Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2017 | |
Document And Entity Information | |
Entity Registrant Name | MassRoots, Inc. |
Entity Central Index Key | 1,589,149 |
Document Type | S1 |
Document Period End Date | Sep. 30, 2017 |
Amendment Flag | false |
Entity Filer Category | Smaller Reporting Company |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
CURRENT ASSETS | |||
Cash | $ 267,322 | $ 374,490 | $ 386,316 |
Accounts receivable | 3,306 | 39,500 | |
Prepaid expenses | 10,440 | 12,938 | |
Total current assets | 277,762 | 377,796 | 438,754 |
Property and equipment - net | 116,845 | 77,322 | 73,023 |
OTHER ASSETS | |||
Goodwill | 4,971,991 | ||
Investments | 403,249 | 235,000 | 175,000 |
Deposits and other assets | 33,502 | 33,502 | 33,502 |
Total Other Assets | 5,408,742 | 268,502 | 208,502 |
TOTAL ASSETS | 5,803,349 | 723,620 | 720,279 |
CURRENT LIABILITIES | |||
Accounts Payable | 258,845 | 382,550 | 109,997 |
Accrued expenses | 63,274 | 84,355 | |
Loan payable | 3,156 | ||
Due to related parties | 492,003 | ||
Deferred revenue | 27,010 | ||
Convertible notes payable, net of debt discount of $713,658 | 331,342 | ||
Derivative Liabilities | 1,506,414 | 1,301,138 | |
Total current liabilities | 2,655,034 | 1,710,698 | 194,352 |
LONG-TERM LIABILITY | |||
Convertible notes payable, long term | 108,100 | 209,100 | |
Total Liabilities | 2,655,034 | 1,818,798 | 403,452 |
STOCKHOLDERS' EQUITY (DEFICIT) | |||
Common stock, $0.001 par value; 200,000,000 shares authorized; 111,326,981 and 71,908,370 shares issued and outstanding as of September 30, 2017 and December 31, 2016; 71,908,370 and 46,939,965 shares issued and outstanding as of December 31, 2016 and 2015, respectively | 111,327 | 71,908 | 46,940 |
Common stock to be issued, 1,551,217 and 1,740,000 shares as of September 30, 2017 and December 31, 2016, 1,740,000 and 624,000 shares,respectively | 1,551 | 1,740 | 624 |
Additional paid in capital | 59,052,979 | 28,693,819 | 12,101,784 |
Accumulated deficit | (56,017,542) | (29,862,645) | (11,832,521) |
Total stockholders' equity (deficit) | 3,148,315 | (1,095,178) | 316,827 |
Total liabilities and stockholders' equity (deficit) | $ 5,803,349 | $ 723,620 | $ 720,279 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | |||
Common Stock, Par Value | $ 0.001 | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 200,000,000 | 200,000,000 | 200,000,000 |
Common Stock, Shares Issued | 111,326,981 | 71,908,370 | 46,939,965 |
Common Stock, Shares Outstanding | 111,326,981 | 71,908,370 | 46,939,965 |
Common stock to be issued | 1,551,217 | 1,740,000 | 624,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Statements Of Operations | ||||||
Revenues: | $ 11,516 | $ 209,003 | $ 289,130 | $ 794,621 | $ 701,581 | $ 213,963 |
Operating expenses: | ||||||
Cost of revenues | 180,427 | 57,611 | ||||
Advertising | 302,809 | 121,642 | 865,052 | 679,061 | 985,342 | 717,773 |
Payroll and related expenses | 811,775 | 478,775 | 2,732,911 | 1,714,819 | 2,112,879 | 1,381,071 |
Stock based compensation | 5,510,554 | 613,353 | 19,882,527 | 2,306,662 | 7,380,431 | 2,722,662 |
Other general and administrative expenses | 908,392 | 880,441 | 3,835,470 | 2,094,829 | 3,644,881 | 1,459,946 |
Total operating expense | 7,533,530 | 2,094,211 | 27,315,960 | 6,795,371 | 14,303,960 | 6,339,063 |
Loss from operations | (7,522,014) | (1,885,208) | (27,026,830) | (6,000,750) | (13,602,379) | (6,125,100) |
Other income (expense): | ||||||
Gain on sale of securities | 75,000 | |||||
Gain / Loss on change in fair value of derivative liabilities | 634,073 | 1,006,358 | 986,058 | 1,320,654 | (581,912) | (2,236,401) |
Interest expense | (189,125) | (2,573,814) | (189,125) | (3,575,008) | (3,845,833) | (111,397) |
Total other income (expense): | 444,948 | (1,567,456) | 871,933 | (2,254,354) | (4,427,745) | (2,347,798) |
Net loss before income taxes | (7,077,066) | (3,452,664) | (26,154,897) | (8,255,104) | (18,030,124) | (8,472,898) |
Provision of income taxes (benefit) | ||||||
NET LOSS | $ (7,077,066) | $ (3,452,664) | $ (26,154,897) | $ (8,255,104) | $ (18,030,124) | $ (8,472,898) |
Net loss per common share-basic and diluted | $ (0.07) | $ (0.07) | $ (0.28) | $ (0.17) | $ (0.34) | $ (0.19) |
Weighted average number of common shares outstanding-basic and diluted | 104,274,253 | 51,083,084 | 92,196,637 | 48,916,198 | 53,151,429 | 43,834,157 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) - USD ($) | Common Stock | Common Stock to be Issued | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2015 | 46,939,965 | 624,000 | |||
Beginning Balance, Amount at Dec. 31, 2015 | $ 46,940 | $ 624 | $ 12,101,784 | $ (11,832,521) | $ 316,827 |
Common stock issued for services rendered, Shares | 4,225,675 | 1,740,000 | |||
Common stock issued for services rendered, Amount | $ 4,226 | $ 1,740 | 4,193,940 | 4,199,906 | |
Sale of common stock, Shares | 10,350,376 | ||||
Sale of common stock, Amount | $ 10,350 | 4,989,925 | 5,000,275 | ||
Common stock issued upon exercise of warrants for cash, Shares | 5,242,393 | ||||
Common stock issued upon exercise of warrants for cash, Amount | $ 5,242 | 1,128,252 | 1,133,494 | ||
Common stock issued upon cashless exercise of options, Shares | 264,158 | ||||
Common stock issued upon cashless exercise of options, Amount | $ 264 | (264) | |||
Common stock issued upon cashless exercise of warrants, Shares | 639,051 | ||||
Common stock issued upon cashless exercise of warrants, Amount | $ 639 | (639) | |||
Common stock issued in settlement of convertible notes, Shares | 3,108,229 | ||||
Common stock issued in settlement of convertible notes, Amount | $ 3,108 | 1,356,783 | 1,359,891 | ||
Common stock issued related to 2015 stock grants, Shares | 624,000 | (624,000) | |||
Common stock issued related to 2015 stock grants, Amount | $ 624 | $ (624) | |||
Common stock issued upon exercise of options for cash, Shares | 210,000 | ||||
Common stock issued upon exercise of options for cash, Amount | $ 210 | 24,790 | 25,000 | ||
Common stock issued for penalties related to convertible notes, Shares | 304,523 | ||||
Common stock issued for penalties related to convertible notes, Amount | $ 305 | 163,316 | 163,621 | ||
Fair value of warrants issued for services rendered, Amount | 68,369 | 68,369 | |||
Reclassify fair value of derivative liability to equity upon note payment and warrant exercise(s), Amount | 1,555,407 | 1,555,407 | |||
Fair value of stock options issued for services, Amount | 3,112,156 | 3,112,156 | |||
Net loss | (18,030,124) | (18,030,124) | |||
Ending Balance, Shares at Dec. 31, 2016 | 71,908,370 | 1,740,000 | |||
Ending Balance, Amount at Dec. 31, 2016 | $ 71,908 | $ 1,740 | 28,693,819 | (29,862,645) | (1,095,178) |
Common stock issued for services rendered, Shares | 22,745,898 | (1,005,141) | |||
Common stock issued for services rendered, Amount | $ 22,746 | $ (1,005) | 14,182,514 | 14,204,255 | |
Sale of common stock, Shares | 2,085,000 | 309,000 | |||
Sale of common stock, Amount | $ 2,085 | $ 309 | 1,195,606 | 1,198,000 | |
Common stock issued upon exercise of warrants for cash, Shares | 6,933,041 | 112,500 | |||
Common stock issued upon exercise of warrants for cash, Amount | $ 6,933 | $ 113 | 4,746,150 | 4,753,196 | |
