18”) to address diversity in practice in the classification and presentation of changes in restricted cash on the statement of cash flows. Under ASU 2016-18, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning and ending cash amounts shown on the statement of cash flows. The update was effective for the Company January 1, 2018 and was applied using a retrospective transition method. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718) (“ASU 2018-07”). ASU 2018-07 provides for improvements to nonemployee share-based payment accounting by expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The awards will be measured at grant date, consistent with accounting for employee share-based payment awards. The measurement date has been redefined as the date at which the grantor and grantee reach a mutual understanding of the key terms and conditions of the award. The requirement to reassess classification of equity-classified awards upon vesting has been eliminated. ASU 2018-07 will have a material impact on the Company’s financial statements as a significant number of options were granted to nonemployees. The Company adopted ASU 2018-07 July 1, 2018. |
4. Inventory
4. Inventory | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventory | NOTE 4 – INVENTORY The following presents the inventory activity during the period: 2018 Inventory, December 31, 2017 $ – Tablets transferred from property and equipment 85,063 Purchases 68,450 Sales (66,549 ) Impairment (16,019 ) Inventory, September 30, 2018 $ 70,945 Prior to the rollout of ReminX, the Company planned to lease tablets to customers and recover the tablet at the end of the lease term. As such, the Company reported its tablet assets within property and equipment. In the third quarter of 2018, the Company changed its strategy and determined it would sell the tablets to customers pursuant to a short-term financing arrangement. Upon the change in strategy, the Company reclassified its tablets to inventory. During the three and nine months ended September 30, 2018, the Company expensed $16,019 to write down the net realizable value of the inventory to expected sales price. The charge was recognized in cost of sales. |
5. Prepaid Expenses
5. Prepaid Expenses | 9 Months Ended |
Sep. 30, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaids and other current assets | NOTE 5 – PREPAID EXPENSES Prepaid expenses consisted of the following: September 30, 2018 December 31, 2017 Tablets $ 467,640 $ – Professional services 73,841 9,354 Commissions 18,000 – Study 15,000 – Marketing services 11,692 77,655 Subscription 11,000 6,667 Freight 6,000 – Insurance 5,310 – Rent – 1,500 Total prepaid expenses $ 608,483 $ 95,176 During nine months ended September 30, 2018, the Company made prepayments to its equipment manufacturer to procure the raw materials and to perform the subassembly of the tablets to be sold. The Company does not have any ownership rights to the assets until the finished goods are received, therefore the prepayment of tablets is classified as a Prepaid Equipment until receipt occurs. |
6. Property and Equipment
6. Property and Equipment | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | NOTE 6 – PROPERTY AND EQUIPMENT The Company’s property and equipment were comprised of the following as of September 30, 2018, and December 31, 2017: September 30, 2018 December 31, 2017 Computer and Equipment $ 8,025 $ 10,237 Assets Used to Fulfill Contract Obligations – 70,195 Tooling for ReminX hardware 56,500 – Less: Accumulated Depreciation (18,926 ) (3,067 ) Net Property and Equipment $ 45,599 $ 77,365 Depreciation expense for the three and nine months ended September 30, 2018 was $14,795 and $16,650, respectively. Depreciation expense for the three and nine months ended September 30, 2017, was $333 and $766, respectively. The Company recorded a loss on disposal of fixed assets in the nine months ended September 30, 2018 of $6,170, with no related expense in the three months ended September 30, 2018 or in the three and nine months ended September 30, 2017. The Company transferred its Assets Used to Fulfill Contract Obligations to Inventory in the third fiscal quarter of 2018 as the Company determined it would sell, rather than lease, its ReminX tablets. The Company capitalized $56,500 for tooling for its ReminX hardware in the third quarter of 2018 and estimated the useful life of the tooling was one year. The Company recognized $14,125 of depreciation expense in cost of revenue related to the tooling in the three and nine months ended September 30, 2018 with no comparable charge in the comparative period. |
7. Software Development Costs
7. Software Development Costs | 9 Months Ended |
Sep. 30, 2018 | |
Research and Development [Abstract] | |
Software Development Costs | NOTE 7 – SOFTWARE DEVELOPMENT COSTS The Company’s capitalized application development stage costs related to computer software development under ASC 350-40 “Intangibles-Goodwill and Other- Internal-Use Software” The Company began amortizing the software August 1, 2018 after the rollout of the ReminX product. The Company recognized amortization of $14,429 in the three and nine months ended September 30, 2018, reported in cost of revenue on the Statement of Operations. The Company considered the applicability of ASC 985-20 for accounting for its internally developed software. The customer does not have a contractual right to take possession of the software, and the software is only available on ReminX tablets (i.e. the Company has not made ReminX software available for use on third-party hardware subsequent to the rollout of the ReminX product on proprietary hardware). The software resides on the Company’s hardware and is accessed on an as-needed basis over the Internet. As such, the software is subject to a hosting arrangement and is therefore not within the scope of ASC 985. |
8. Debt