Common stock issued upon cashless exercise of options, Shares | 41,153 | 394,858 | |||
Common stock issued upon cashless exercise of options, Amount | $ 41 | $ 394 | (435) | ||
Common stock issued upon cashless exercise of warrants, Shares | 355,689 | ||||
Common stock issued upon cashless exercise of warrants, Amount | $ 356 | (356) | |||
Common stock issued in settlement of convertible notes, Shares | 1,081,000 | ||||
Common stock issued in settlement of convertible notes, Amount | $ 1,081 | 107,019 | 108,100 | ||
Common stock issued to acquire Odava Inc., Shares | 3,250,000 | ||||
Common stock issued to acquire Odava Inc., Amount | $ 3,250 | 1,963,000 | 1,966,250 | ||
Common stock issued to acquire DDDigtal Inc., Shares | 2,926,830 | ||||
Common stock issued to acquire DDDigtal Inc., Amount | $ 2,927 | 2,880,293 | 2,883,220 | ||
Reclassify fair value of liability warrants issued in connection with sale of common stock | (1,003,870) | (1,003,870) | |||
Reclassify fair value of derivative liability to equity upon warrant exercise(s) | 610,967 | 610,967 | |||
Stock based compensation | 5,678,272 | 5,678,272 | |||
Net loss | $ (26,154,897) | (26,154,897) | |||
Ending Balance, Shares at Sep. 30, 2017 | 111,326,981 | 1,551,217 | |||
Ending Balance, Amount at Sep. 30, 2017 | $ 111,327 | $ 1,551 | $ 3,148,315 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net loss | $ (26,154,897) | $ (8,255,104) | $ (18,030,124) | $ (8,472,898) |
Adjustments to reconcile net (loss) to net cash (used in) operating activities: | ||||
Depreciation | 21,344 | 14,224 | 19,451 | 10,174 |
Amortization of debt discounts | 187,272 | 1,549,669 | 1,549,669 | 107,016 |
Stock based compensation | 19,882,527 | 2,496,873 | 7,380,431 | 2,722,662 |
Gain on sale of securities | (75,000) | |||
Change in fair value of derivative liabilities | (986,058) | (1,320,654) | 581,912 | 2,236,401 |
Non cash interest | 1,265,376 | 1,265,376 | 4,381 | |
Penalties related to note maturity | 763,872 | 763,872 | ||
Changes in operating assets and liabilities | ||||
Accounts receivable | 6,889 | (72,324) | 36,194 | (28,299) |
Prepaid and other | (13,687) | 12,938 | 12,938 | 209,370 |
Deposit | (30,953) | |||
Accounts payable and other liabilities | (41,556) | 629,298 | 210,455 | 112,906 |
Deferred revenue | (27,010) | 27,010 | ||
Net cash used in operating activities | (7,200,176) | (2,915,832) | (6,182,816) | (3,129,240) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Cash acquired from acquisition of DDDigtal Inc | 8,672 | |||
Cash acquired from acquisition of Odava, Inc. | 2,601 | |||
Proceeds from sale of securities | 250,000 | |||
Cash paid related to acquisition of Odava, Inc. | (40,570) | |||
Purchase of equity investment | (100,002) | |||
Purchase of convertible promissory note | (300,000) | |||
Purchase of equipment | (57,534) | (19,100) | (23,750) | (69,035) |
Investment in DDDigtal LLC | (60,000) | |||
Investment in Flowhub | (175,000) | |||
Net cash used in investing activities | (236,833) | (19,100) | (83,750) | (244,035) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Net proceeds from sale of common stock | 1,198,000 | 1,660,500 | 5,000,275 | 3,075,577 |
Proceeds from issuance of convertible note | 942,500 | 1,420,000 | 1,420,000 | |
Proceeds from exercise of warrants | 4,753,196 | 596,331 | 1,133,494 | 542,086 |
Proceeds from exercise of options | 25,000 | 25,000 | ||
Proceeds from related party advances | 442,500 | |||
Repayments of loans | (6,355) | |||
Repayments of convertible notes | (1,026,600) | (1,324,029) | ||
Net Cash Provided by Financing Activities | 7,329,841 | 2,675,231 | 6,254,740 | 3,617,663 |
Net (decrease) increase in cash | (107,168) | (259,701) | (11,826) | 244,388 |
CASH AT BEGINNING OF PERIOD | 374,490 | 386,316 | 386,316 | 141,928 |
CASH AT END OF YEAR | 267,322 | 126,615 | 374,490 | 386,316 |
NON-CASH FINANCING ACTIVITIES | ||||
Common stock issued in settlement of debt | 108,100 | 447,085 | 1,359,891 | 60,000 |
Common stock issued in payment of penalties related to notes payable | 163,621 | 163,621 | ||
Common stock issued to acquire DDDigtal Inc. | 2,883,220 | |||
Net assets acquired from acquisition of DDDigtal Inc. | 15,448 | |||
Common stock issued to acquire Odava, Inc | 1,966,250 | |||
Net assets acquired from acquisition of Odava, Inc. | 2,601 | |||
Reclassification of liability warrants from equity in connection with the sale of common stock | 1,003,870 | |||
Reclassification of derivative liability to equity upon note prepayment(s) | 7,308 | |||
Reclassification of derivative liability to equity upon warrant exercise(s) | $ 610,967 | |||
Beneficial conversion feature relating to convertible note payable | 945,596 | |||
Reclassification of derivative liability to equity upon note payment(s) | $ 1,555,407 | $ 3,336,109 |
1. NATURE OF OPERATIONS AND BAS
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION | NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION MassRoots, Inc. (“MassRoots” or the “Company”) has created a technology platform for the cannabis industry focused on enabling users to share their cannabis content, follow their favorite dispensaries, and stay connected with the legalization movement. The Company was incorporated in the State of Delaware on April 26, 2013. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of September 30, 2017 and for the three and nine months ended September 30, 2017 and 2016. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the operating results for the full year ending December 31, 2017, or any other period. These interim condensed consolidated financial statements should be read in conjunction with the financial statements and related disclosures of the Company as of December 31, 2016 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on March 31, 2017. Acquisitions DDDigtal Inc. On December 15, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Whaxy Inc., a wholly-owned subsidiary of the Company (“Merger Subsidiary”), DDDigtal Inc., a Colorado corporation (“DDDigtal”), Zachary Marburger, an individual acting solely in his capacity as Stockholder Representative, and all of the stockholders of DDDigtal. Pursuant to the Merger Agreement, the parties agreed to merge Merger Subsidiary with and into DDDigtal, whereby DDDigtal survived as a wholly-owned subsidiary of MassRoots (the “Merger”). On January 25, 2017 (the “Effective Date”), the Merger was completed and became effective upon the filing of certificates of merger with the respective Secretary of State of the States of Delaware and Colorado, in such forms as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law and the Colorado Business Corporation Act. Pursuant to the terms of the Merger Agreement, each share of DDDigtal’s common stock was to be exchanged for a number of shares of the Company’s common stock (or a fraction thereof), based on an exchange ratio, as ultimately calculated, equal to approximately 5.273-for-1, such that 1 share of the Company’s’ common stock was issued for every 5.273 shares of DDDigtal’s common stock. On the Effective Date, the Company issued 2,926,830 shares of the Company’s common stock pro rata Also pursuant to the terms of the Merger Agreement, the Company paid cash consideration, in