8. Debt | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt | NOTE 8 – DEBT Notes payable The following notes payable were outstanding as of September 30, 2018, with no comparable balances as of December 31, 2017: Ref Amount Interest rate Net debt discount Carrying value of debt Accrued and unpaid interest Total 1 $ 50,000 14.4% $ – $ 50,000 $ 1,321 $ 51,321 2 50,000 12.0% – 50,000 1,578 51,578 3 50,000 12.0% – 50,000 1,561 51,561 5 275,000 OID (139,151 ) 135,849 – 135,849 6 550,000 OID (276,267 ) 273,733 2,564 276,297 Total $ 975,000 $ (415,418 ) $ 559,582 $ 7,024 $ 566,606 (1) On May 11, 2018, the Company issued a short-term promissory note to an unrelated party for $50,000 due 30 days from the date of issuance. The note bore an interest rate of 14.4% per annum, and the Company had the right to pre-pay with no penalty or premium. The Company’s obligation to repay the note was secured by the grant of a security interest in the assets of the Company. On June 10, 2018, the Company extended the term of the above short-term promissory note of $50,000 to October 31, 2018. All other terms remained the same. This note was subsequently repaid. See Subsequent Events Footnote 13 for additional details. (2) On June 28, 2018, the Company issued a short-term promissory note to an unrelated party for $50,000 due 90 days from the date of issuance. The note bore interest at a rate of 12% per annum, and the Company had the right to pre-pay with no penalty or premium. The Company’s obligation to repay the note was secured by the grant of a security interest in the assets of the Company. This note was extended on August 28, 2018 to October 31, 2018 and was subsequently repaid. See Subsequent Events Footnote 13 for additional details. (3) On July 2, 2018, the Company issued a short-term note to a related party for $50,000 due 90 days from the date of issuance. The note bore interest at a rate of 12% per annum, and the Company had the right to pre-pay with no penalty or premium. In November 2018, the Company modified the loan as part of its crossover funding, which will automatically convert to common shares upon uplisting. See Subsequent Events Footnote 13 for additional details. (4) On July 2, 2018, the Company issued a short-term note to a related party for $100,000 due 60 days from the date of issuance. The note bore an interest rate of 12% per annum, and the Company had the right to pre-pay with no penalty or premium. The Company’s obligation to repay the note was secured by the grant of a security interest in the assets of the Company. This note was extinguished as a part of the following note. (5) On September 17, 2018, the Company issued a short-term 10% original issue discount (“OID”) note to a related party with a face amount of $550,000 and a purchase price of $500,000, $400,000 of which was received in cash and $100,000 was paid through the extinguishment of an existing promissory note, referenced above. The note is due and payable January 17, 2019 and is secured by the Company’s assets. Upon closing of the crossover funding, the note will automatically convert to a convertible note which will convert into common shares upon uplisting. In connection with the note, the Company issued 25,000 shares of common stock and 50,000 warrants to purchase 50,000 additional shares. The initial debt discount recorded was $301,775, based on the relative fair value of the warrants and common stock issued, as well as OID interest. The debt discount will be accreted according to the effective interest method over the contractual term of the note. The warrants qualified for equity classification and were reported within Additional Paid-In Capital as of September 30, 2018. (6) On September 14, 2018, the Company issued a short-term 10% OID note to a related party with a face amount of $275,000 and a purchase price of $250,000. The note is due and payable January 14, 2019 and is secured by the Company’s assets. Upon closing of the crossover funding, the note will automatically convert to a convertible note which will convert into common shares upon uplisting. In connection with the note, the Company issued 12,500 shares of common stock and 25,000 warrants. The initial debt discount recorded was $154,760, based on the relative fair value of the warrants and common stock issued, as well as OID interest. The debt discount will be accreted according to the effective interest method over the contractual term of the note. The warrants qualified for equity classification and were reported within Additional Paid-In Capital as of September 30, 2018. Convertible note The following convertible note was outstanding as of September 30, 2018, with no comparable balances as of December 31, 2017: Ref Amount Interest rate Net debt discount Carrying value of debt Accrued and unpaid interest Total 7 1,100,000 OID (1,099,999 ) 1 – 1 Total $ 1,100,000 $ (1,099,999 ) $ 1 $ – $ 1 (7) On September 21, 2018, the Company issued a short term 10% OID convertible note to an unrelated party with a face amount of $1.1 million and a purchase price of $1.0 million. The convertible note is secured by the Company’s assets. Of the face amount of this note, $550,000 automatically converts to common shares upon uplisting and $550,000 is convertible into common shares at a conversion price of $10.00 per share at any time after uplisting or certain other events. The Company analyzed the conversion feature of the agreement for derivative accounting considerations under ASC 815-15 “Derivatives and Hedging” and determined the embedded conversion feature should be classified as a derivative because the exercise price of the convertible note is subject to a variable conversion rate upon default and default includes matters outside the control of the Company. Accordingly, the Company bifurcated the conversion feature of the note and recorded a derivative liability pursuant to ASC 815. In connection with the note, the Company issued 50,000 shares of common stock and warrants to purchase 100,000 additional shares. The warrants did not qualify for equity classification based on the Company’s inability to assert there will be sufficient authorized and unissued shares of common stock to fulfill its obligation to settle the contract in shares should the warrants be exercised. Therefore, the warrants are reported as a derivative liability as of September 30, 2018. The initial fair value of the warrants and conversion feature were $792,191 and $389,829, respectively. The fair values of the warrants and conversion feature were remeasured as of the end of the financial reporting period and were determined to equal $718,539 and $388,172, respectively. The initial debt discount recorded was $1.1 million which will be accreted according to the effective interest method over the contractual term of the note. The excess fair value at initial measurement was recorded as derivative expense on the Statement of Operations. Refer to Note 12 for additional information regarding the fair value measurement of the warrants and beneficial conversion feature. |
9. Common Stock
9. Common Stock | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Common Stock | NOTE 9 – COMMON STOCK As of September 30, 2018, the Company was authorized to issue 600,000,000 shares of $0.001 par value per share Common Stock, of which 2,667,602 and 2,352,166 shares were issued outstanding as of September 30, 2018, and December 31, 2017, respectively. During the nine months ended September 30, 2018, the Company issued 199,093 shares of Common Stock for $2,024,350 in cash in connection with a private placement offering. During the nine months ended September 30, 2018, option holders exercised 14,843 options at $2.14 per share of common stock for $31,806. During the nine months ended September 30, 2018, the Company issued an aggregate of 87,500 shares of stock in connection with the issuance of debt instruments as noted above. The fair value allocated to the commitment shares on a relative fair value basis was $194,216, which was recorded as a debt discount on the Statement of Financial Position. During the nine months ended September 30, 2018, the Company issued 14,000 shares of common stock in exchange for strategic advisory and marketing services. The fair value of the stock compensation was $123,632 of which $50,898 and $63,957 was recognized in general and administrative expenses for the three and nine months ended September 30, 2018, respectively, with the remainder in prepaid assets for future services. |
10. Stock Options and Warrants
10. Stock Options and Warrants | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options and Warrants | NOTE 10 – STOCK OPTIONS AND WARRANTS Stock Purchase Options On March 21, 2018, the Company’s Board of Directors voted to grant to sixteen individuals options to purchase up to an aggregate of 75,000 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 $13.00, which was the market price of the options on the date of the grant. Included in the grants were options to purchase up to 12,500 shares to the Company’s President and Chief Executive Officer, and options to purchase up to 12,500 shares to the Company’s Chief Technical Officer. The options were not issued pursuant to a stock option or stock incentive plan. On April 6, 2018, the Company’s Board of Directors approved the grant of 12,500 shares of the Company’s common stock to the newest member of the Board of Directors. 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 $13.00. On June 13, 2018, the Company’s Board of Directors approved the grant of 3,000 options to purchase shares of the Company’s common stock, to a consultant in exchange for services. The options granted had an exercise price of $9.00 per share. One-sixth of the options shall vest each month for six months, the first one-sixth will vest in June 2018 and the last one-sixth will vest in November 2018. The grants expire on the eighth anniversary of the date of grant. On June 28, 2018, the Company’s Board of Directors approved the grant of an aggregate of 12,500 options to purchase shares of the Company’s common stock, consisting of grants of 6,250 options to two Board Members of the Company. The options granted had an exercise price of $8.40 per share, and vest one-third on each of the first, second, and third anniversaries of the date of grant, and expire on the eighth anniversary of the date of grant. On June 29, 2018, the Company’s Board of Directors approved the grant of an aggregate of 30,000 options to purchase shares of the Company’s common stock, consisting of grants of 1,250 options to 24 employees and consultants to the Company who had been instrumental in helping the Company get to the point of the initial rollout. The options granted had an exercise price of $8.40 per share, and vest one-third on each of the first, second, and third anniversaries of the date of grant, and expire on the eighth anniversary of the date of grant. The Company early adopted ASU 2018-07 in the third quarter of 2018. As such, the outstanding options issued to non-employees were measured using the Black-Scholes valuation model as of July 1, 2018 and will be amortized ratably over the remaining service period. An adjustment was made to retained earnings in the amount of $190 in connection with the adoption of the updated accounting guidance. Stock options issued to employees are valued on the date of issuance and amortized over the service period until they fully vest 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. As of September 30, 2018, the compensation expense totaled $2,001,102 to be recognized over the vesting period. The Company recorded $174,050 and $388,855 of stock-based compensation expense in the three and nine months ended September 30, 2018, respectively. The Company recorded a reversal of $652,489 in the three months ended September 30, 2017 due to a decrease in the value of the underlying stock. The Company recorded $399,049 of stock-based compensation expense in the nine months ended September 30, 2017. As of September 30, 2018, the Company had $ 1,219,425 in unrecognized expense related to future vesting of stock options. The following table summarizes the changes in options outstanding of the Company during the nine months ending September 30, 2018: Number of Options Weighted Average Exercise Price per Share Weighted Aggregate Outstanding, December 31, 2017 69,118 $ 5.75 Granted 133,000 $ 11.44 Exercised (14,843 ) $ 2.14 Cancelled (13,750 ) $ 11.75 Outstanding, September 30, 2018 173,525 $ 9.95 7.43 $ 144,996 Exercisable, September 30, 2018 52,147 $ 6.88 7.05 $ 109,774 Stock Purchase Warrants During the nine months ended September 30, 2018, the Company issued 175,000 warrants in connection with its debt agreements. The following table summarizes the changes in warrants outstanding during the nine months ended September 30, 2018: Number of Warrants Weighted Average Exercise Price per Share Outstanding, December 31, 2017 327,719 $ 9.00 Warrants issued pursuant to debt agreements 175,000 13.00 Outstanding, September 30, 2018 502,719 $ 10.39 Exercisable, September 30, 2018 100,000 $ 13.00 The warrants issued in 2017 are contractually exercisable two years after the grant date and expire four years after the grant date. There is a 30-day mandatory exercise period triggered by the Company’s stock trading on a national exchange at a price of more than $50.00 per share for 30 consecutive trading days. If warrants are not exercised within 30 days of the mandatory exercise period termination, the warrants will be forfeited. With respect to the warrants issued in 2018, 75,000 warrants are contractually exercisable 180 days after the grant date and expire five years after the grant date. The remaining 100,000 warrants are contractually exercisable immediately upon issuance and expire five years after the grant date. |
11. Revenue Recognition
11. Revenue Recognition | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | NOTE 11 – REVENUE RECOGNITION The Company provides digital reminiscence therapy to users suffering from neurodegenerative diseases and social isolation in a single operating segment. Sales are related to a beta version of the company’s product that incorporated the Company’s proprietary software but not the proprietary hardware and the newly rolled out ReminX product. ReminX is a consumer health product and general wellness device exempt from FDA regulations that is designed for seniors suffering from social isolation and living with dementia. ReminX is comprised of three key components: A ReminX computer tablet (proprietary hardware), an AI chatbot, and a family feedback loop (proprietary software). The initial commercial rollout of ReminX began in the three months ending September 2018. Revenue recognized in the three months ended September 30, 2018 Revenue recognized in the nine months ended September 30, 2018 Beta version 4,122 4,122 ReminX 2,363 2,363 Total Revenue $ 6,485 $ 6,485 The balances of the contract liabilities from contracts with customers as of September 30, 2018 and December 31, 2017 were as follows: Contract liabilities included in deferred revenue Balance as of January 1, 2017 1,800 Balance as of September 30, 2018 12,287 Change $ 10,487 Contract liabilities are recorded when subscription payments are collected in advance of delivery of subscription services. The change in contract liabilities primarily relates to customer activity associated with the prepaid pricing option including the receipt of cash payments and the satisfaction of performance obligations. Of the revenue recognized in the three and nine months ended September 30, 2018, $3,945 and $1,800 were reported in deferred revenue as of June 30, 2018, and December 31, 2017, respectively. As of September 30, 2018, the aggregate amount of transaction price allocated to remaining performance obligations was $12,287. The performance obligations will be satisfied within the next 12 months. The Company adopted the practical expedient to recognize as expense when incurred incremental costs to obtain contracts as all contracts are 12 months or less. Deferred contract costs incurred to fulfill the contract will be amortized ratably over the 12-month contract period. Amortization of deferred contract costs was $57,687 for the three and nine months ended September 30, 2018. A significant portion of the revenue recognized in the three and nine months ended September 30, 2018 arises from transactions with customers for services provided during beta testing on third-party tablets prior to the rollout of ReminX. |
12. Fair Value Measurements
12. Fair Value Measurements | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | NOTE 12 - FAIR VALUE MEASUREMENTS Measurement at fair value approximates amounts that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. The Company uses the Black-Scholes options pricing option model to measure the fair value of stock options and Monte Carlo simulations to measure the fair value of derivative liabilities. The derivative liabilities arise from certain conversion features of convertible debt and certain warrants issued in connection with the convertible debt. The table below presents the Company’s instruments measured at fair value as of September 30, 2018: Level 1 Level 2 Level 3 Total Fair value of options $ – $ – $ – $ – Fair value of derivative liabilities $ – $ – $ 1,106,711 $ 1,106,711 The table below presents the Company’s instruments measured at fair value as of December 31, 2017: Level 1 Level 2 Level 3 Total Fair value of options $ – $ – $ 960,518 $ 960,518 Derivative liabilities The following table presents the change in the fair value of the derivative liabilities: 2018 Fair value of instruments measured at fair value, December 31, 2017 $ – Initial recognition of a derivative liability 1,182,020 Change in fair value of derivative liability (75,309 ) Fair value of instruments measured at fair value, September 30, 2018 $ 1,106,711 The terms of the warrants provide that in the event the Company issues shares at a price per share lower than the exercise price in effect, the exercise price will be reduced to equal the per share price of the new securities. Similarly, the terms of the convertible note provide that in the event the Company issues new shares at a price lower than the conversion price in effect, the conversion price will be reduced to equal the per share price of the new securities. Due to the path-dependent nature of potential price adjustments, it is necessary to value the instruments using a Monte Carlo simulation. The inputs used for the valuation are as follows: Initial measurement As of September 30, 2018 Warrants Conversion Warrants Conversion Valuation date 9/21/2018 9/21/2018 9/30/2018 9/30/2018 Expected term 5 years 0.50 years 4.98 years 0.48 years Stock price $ 10.00 $ 10.00 $ 8.99 $ 8.99 Exercise price $ 13.00 $ 10.00 $ 13.00 $ 10.00 Volatility 107.2% 107.3% 107.6% 108.2% Risk-free rate 2.95% 2.38% 2.94% 2.34% The volatility assumption was measured from the volatility of guideline public companies using a historical period commensurate with the remaining expected term of the applicable instrument. |