December 2016, of $40,000 to Zachary Marburger and $20,000 to Micah Davidson, as repayment of outstanding debts owed by DDDigtal to the individuals. As a condition to the closing of the Merger, the Company hired Zachary Marburger as its Vice President of Strategy, and engaged Micah Davidson as a Senior Software Engineer. As a condition of Mr. Marburger’s employment and pursuant to the Merger Agreement, the Company will pay Mr. Marburger an additional $40,000 following the one-year anniversary of his constant employment with the Company. A summary of consideration is as follows: Cash (paid in December 2016) $ 60,000 2,926,830 shares of the Company’s common stock 2,883,220 Liabilities assumed 40,140 Total purchase price $ 2,983,360 The following summarizes the current estimates of fair value of assets acquired and liabilities assumed: Cash $ 8,672 Accounts receivable 3,583 Property and equipment 3,333 Goodwill 2,967,772 Assets acquired $ 2,983,360 The above estimated fair value of the intangible assets is based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocation period, we record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined. Pro forma Results The following tables set forth the unaudited pro forma results of the Company as if the acquisition of DDDigtal had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented. Three months ended September 30, 2017 Three months ended September 30, 2016 Total revenues $ 11,516 $ 232,313 Net loss (7,077,066 ) (7,263,951 ) Basic and diluted net loss per common share $ (0.07 ) $ (0.07 ) Nine months ended September 30, 2017 Nine months ended September 30, 2016 Total revenues $ 289,130 $ 833,304 Net loss (26,154,897 ) (8,373,192 ) Basic and diluted net loss per common share $ (0.28 ) $ (0.17 ) Odava, Inc. On July 5, 2017, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MassRoots Compliance Technology, Inc., a wholly-owned subsidiary of the Company (“Merger Subsidiary”), Odava, Inc., a Delaware corporation (“Odava”), and Scott Kveton, an individual acting solely in his capacity as a stockholder representative (“Stockholder Representative”). Pursuant to the Merger Agreement, the parties agreed to merge Merger Subsidiary with and into Odava, whereby Odava survived as a wholly-owned subsidiary of MassRoots (the “Merger”). On July 13, 2017 (the “Effective Date”), the Merger was completed and became effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware, in the form as required by and executed in accordance with Title 8, Section 251(c) of the Delaware General Corporation Law. A copy of the certificate of merger is filed as Exhibit 3.1 hereto, and is hereby incorporated by reference into this Item 2.01. Pursuant to the terms of the Merger Agreement, each share of Odava’s common stock was to be exchanged for a number of shares of MassRoots’ Common Stock (or a fraction thereof), based on an exchange ratio, as ultimately calculated, equal to approximately 4.069-for-1, such that one share of MassRoots’ Common Stock was issued for approximately every 4.069 shares of Odava’s common stock. On the Effective Date, the Company issued 3,250,000 shares of common stock pro rata Also pursuant to the terms of the Merger Agreement, MassRoots paid cash consideration of $30,000 to Scott Kveton and $5,000 to Steven Osborn, as repayment of outstanding debts at closing owed by Odava to the individuals. As a condition to the closing of the Merger, the Company hired Scott Kveton as its new Director of Business Development, and Steven Osborn as its Principal Architect. A summary of consideration is as follows: Cash and costs incurred $ 40,570 2,926,830 shares of the Company’s common stock 1,966,250 Total purchase price $ 2,006,820 The following summarizes the current estimates of fair value of assets acquired and liabilities assumed: Cash $ 2,601 Goodwill 2,004,219 Assets acquired $ 2,006,820 The above estimated fair value of the intangible assets is based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocation period, we record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined. Pro forma results The following tables set forth the unaudited pro forma results of the Company as if the acquisition of Odava had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented. Three months ended September 30, 2017 Three months ended September 30, 2016 Total revenues $ 11,516 $ 209,003 Net loss (7,077,066 ) (3,452,664 ) Basic and diluted net loss per common share $ (0.07 ) $ (0.07 ) Nine months ended September 30, 2017 Nine months ended September 30, 2016 Total revenues $ 289,130 $ 794,621 Net loss (26,154,897 ) (8,277,114 ) Basic and diluted net loss per common share $ (0.28 ) $ (0.17 ) The Company accounts for acquisitions in accordance with the provisions of Accounting Standards Codification (“ASC”) 805-Business Combinations (“ASC 805”). The Company assigns to all identifiable assets acquired a portion of the cost of the acquired company equal to the estimated fair value of such assets at the date of acquisition. The Company records the excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired as goodwill. The Company recorded goodwill in the aggregate amount of $4,971,991 as a result of the acquisitions of DDDitgal and Odava during the nine months ended September 30, 2017. The Company accounts for and reports acquired goodwill under ASC subtopic 350-10, Intangibles-Goodwill and Other (“ASC 350-10”). In accordance with ASC 350-10, at least annually, the Company tests its intangible assets for impairment or more often if events and circumstances warrant. Any write-downs will be included in results from operations. |
1. SUMMARY OF SIGNIFICANT ACCOU
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of MassRoots, Inc. and its wholly owned operating subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates. Fair Value of Financial Instruments Accounting Standards Codification (“ASC”) subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. The Company follows ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value. Cash and Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Accounts Receivable and Allowance for Doubtful Accounts The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. As of September 30, 2017 and December 31, 2016, based upon the review of the outstanding accounts receivable, the Company has determined that an allowance for doubtful accounts is not required. Revenue Recognition The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered and all required milestones achieved, (iii) the sales price is fixed and determinable, and (iv) collectability is reasonably assured. The Company primarily generates revenue by charging businesses to advertise on the network. The Company has the ability to target advertisements directly to a clients’ target audience, based on their location, on their mobile devices. In cases where clients sign advertising contracts for an extended period of time, the Company only realizes revenue for services provided during that quarter and defers all other revenue to future quarters. Stock Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Income Taxes The Company follows ASC subtopic 740-10, Income Taxes- (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Convertible Instruments U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under ASC 480-10. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. Derivative Financial Instruments The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. The Company’s free standing derivatives consisted of warrants to purchase common stock that were issued in connection with the issuance of debt and sale of common stock, and of embedded conversion options with convertible debentures. The Company evaluated these derivatives to assess their proper classification in the balance sheet as of September 30, 2017 using the applicable classification criteria enumerated under ASC 815-Derivatives and Hedging. The Company determined that certain embedded conversion and/or exercise features do not contain fixed settlement provisions. The convertible debentures contain a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands. As such, the Company was required to record the derivatives which do not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the end of each reporting period. Long-Lived Assets The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Indefinite Lived Intangibles and Goodwill Assets The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. Segment Reporting Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business. Net Earnings (Loss) Per Common Share The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic and diluted income (loss) per share as of September 30, 2017 and 2016 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: September 30, 2017 September 30, 2016 Common stock issuable upon conversion of convertible debentures 3,538,894 2,744,432 Options to purchase common stock 14,574,977 5,569,883 Warrants to purchase common stock 11,864,347 14,079,715 Totals 29,978,218 22,394,030 Reclassification Certain reclassifications have been made to the prior years’ data to conform to the current year presentation. These reclassifications had no effect on reported income (losses). Recent Accounting Pronouncements There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. Subsequent Events The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. | NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows. Business and organization MassRoots, Inc. (MassRoots or the Company) has created a technology platform for the cannabis industry focused on enabling users to share their cannabis content, follow their favorite dispensaries, and stay connected with the legalization movement. The Company was incorporated in the State of Delaware on April 26, 2013. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Companys stock, stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates. Fair Value of Financial Instruments Accounting Standards Codification (ASC) subtopic 825-10, Financial Instruments (ASC 825-10) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed. The Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures (ASC 820-10) and ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value. Cash and Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Companys ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Companys customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. As of December 31, 2016 and December 31, 2015, based upon the review of the outstanding accounts receivable, the Company has determined that an allowance for doubtful accounts is not required. Concentrations of Credit Risk Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit. At December 31, 2016 and 2015, deposits in excess of FDIC limits were $124,490 and $136,316, respectively. Revenue Recognition The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered and all required milestones achieved, (iii) the sales price is fixed and determinable, and (iv) collectability is reasonably assured. The Company primarily generates revenue by charging businesses to advertise on the network. The Company has the ability to target advertisements directly to a clients target audience, based on their location, on their mobile devices. In cases where clients sign advertising contracts for an extended period of time, the Company only realizes revenue for services provided during that period and defers all other revenue to future periods. The Companys secondary source of income is merchandise sales. The objective with the sales is not to generate large profit margins, but to help offset the cost of marketing. Each t-shirt, sticker and jar the Company sells will likely lead to more downloads and active users. At December 31, 2016 and 2015, the Company had deferred revenues of $27,010 and $0, respectively. Cost of Revenue The Companys main cost of revenue originates from its merchandise store, where often times the Company realizes low profit margins and is not the main focus of the Company. Property and Equipment Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of three to five years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. Long-Lived Assets The Company follows ASC 360-10-15-3, Impairment or Disposal of Long-lived Assets, which established a primary asset approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. Derivative Financial Instruments The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Companys own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Companys control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable ASC 480-10: Accounting for Redeemable Equity Instruments: Distinguishing Liabilities from Equity. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Companys free standing derivatives consisted of warrants to purchase common stock that were issued in connection with the issuance of debt and of embedded conversion options with convertible debentures. The Company evaluated these derivatives to assess their proper classification in the balance sheet as of December 31, 2016 using the applicable classification criteria enumerated under ASC 815, Derivatives and Hedging. The Company determined that certain embedded conversion and/or exercise features do not contain fixed settlement provisions. Certain outstanding warrants at December 31, 2016 contain an anti-dilutive (reset) feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands. Stock Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Net Earnings (Loss) Per Common Share The Company computes earnings (loss) per share under ASC 260-10, Earnings Per Share (ASC 260-10). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the treasury stock and/or if converted methods as applicable. The computation of basic and diluted income (loss) per share as of December 31, 2016 and 2015 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: 2016 2015 Common stock issuable upon conversion of convertible debentures 1,081,000 2,091,000 Options to purchase common stock 14,824,158 5,625,000 Warrants to purchase common stock 15,448,056 9,018,609 Totals 31,353,214 16,734,609 Advertising The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $985,342 and $717,773 as advertising costs for the year ended December 31, 2016 and 2015, respectively. Income Taxes The Company follows ASC 740-10, Income Taxes (ASC 740-10) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. Reclassification Certain reclassifications have been made to the prior years data to conform to the current year presentation. These reclassifications had no effect on reported income (losses). Recent Accounting Pronouncements In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption of this standard is not expected to have a material impact on the Companys financial position and results of operations. The FASB issued ASU 2016-02, Leases (Topic 842) The FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. In November 2016, the FASB issued ASU No. 2016-18, S tatement of Cash Flows (Topic 230): Restricted Cash In April 2015, the FASB issued ASU No. 2015-03 (ASU 2015-03), Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Companys financial position, results of operations or cash flows. |
2. GOING CONCERN AND MANAGEMENT
2. GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
2. GOING CONCERN AND MANAGEMENT'S LIQUIDITY PLANS | NOTE 2 –GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS As of September 30, 2017, the Company had cash of $267,322 and working capital deficit (current liabilities in excess of current assets) of $2,377,272. During the nine months ended September 30, 2017, the Company used net cash in operating activities of $7,200,176. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. In the first nine months of 2017, the Company received $4,753,196, $942,500, $1,198,000 and $442,500 from the exercise of common stock warrants, proceeds from issuance of convertible notes, sale of common stock and related party advances, respectively. The Company does not have cash sufficient to fund operations. The Company’s primary source of operating funds since inception has been cash proceeds from private placements of common stock, proceeds from the exercise of warrants and options and issuance of notes payable. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company will require additional financing to fund future operations. Management’s plans with regard to these matters encompass the following actions: 1) obtain funding from new and potentially current investors to alleviate the Company’s working capital Accordingly, the accompanying unaudited condensed interim financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The unaudited condensed interim financial statements do not include any adjustment that might result from the outcome of this uncertainty. | NOTE 2 GOING CONCERN AND MANAGEMENTS LIQUIDITY PLANS As of December 31, 2016, the Company had cash of $374,490 and working capital deficit (current liabilities in excess of current assets) of $1,332,902. During the year ended December 31, 2016, the Company used net cash in operating activities of $6,182,816. These conditions raise substantial doubt about the Companys ability to continue as a going concern. Management believes that the Company does not have sufficient funds to meet its funding requirements. In 2016, the Company sold shares of common stock and warrants for net proceeds of approximately $5,000,000. In addition, the Company received approximately $1,158,494 from the exercise of common stock warrants and options and $1,420,000 from the issuance of convertible notes. It is anticipated that the proceeds from the sale of its common stock and warrants and from the warrant exercise will not provide the Company with cash sufficient to fund operations in 2017. The Companys primary source of operating funds since inception has been cash proceeds from private placements of common stock, proceeds from the exercise of warrants and options and issuance of notes payable. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company has stockholders deficiencies at December 31, 2016 and will require additional financing to fund future operations. Managements plans with regard to these matters encompass the following actions: (1) obtain funding from new and potentially current investors to alleviate the Companys working deficiency, and (2) implement a plan to generate sales. The Companys continued existence is dependent upon its ability to translate its user base into sales. However, the outcome of managements plans cannot be ascertained with any degree of certainty. Accordingly, the accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustment that might result from the outcome of this uncertainty. |
3. INVESTMENTS
3. INVESTMENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Schedule of Investments [Abstract] | ||
3. INVESTMENTS | NOTE 4 – INVESTMENTS As of September 30, 2017 and December 31, 2016, the carrying value of our investments in privately held companies totaled $403,249 and $235,000, respectively. These investments are accounted for as cost method investments, as we own less than 20% of the voting securities and do not have the ability to exercise significant influence over operating and financial policies of the entities. To facilitate the integration with dispensary point of sale systems, in 2015, the Company invested $175,000 in exchange for preferred shares of Flowhub LLC (“Flowhub”), a seed-to-sale system, equal to 8.95% of the then outstanding equity of Flowhub. The acquired preferred shares are considered non-marketable securities. On May 12, 2017, the Company sold its preferred shares in Flowhub for net proceeds of $250,000. The gain on sale of securities of $75,000 was recorded in current period operations. During the nine months ended September 30, 2017, the Company acquired 23,810 Class A common stock of Hightimes Holding Corp. for $100,002 ($4.20 per share). The acquired common shares are considered non-marketable securities. On July 13, 2017, the Company purchased a convertible promissory note in the principal sum of $300,000 from Cannaregs, Ltd, a Colorado limited liability company. The promissory note bears interest at 5% per annum payable upon maturity at December 19, 2019 and is unsecured. As of September 30, 2017, the carrying value of the promissory note was $303,247, including accrued interest. In the event the issuer consummates, prior to maturity, an equity financing in excess of $2,000,000, the outstanding principal and any accrued and unpaid interest automatically converts to equity securities of the same class or series issued by the issuer at the lesser of: a) 90% of the price paid per equity security or b) a price reflecting a valuation cap of $4,500,000. | NOTE 3 INVESTMENTS To facilitate the integration with dispensary point of sale systems, in 2015, the Company invested $175,000 in exchange for preferred shares of Flowhub LLC (Flowhub), a seed-to-sale system, equal to 8.95% of the then outstanding equity of Flowhub. The Company currently is working with Flowhub to integrate their system with the Companys network. The acquired preferred shares are considered non-marketable securities. In 2016, the Company paid $60,000 acquisition deposit to acquire DDDitgal LLC. See Subsequent Events Note 13. |
4. PROPERTY AND EQUIPMENT
4. PROPERTY AND EQUIPMENT | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