13. Subsequent Events
13. Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 13 - 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: Financing In October 2018, the Company repaid two promissory notes and all accrued and unpaid interest thereon in the amount of $102,971. In October 2018, the Company modified a $50,000 loan as part of its crossover funding, which will automatically convert to common shares upon uplisting. The note bears interest at a rate of 6% per annum and may be prepaid at any time at 125% of the outstanding principal at the time of repayment, plus accrued and unpaid interest. Stock Options In October 2018, the Company’s Board of Directors approved the grant of 20,000 options to purchase shares of the Company’s common stock. The options granted had an exercise price of $4.10 per share, and vest one-third on each of the first, second, and third anniversaries of the date of grant, and expire on the eighth anniversary of the date of grant. In October 2018, the Company’s Board of Directors approved the grant of 12,500 options to purchase shares of the Company’s common stock to contractors. The options granted had an exercise price of $4.10 per share, and vest one-third on each of the first, second, and third anniversaries of the date of grant, and expire on the eighth anniversary of the date of grant. |
3. Summary of Significant Acc_2
3. Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Nature of Business | Basis of Preparation The Company’s financial statements are prepared using the accrual basis of accounting in accordance with 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 expenses during the reporting periods. Significant estimates are made in relation to 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. |
Inventory | Inventory The Company reported inventory related to its ReminX tablets as of September 30, 2018. The Company adopted FIFO as its inventory valuation method and reports inventory at the lower of cost or net realizable value. |
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 application 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. Some costs in post-implementation stage can be capitalized if the modifications add additional functionality in the future. The application development stage begin in the first fiscal quarter of 2018 and the post-implementation/operation stage was reached in the third fiscal quarter of 2018. |
Research and Development | Research and Development The Company engages in new software and hardware development efforts. Research and development expenses relating to possible future software and hardware are expensed as incurred. Research and development expenses were $64,377 and $142,565 for the three and nine months ended September 30, 2018, respectively, and $66,940 and $158,274 for the three and nine months ended September 30, 2017, respectively. |
Revenue | Revenue The Company generates revenue from the sale of device consisting of a digital tablet specifically designed for seniors with proprietary software. As the nature of the Company’s performance obligation to its customers is to provide digital reminiscence therapy, which requires both the tablet and the software, the Company determined it has a single performance obligation. The Company recognizes revenue upon satisfaction of the single performance obligation ratably over the contract period as the customer receives and consumes the benefits derived from the Company’s performance as the Company performs. |
Derivative Instruments | Derivative Instruments The Company evaluates its convertible notes and warrants to determine whether those contracts, or components of those contracts, qualify as derivatives to be separately accounted for. To the extent the conversion price of notes issued is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 – 40, the fair value of the notes is recognized as a derivative instrument at the issuance date. The classification of derivative instruments is re-assessed at the end of each financial reporting period. Each derivative is measured at the transaction date and will be remeasured by a third-party specialist and reported at fair value with changes reported through profit and loss each financial reporting date until the liabilities are settled. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and the fair value is classified as equity. The Company uses a Monte Carlo simulation to value its derivatives due to the path-dependent nature of certain potential exercise price adjustments. The Company does not use derivative instruments to hedge exposure to cash flow or fair value risks. |
Reclassification | Reclassification Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation. Professional Fees and Depreciation are presented with General and Administrative expenses. Research and Development costs and Sales and Marketing expenses have been presented separately from General and Administrative expenses. Related Party Advances are presented with Accounts Payable and Accrued Liabilities and Restricted Cash is presented separately from Cash. |
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 stock options and warrants. 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 nine months ended September 30, 2018 and 2017, all of the Company’s potentially dilutive securities (options, warrants, and conversion features) were excluded from the computation of diluted earnings per share as they were anti-dilutive. The total numbers of potentially dilutive Common Shares that were excluded were 790,945 and 396,437 for the nine months ended September 30, 2018 and 2017, respectively. |