4. PROPERTY AND EQUIPMENT | NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment as of September 30, 2017 and December 31, 2016 is summarized as follows: September 30, 2016 December 31, 2016 Computers $ 125,089 $ 72,124 Office equipment 44,253 36,850 Subtotal 169,342 108,974 Less accumulated depreciation (52,497 ) (31,652 ) Property and equipment, net $ 116,845 $ 77,322 Depreciation expense for the three and nine months ended September 30, 2017 was $9,410 and $21,344, respectively; and $5,499 and $14,224 for the three and nine months ended September 30, 2016, respectively. | NOTE 4 PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2016 and 2015 is summarized as follows: 2016 2015 Computers $ 72,124 $ 58,141 Office equipment 36,850 27,083 Subtotal 108,974 85,224 Less accumulated depreciation (31,652 ) (12,201 ) Property and equipment, net $ 77,322 $ 73,023 Depreciation expense for the year ended December 31, 2016 and 2015 was $19,451 and $10,174, respectively. |
5. CONVERTIBLE DEBENTURES
5. CONVERTIBLE DEBENTURES | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Debt Disclosure [Abstract] | ||
5. CONVERTIBLE DEBENTURES | NOTE 6 – CONVERTIBLE NOTES PAYABLE On March 24, 2014, the Company issued convertible debentures to certain accredited investors. The total principal amount of the debentures is $269,100 and originally matured on March 24, 2016 with a 0% interest rate. The debentures are convertible into shares of the Company’s common stock at $0.10 per share. In March 2016, the debentures were amended to extend the maturity date to March 24, 2018. In 2016, the Company issued an aggregate of 1,010,000 shares of its common stock in settlement of $101,000 of outstanding debentures and during the nine months ended September 30, 2017, the Company issued an aggregate of 1,081,000 shares of its common stock in settlement of $108,100 of outstanding debentures As of September 30, 2017 and December 31, 2016, the aggregate carrying value of the debentures was $0 and $108,100, net of debt discounts of $0, respectively. On August 17, 2017, the Company issued convertible notes to certain accredited investors. The total principal amount of the notes is $1,045,000 and matures on February 18, 2018 with 0% interest rate. Net proceeds received were $942,500 after deduction of legal and other fees. If the Company exercises its right to prepay the Note, the Company shall make payment to the Investor of an amount in cash equal to the sum of the then outstanding principal amount of the Note that it desires to prepay, multiplied by (a) 1.1, during the first ninety (90) days after the execution of this Note, or (b) 1.25, at any point thereafter. The Notes are convertible into shares of the Company’s common stock at a price per share equal to the lower of (i) seventy five cents ($0.75), and (ii) a 25% discount to the price at which the Company next conducts an offering after the issuance date of the Note; provided, however, if any part of the principal amount of the Note remains unpaid at its Maturity Date (as defined in the Note), the conversion price will be equal to 65% of the average of the three trading days with the lowest daily weighted average prices of the Company’s common stock occurring during the fifteen days prior to the Notes’ Maturity Date. In connection with the issuance of the notes, the Company and the Investors also entered into a Security Agreement, whereby the Notes are secured with all the assets of the Company currently held or hereafter acquired. In connection with the issuance of the notes, the Company issued an aggregate of 2,090,000 warrants to purchase an amount of shares of the Company’s common stock with an initial exercise price of $0.50, expiring five years from the date of issuance. The warrants contain certain anti-dilutive (reset) provisions. On August 17, 2017, upon issuance of the secured convertible notes and warrants, the Company has determined that the features associated with the embedded conversion option and reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. During the three and nine months ended September 30, 2017, the Company amortized $187,272 of debt discounts to current period interest. | NOTE 5 CONVERTIBLE NOTES PAYABLE On March 24, 2014, the Company issued convertible debentures to certain accredited investors. The total principal amount of the debentures is $269,100 and originally matured on March 24, 2016 with a 0% interest rate. The debentures are convertible into shares of the Companys common stock at $0.10 per share. In March 2016, the debentures were amended to extend the maturity date to March 24, 2018. In 2016, the Company issued an aggregate of 1,010,000 shares of its common stock in settlement of 101,000 of outstanding debentures. As of December 31, 2016 and 2015, the aggregate carrying value of the debentures was $108,100 and $209,100, net of debt discounts of $0, respectively. In February 2016, the Company issued to a service provider a 12 month convertible debenture at 15% interest with a principal amount of $35,000 along with 35,000 3-year warrants to purchase shares of common stock at $1.00 per share. The convertible debenture is payable at maturity, and convertible at the investors determination at a price equal to 90% of the price of a subsequent public underwritten offering if one occurs over $5 million, or, if no such subsequent offering occurs, at $0.75 per share. During the year ended December 31, 2016, the Company issued an aggregate of 343,767 shares in full settlement of the debenture obligation. On March 14, 2016, the Company sold to investors six (6) month secured convertible original issue discount notes with a principal amount in the aggregate of $1,514,669, together with five-year warrants to purchase an amount of shares of the Companys common stock equal to the number of shares of common stock issuable upon the conversion of the notes in full and having an exercise price of $1.00 per share with reset provisions. If the Company exercises its right to prepay the note, the Company must make payment to the investor of an amount in cash equal to the sum of the then outstanding principal amount of the note that it desires to prepay, multiplied by (a) 1.2, during the first ninety (90) days after the execution of the note, or (b) 1.35, at any point thereafter. The notes are convertible into shares of the Companys common stock at a price per share equal to the lower of (i) $1.00, and (ii) a 25% discount to the price at which the Company next conducts an offering after the issuance date of the note; provided, however, for any part of the principal amount of the note that is not paid at its maturity date, September 14, 2016, the conversion price for such amount is equal to 65% of the average of the three trading days with the lowest daily weighted average prices of the Companys common stock occurring during the fifteen days prior to the notes maturity date, September 14, 2016. The notes require that any net proceeds received in subsequent offerings made by the Company first be used to repay the notes outstanding principal amount. Because the note was not repaid by the maturity date, the investors became entitled to receive, in aggregate, but calculated pro rata to the principal amounts remaining outstanding at the time of maturity, up to five hundred thousand (500,000) shares of the Companys common stock. Gross proceeds received by the Company for the notes and warrants in this offering were $1,420,000, while net proceeds were $1,271,600 (excluding any legal fees). On September 14, 2016, upon maturity of the notes, the Company was unable to make the required payment of the then outstanding aggregate principal amount of $966,384 and was in default under the notes. Penalties in aggregate of $584,735 were added to the carrying amount of the notes and were charged to current period interest. During the year ended December 31, 2016, the Company paid an aggregate of $1,479,498 cash and issued 1,754,462 shares of its common stock upon conversion of $619,906 of the debenture obligation and accrued interest. In addition, the Company issued an aggregate of 304,523 shares of its common stock as penalty shares valued at $163,621 and was charged to current period interest. As of December 31, 2016, the debentures were paid in full. The Companys convertible debt is summarized as follows as of December 31, 2016 and 2015: 2016 2015 Note payable dated March 24, 2014 $ 108,100 $ 209,100 Less: current portion Long term portion $ 108,100 $ 209,100 |