Reverse stock split | Reverse stock split On September 25, 2018, the Company effectuated a reverse stock-split of its issued and outstanding common stock at a ratio of one-for-20 (the “Listing Reverse Split”). The Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada to effectuate the Listing Reverse Split. The Listing Reverse Split did not affect the number of authorized shares of common stock. A proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the exercise or conversion of the Company’s outstanding equity awards, options and warrants to purchase shares of common stock and outstanding convertible notes. The accompanying condensed consolidated financial statements and notes give retroactive effect to the Listing Reverse Split for all periods presented. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) . In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows, Restricted Cash (“ASU 2016-18”) to address diversity in practice in the classification and presentation of changes in restricted cash on the statement of cash flows. Under ASU 2016-18, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning and ending cash amounts shown on the statement of cash flows. The update was effective for the Company January 1, 2018 and was applied using a retrospective transition method. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718) (“ASU 2018-07”). ASU 2018-07 provides for improvements to nonemployee share-based payment accounting by expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The awards will be measured at grant date, consistent with accounting for employee share-based payment awards. The measurement date has been redefined as the date at which the grantor and grantee reach a mutual understanding of the key terms and conditions of the award. The requirement to reassess classification of equity-classified awards upon vesting has been eliminated. ASU 2018-07 will have a material impact on the Company’s financial statements as a significant number of options were granted to nonemployees. The Company adopted ASU 2018-07 July 1, 2018. |
4. Inventory (Tables)
4. Inventory (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | 2018 Inventory, December 31, 2017 $ – Tablets transferred from property and equipment 85,063 Purchases 68,450 Sales (66,549 ) Impairment (16,019 ) Inventory, September 30, 2018 $ 70,945 |
5. Prepaids Expenses (Tables)
5. Prepaids Expenses (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaids Expenses | NOTE 5 – PREPAID EXPENSES Prepaid expenses consisted of the following: September 30, 2018 December 31, 2017 Tablets $ 467,640 $ – Professional services 73,841 9,354 Commissions 18,000 – Study 15,000 – Marketing services 11,692 77,655 Subscription 11,000 6,667 Freight 6,000 – Insurance 5,310 – Rent – 1,500 Total prepaid expenses $ 608,483 $ 95,176 During the nine months ended September 30, 2018, the Company made prepayments to its equipment manufacturer to procure the raw materials and to perform the subassembly of the tablets to be sold. The Company does not have any ownership rights to the assets until the finished goods are received, therefore the prepayment of tablets is classified as a Prepaid Tablets until receipt occurs. |
6. Property and Equipment (Tabl
6. Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment schedule | September 30, 2018 December 31, 2017 Computer and Equipment $ 8,025 $ 10,237 Assets Used to Fulfill Contract Obligations – 70,195 Tooling for ReminX hardware 56,500 – Less: Accumulated Depreciation (18,926 ) (3,067 ) Net Property and Equipment $ 45,599 $ 77,365 |
8. Debt (Tables)
8. Debt (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of debt | Ref Amount Interest rate Net debt Carrying Accrued Total 1 $ 50,000 14.4% $ – $ 50,000 $ 1,321 $ 51,321 2 50,000 12.0% – 50,000 1,578 51,578 3 50,000 12.0% – 50,000 1,561 51,561 5 275,000 OID (139,151 ) 135,849 2,564 138,413 6 550,000 OID (276,267 ) 273,733 – 273,736 $ 975,000 $ (415,418 ) $ 559,582 $ 7,024 $ 566,609 |
Schedule of convertible notes payable | Ref Amount Interest Net debt Carrying Accrued and Total 7 1,100,000 OID (1,099,999 ) 1 – 1 $ 1,100,000 $ (1,099,999 ) $ 1 $ – $ 1 |
10. Stock Purchase Options and
10. Stock Purchase Options and Warrants (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Option activity | Number of Options Weighted Average Exercise Price per Share Weighted Aggregate Outstanding, December 31, 2017 69,118 $ 5.75 Granted 133,000 $ 11.44 Exercised (14,843 ) $ 2.14 Cancelled (13,750 ) $ 11.75 Outstanding, September 30, 2018 173,525 $ 9.95 7.43 $ 144,996 Exercisable, September 30, 2018 52,147 $ 6.88 7.05 $ 109,774 |
Schedule of warrants outstanding | Number of Warrants Weighted Average Exercise Price per Share Outstanding, December 31, 2017 327,719 $ 9.00 Warrants issued pursuant to debt agreements 175,000 13.00 Outstanding, September 30, 2018 502,719 $ 10.39 Exercisable, September 30, 2018 100,000 $ 13.00 |
11. Revenue Recognition (Tables
11. Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Subscriptions | Revenue recognized in the three months ended September 30, 2018 Revenue recognized in the nine months ended September 30, 2018 Beta version 4,122 4,122 ReminX 2,363 2,363 Total Revenue $ 6,485 $ 6,485 |
Contract liabilities | Contract liabilities included in deferred revenue Balance as of January 1, 2017 1,800 Balance as of September 30, 2018 12,287 Change $ 10,487 |
12. Fair Value Measurements (Ta
12. Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Level 1 Level 2 Level 3 Total Fair value of options $ – $ – $ – $ – Fair value of derivative liabilities $ – $ – $ 1,106,711 $ 1,106,711 The table below presents the Company’s instruments measured at fair value as of December 31, 2017: Level 1 Level 2 Level 3 Total Fair value of options $ – $ – $ 960,518 $ 960,518 |