6. DERIVATIVE LIABILITIES AND F
6. DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Notes to Financial Statements | ||
6. DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS | NOTE 7 – DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS The Company identified conversion features embedded within convertible debt and certain warrants outstanding during the nine months ended September 30, 2017 and year ended December 31, 2016. The Company has determined that the features associated with the embedded conversion option and exercise prices, in the form of ratchet provisions, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. On March 17, 2016, upon issuance of the secured convertible debentures, the Company has determined that the features associated with the embedded conversion option and reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. At the date of inception, the Company estimated the fair value of the embedded derivatives of $1,769,121 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 112.29%, (3) weighted average risk-free interest rate of 0.47% to 1.04% (4) expected life of 0.05 to 5.00 years, and (5) estimated fair value of the Company’s common stock of $1.04 per share. The estimated fair value of the embedded derivative of $1,769,121 was charged to debt discount up to the net proceeds of $1,420,000 and amortized over the term of the debenture with the excess charged to current period interest. On December 31, 2016, the Company estimated the fair value of the embedded derivatives of $1,301,138 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 110.39%, (3) weighted average risk-free interest rate of 1.47%, (4) expected life of 4.21 years, and (5) estimated fair value of the Company’s common stock of $1.03 per share. On January 4, 2017, warrant holders exercised outstanding warrants for 682,668 shares of Common Stock, and as such the Company transferred to estimated fair value of the embedded derivatives of $610,967 from liability to equity. The Company estimated the fair value at the time of exercise using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 110.13%, (3) weighted average risk-free interest rate of 1.94%, (4) expected life of 4.20 years, and (5) estimated fair value of the Company’s common stock of $1.07 per share. On July 21, 2017, upon issuance of the warrants in connection with the sale of common stock, the Company has determined that the features associated with the reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. The Company estimated the fair value of the embedded derivatives of $1,003,870 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 103.46%, (3) weighted average risk-free interest rate of 1.81% (4) expected life of 5.00 years, and (5) estimated fair value of the Company’s common stock of $0.5687 per share. The estimated fair value of the embedded derivative of $1,003,870 was reclassified from equity at the date of issuance. On August 17, 2017, upon issuance of the secured convertible notes and warrants, the Company has determined that the features associated with the embedded conversion option and reset provisions embedded in the issued notes and warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. The Company estimated the fair value of the embedded derivatives of $798,429 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 102.73%, (3) weighted average risk-free interest rate of 1.11% to 1.78% (4) expected life of 0.49 to 5.00 years, and (5) estimated fair value of the Company’s common stock of $0.457 per share. The estimated fair value of the embedded derivative of $798,429 together with the issuance costs of $102,500 (aggregate of $900,929) was charged to debt discount and amortized over the term of the debenture with the excess charged to current period interest. On September 30, 2017, the Company estimated the fair value of the embedded derivatives of $1,506,414 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 101.58%, (3) weighted average risk-free interest rate of 1.20% to 1.92%, (4) expected life of 0.39 to 4.90 years, and (5) estimated fair value of the Company’s common stock of $0.3320 per share. The Company adopted the provisions of ASC 825-10, Financial Instruments (“ASC 825-10”). ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value: · Level 1 – Quoted prices in active markets for identical assets or liabilities. · Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. · Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement. The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company. As of September 30, 2017 and December 31, 2016, the Company did not have any derivative instruments that were designated as hedges. Items recorded or measured at fair value on a recurring basis in the accompanying financial statements consisted of the following items as of September 30, 2017 and December 31, 2016: September 30, 2017 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability $ 1,506,414 $ — $ — $ 1,506,414 December 31, 2016 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability $ 1,301,138 $ — $ — $ 1,301,138 The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the nine months ended September 30, 2017: Balance, January 1, 2017 $ 1,301,138 Transfers in due to issuance of liability warrants in connection with sale of common stock 1,003,870 Transfers in due to issuance of convertible notes and warrants with embedded conversion and reset options 798,431 Transfers out due to warrant exercise (610,967 ) Mark to market to September 30, 2017 (986,058 ) Balance, September 30, 2017 $ 1,506,414 Gain on change in warrant liabilities for the nine months ended September 30, 2017 $ 986,058 Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value. | NOTE 6 DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS The Company identified conversion features embedded within convertible debt and warrants outstanding during the year ended December 31, 2016 and 2015. The Company has determined that the features associated with the embedded conversion option and exercise prices, in the form of ratchet provisions, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. During the third quarter of 2015, the Company and the convertible debt note and warrant