Schedule of Derivative Liabilities at Fair Value | 2018 Fair value of instruments measured at fair value, December 31, 2017 $ – Initial recognition of a derivative liability 1,182,020 Change in fair value of derivative liability (75,309 ) Fair value of instruments measured at fair value, September 30, 2018 $ 1,106,711 |
Schedule of Valuation Techniques | Initial measurement As of September 30, 2018 Warrants Conversion feature Warrants Conversion feature Valuation date 9/21/2018 9/21/2018 9/30/2018 9/30/2018 Expected term 5 years 0.50 years 4.98 years 0.48 years Stock price $ 10.00 $ 10.00 $ 8.99 $ 8.99 Exercise price $ 13.00 $ 10.00 $ 13.00 $ 10.00 Volatility 107.2% 107.3% 107.6% 108.2% Risk-free rate 2.95% 2.38% 2.94% 2.34% |
2. Going Concern (Details Narra
2. Going Concern (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accumulated deficit | $ (7,676,831) | $ (4,536,947) |
3. Summary of Significant Acc_3
3. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Accounting Policies [Abstract] | ||||
Research and development expenses | $ 64,377 | $ 66,940 | $ 142,565 | $ 158,274 |
Antidilutive shares excluded from EPS | 790,945 | 396,437 |
4. Inventory (Details)
4. Inventory (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | ||||
Inventory at beginning | $ 0 | |||
Tablets transferred from property and equipment | 85,063 | |||
Purchases | 68,450 | |||
Sales | 1,901 | $ 0 | ||
Impairment | $ (16,019) | $ 0 | (16,019) | $ 0 |
Inventory at end | $ 70,945 | $ 70,945 |
4. Inventory (Details Narrative
4. Inventory (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Inventory Disclosure [Abstract] | ||||
Inventory write down | $ (16,019) | $ 0 | $ (16,019) | $ 0 |
5. Prepaid Expenses (Details)
5. Prepaid Expenses (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Tablets | $ 467,640 | $ 0 |
Professional services | 73,841 | 9,354 |
Commissions | 18,000 | 0 |
Study | 15,000 | 0 |
Marketing services | 11,692 | 77,655 |
Subscription | 11,000 | 6,667 |
Freight | 6,000 | 0 |
Insurance | 5,310 | 0 |
Rent | 0 | 1,500 |
Net prepaid expense | $ 608,483 | $ 95,176 |
6. Property and Equipment (Deta
6. Property and Equipment (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Abstract] | ||
Computer and equipment | $ 8,025 | $ 10,237 |
Assets used to fulfill contract obligations | 0 | 70,195 |
Tooling for ReminX hardware | 56,500 | 0 |
Less: Accumulated depreciation | (18,926) | (3,067) |
Net property and equipment | $ 45,599 | $ 77,365 |
6 Property and Equipment (Detai
6 Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 14,795 | $ 333 | $ 16,650 | $ 766 |
Loss on disposal of fixed assets | $ 0 | $ 0 | $ (6,170) | $ 0 |
7. Software Development Costs (
7. Software Development Costs (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Research and Development [Abstract] | ||
Amortization of software development costs | $ 14,210 | $ 14,429 |
8. Debt (Details - Notes Payabl
8. Debt (Details - Notes Payable) | Sep. 30, 2018USD ($) |
Note Payable 1 [Member] | |
Face amount | $ 50,000 |
Interest rate | 14.40% |
Net debt discount | $ 0 |
Carrying value of debt | 50,000 |
Accrued and unpaid interest | 1,321 |
Total notes payable | 51,321 |
Note Payable 2[Member] | |
Face amount | $ 50,000 |
Interest rate | 12.00% |
Net debt discount | $ 0 |
Carrying value of debt | 50,000 |
Accrued and unpaid interest | 1,578 |
Total notes payable | 51,578 |
Note Payable 3 [Member] | |
Face amount | $ 50,000 |
Interest rate | 12.00% |
Net debt discount | $ 0 |
Carrying value of debt | 50,000 |
Accrued and unpaid interest | 1,561 |
Total notes payable | 51,561 |
Note Payable 5 [Member] | |
Face amount | 275,000 |
Net debt discount | (139,151) |
Carrying value of debt | 135,849 |
Accrued and unpaid interest | 2,564 |
Total notes payable | 138,413 |
Note Payable 6 [Member] | |
Face amount | 550,000 |
Net debt discount | (276,267) |
Carrying value of debt | 273,733 |
Accrued and unpaid interest | 0 |
Total notes payable | 273,736 |
Notes Payable [Member] | |
Face amount | 975,000 |
Net debt discount | (415,418) |
Carrying value of debt | 559,582 |
Accrued and unpaid interest | 7,024 |
Total notes payable | $ 566,609 |
8. Debt (Details - Convertible
8. Debt (Details - Convertible Notes) - Convertible Notes Payable [Member] | Sep. 30, 2018USD ($) |
Face amount | $ 1,100,000 |
Net debt discount | (1,099,999) |
Carrying value of debt | 1 |
Accrued and unpaid interest | 0 |
Total Convertible notes | $ 1 |
8. Debt (Details Narrative)
8. Debt (Details Narrative) | 9 Months Ended |
Sep. 30, 2018USD ($)shares | |
Note Payable 1 [Member] | |
Debt issuance date | May 11, 2018 |
Debt face value | $ 50,000 |
Debt stated interest rate | 14.40% |
Note Payable 2[Member] | |
Debt issuance date | Jun. 28, 2018 |
Debt face value | $ 50,000 |
Debt stated interest rate | 12.00% |
Note Payable 3 [Member] | |
Debt issuance date | Jul. 2, 2018 |
Debt face value | $ 50,000 |
Debt stated interest rate | 12.00% |
Note Payable 4 [Member] | |
Debt issuance date | Jul. 2, 2018 |
Debt face value | $ 100,000 |
Debt stated interest rate | 12.00% |
Note Payable 5 [Member] | |
Debt issuance date | Sep. 17, 2018 |
Debt face value | $ 275,000 |
Number Of Common Stock Convered | shares | 25,000 |
Initial Debt Discount | $ 301,775 |
Note Payable 6 [Member] | |
Debt issuance date | Sep. 14, 2018 |
Debt face value | $ 550,000 |
Number Of Common Stock Convered | shares | 12,500 |
Initial Debt Discount | $ 154,760 |
Note Payable 7 [Member] | |
Debt issuance date | Sep. 21, 2018 |
Debt face value | $ 1,100,000 |
Debt stated interest rate | 10.00% |
Number Of Common Stock Convered | shares | 550,000 |
Initial Debt Discount | $ 1,100,000 |
Beneficial Conversion Feature | 792,191 |
Fair values of warrants | 390 |
Remeasurement of fair values of the warrants | 718,539 |
Remeasurement of Beneficial conversion feature | $ 388,172 |
9. Common Stock (Details Narrat
9. Common Stock (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Common stock Par value | $ 0.001 | $ 0.001 | $ 0.001 | |
Common stock, Authorized | 600,000,000 | 600,000,000 | 600,000,000 | |
Common stock, Issued | 2,667,602 | 2,667,602 | 2,352,166 | |
Common stock, outstanding | 2,667,602 | 2,667,602 | 2,352,166 | |
Proceeds from options exercised | $ 31,806 | $ 0 | ||
Stock issued in connection with issuance of debt | $ 87,500 | |||
Stock issued in connection with issuance of debt, Shares | 194,216 | |||
strategic sales and marketing services | ||||
Stock issued in exchange of services, shares | 14,000 | |||
Fair value of stock compensation | $ 123,632 | |||
strategic sales and marketing services | General and Administrative Expense [Member] | ||||
Fair value of stock compensation | $ 50,898 | $ 63,957 | ||
Options Exercised [Member] | ||||
Stock issued upon exercise of options, shares | 14,843 | |||
Options exercised, exercise price | $ 2.14 | |||
Proceeds from options exercised | $ 31,806 | |||
Private Placement [Member] | ||||
Stock issued new, shares | 199,093 | |||
Proceeds from private placement | $ 2,024,350 |
10. Stock Purchase Options an_2
10. Stock Purchase Options and Warrants (Details - Option activity) - Equity Option [Member] | 9 Months Ended |
Sep. 30, 2018USD ($)$ / sharesshares | |
Number of Options | |
Options outstanding, beginning balance | shares | 69,118 |
Options granted | shares | 133,000 |
Options exercised | shares | (14,843) |
Options cancelled | shares | (13,750) |
Options outstanding, ending balance | shares | 173,525 |
Options exercisable | shares | 52,147 |
Weighted Average Exercise Price | |
Weighted average exercise price, options outstanding beginning | $ / shares | $ 5.75 |
Weighted average exercise price, options granted | $ / shares | 11.44 |
Weighted average exercise price, options exercised | $ / shares | 2.14 |
Weighted average exercise price, options cancelled | $ / shares | 11.75 |
Weighted average exercise price, options outstanding ending | $ / shares | 9.95 |
Weighted average exercise price, options exercisable | $ / shares | $ 6.88 |
Weighted-Average Remaining Contractual Term (In Years) | |
Weighted Average Remaining Contractual Term (in years) Outstanding | 7 years 5 months 5 days |
Weighted Average Remaining Contractual Term (in years) Exercisable | 7 years 18 days |
Aggregate Intrinsic Value | |
Aggregate Intrinsic Value Outstanding | $ | $ 144,996 |
Aggregate Intrinsic Value Exercisable | $ | $ 109,774 |
10. Stock Purchase Options an_3
10. Stock Purchase Options and Warrants (Details - Warrants) | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Number of warrants | |
Warrants outstanding, beginning balance | shares | 327,719 |
Warrants issued | shares | 175,000 |
Warrants outstanding, ending balance | shares | 502,719 |
Warrants exercisable | shares | 100,000 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price, Warrants outstanding, beginning balance | $ / shares | $ 9 |
Weighted Average Exercise Price, Warrants issued | $ / shares | 13 |
Weighted Average Exercise Price, Warrants outstanding, ending balance | $ / shares | 10.39 |
Weighted average exercise price, exercisable | $ / shares | $ 13 |
10. Stock Purchase Options an_4
10. Stock Purchase Options and Warrants (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Share based compensation | $ 174,050 | $ 652,489 | $ 388,855 | $ 399,049 |
Unrecognized stock option expense | $ 1,219,425 | $ 1,219,425 | ||
Options [Member] | ||||
Options granted | 75,000 | |||
Options vesting period | 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 | |||
Options granted, value | $ 2,097,912 | |||
Options [Member] | President [Member] | ||||
Options granted | 12,500 | |||
Options [Member] | Chief Executive Officer [Member] | ||||
Options granted | 12,500 | |||
Options [Member] | Newest member of Board of Directors [Member] | ||||
Options granted | 12,500 | |||
Option exericse price | $ 8.40 | |||
Options [Member] | TwentyFour employees and consultants [Member] | ||||
Options granted | 30,000 | |||
Option exericse price | $ 8.40 | |||
Options [Member] | Two Board Members [Member] | ||||
Options granted | 12,500 | |||
Option exericse price | $ 8.40 | |||
Options [Member] | Consultant [Member] | ||||
Options granted | 3,000 | |||
Option exericse price | $ 9 |
11. Revenue Recognition (Detail
11. Revenue Recognition (Details - Subscriptions) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenue | $ 6,485 | $ 0 | $ 6,485 | $ 0 |
Beta Version [Member] | ||||
Revenue | 4,122 | 4,122 | ||
ReminX [Member] | ||||
Revenue | $ 2,363 | $ 2,363 |
11. Revenue Recognition (Deta_2
11. Revenue Recognition (Details - contract liabilities) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Revenue from Contract with Customer [Abstract] | |
Contract liabilities, beginning balance | $ 1,800 |
Contract liabilites, ending balance | 12,287 |
Change in contract liabilities | $ 10,487 |
11. Revenue Recognition (Deta_3
11. Revenue Recognition (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Revenue from Contract with Customer [Abstract] | ||
Deffered Revenue | $ 3,945 | $ 1,800 |
Amortization of deferred contract costs | $ 57,687 |
12. Fair Value Measurements (De
12. Fair Value Measurements (Details - Fair Value Measurements) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Fair value of derivative liabilities | $ 1,106,711 | $ 0 | $ 0 | $ 234,502 |
Fair Value, Measurements, Recurring [Member] | ||||
Fair value of options | 0 | 960,518 | ||
Fair value of derivative liabilities | 1,106,711 | |||
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | ||||
Fair value of options | 0 | 0 | ||
Fair value of derivative liabilities | 0 | |||
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | ||||
Fair value of options | 0 | 0 | ||
Fair value of derivative liabilities | 0 | |||
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | ||||
Fair value of options | 0 | $ 960,518 | ||
Fair value of derivative liabilities | $ 1,106,711 |
12. Fair Value Measurements (_2
12. Fair Value Measurements (Details - Change in the fair value of the derivative liabilities) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | ||||
Fair value of instruments measured at fair value | $ 0 | $ 234,502 | ||
Initial recognition of a derivative liability | 1,182,020 | 0 | ||
Change in fair value of derivative liability | $ (75,309) | $ 0 | (75,309) | (142,835) |
Fair value of instruments measured at fair value | $ 1,106,711 | $ 0 | $ 1,106,711 | $ 0 |