holders agreed to amend terms of the agreements to remove the ratchet provisions. Accordingly, the Company reclassified the derivative liability to equity classification resulting in an increase to additional paid in capital by $3,336,109. During the fourth quarter of 2015, the Company and the holders of warrants previously issued as part of our offering from September 2014 to March 2015 with an exercise price of $1.00 per share and all other warrant holders agreed to amend the warrants to remove the ratchet provision in exchange for a warrant of an additional 20% of their original warrant shares at $1.06 per share. This reduced the Companys derivative liability by $1,155,199 and increased additional paid in capital by $761,426. On March 17, 2016, upon issuance of the secured convertible debentures (see Note 5), the Company has determined that the features associated with the embedded conversion option and reset provisions embedded in the issued warrants, in the form of a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. At the date of inception, the Company estimated the fair value of the embedded derivatives of $1,769,121 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 112.29%, (3) weighted average risk-free interest rate of 0.47% to 1.04% (4) expected life of 0.05 to 5.00 years, and (5) estimated fair value of the Companys common stock of $1.04 per share. The estimated fair value of the embedded derivative of $1,769,121 was charged to debt discount up to the net proceeds of $1,420,000 and amortized over the term of the debenture with the excess charged to current period interest. On September 14, 2016, upon the maturity of certain secured convertible debentures (see Note 5), the embedded conversion terms changed. As such, the Company estimated the fair value of the change in the embedded derivative of $951,254 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 106.24%, (3) weighted average risk-free interest rate of 0.30%, (4) expected life of three months, and (5) estimated fair value of the Companys common stock of $0.51 per share. The estimated fair value of the embedded derivative of $951,254 was charged to current period interest. On December 31, 2016, the Company estimated the fair value of the embedded derivatives of $1,301,138 using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 110.39%, (3) weighted average risk-free interest rate of 1.47%, (4) expected life of 4.21 years, and (5) estimated fair value of the Companys common stock of $1.03 per share. The Company adopted the provisions of ASC 825-10, Financial Instruments (ASC 825-10). ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement. The Company recognizes its derivative liabilities as Level 3 and values its derivatives using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed are that of volatility and market price of the underlying common stock of the Company. As of December 31, 2016 and 2015, the Company did not have any derivative instruments that were designated as hedges. Items recorded or measured at fair value on a recurring basis in the accompanying financial statements consisted of the following items as of December 31, 2015 and 2016: December 31, 2015 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability $ - $ - $ - $ - December 31, 2016 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability $ 1,301,138 $ - $ - $ 1,301,138 The following table provides a summary of changes in fair value of the Companys Level 3 financial liabilities for the two years ended December 31, 2016: Balance, January 1, 2015 $ 1,099,708 Transfers out due to term modifications (3,336,109 ) Mark-to-market 2,236,401 Balance, December 31, 2015 Transfers in to Level 3: 2,720,375 Transfers out due to conversions and payoffs (2,001,149 ) Mark to market to December 31, 2016 581,912 Balance, December 31, 2016 $ 1,301,138 Loss on change in warrant and derivative liabilities for the year ended December 31, 2016 $ (581,912 ) Fluctuations in the Companys stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Companys balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Companys derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the Companys expected volatility. Increases in expected volatility would generally result in higher fair value measurement. A 10% change in pricing inputs and changes in volatilities and correlation factors would not result in a material change in our Level 3 fair value. |
7. CAPITAL STOCK
7. CAPITAL STOCK | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Equity [Abstract] | ||
7. CAPITAL STOCK | NOTE 8 – CAPITAL STOCK Preferred Stock T Common Stock The Company is authorized to issue 200,000,000 shares of its common stock at $0.001 par value per share. As of September 30, 2017, there were 111,326,981 shares of common stock issued and outstanding and 1,551,217 shares of common stock to be issued. As of December 31, 2016, there were 71,908,370 shares of common stock issued and outstanding and 1,740,000 shares of common stock to be issued. The following common stock transactions were recorded during the nine months ended September 30, 2017: During the nine months ended September 30, 2017, the Company issued an aggregate of 22,745,898 shares of its common stock for services valued at $14,204,255. During the nine months ended September 30, 2017, the Company sold 2,394,000 shares of its common stock and warrants for net proceeds of $1,198,000. During the nine months ended September 30, 2017, the Company issued an aggregate of 41,153 shares for its common stock for cashless exercise of common stock options. During the nine months ended September 30, 2017, the Company issued an aggregate of 355,689 shares of its common stock for the cashless exercise of common stock warrants. During the nine months ended September 30, 2017, the Company issued an aggregate of 1,081,000 shares of its common stock in settlement of $108,100 of convertible debt. During the nine months ended September 30, 2017, the Company issued an aggregate of 6,933,041 shares of its common stock for exercise of common stock warrants. Net proceeds were $4,753,196. During the nine months ended September 30, 2017, the Company issued an aggregate of 2,926,830 shares of its common stock to acquire DDDigtal (Note 1). During the nine months ended September 30, 2017, the Company issued an aggregate of 3,250,000 shares of its common stock to acquire Odava (Note 1). | NOTE 7 CAPITAL STOCK Preferred stock T Common stock The Company is authorized to issue 200,000,000 shares of its common stock at $0.001 par value per share. As of December 31, 2016, there were 71,908,370 shares of common stock issued and outstanding and 1,740,000 shares of common stock to be issued. As of December 31, 2015, there were 46,939,965 shares of common stock issued and outstanding and 624,000 shares of common stock to be issued. The following is a summary of the common stock transactions incurred during the years ended December 31, 2016 and 2015: From September 15, 2014 to March 11, 2015, the Company completed an offering of $861,000 of its securities to certain accredited and non-accredited investors, consisting of 1,722,000 shares of its common stock at $0.50 per share. As of December 31, 2015, 1,732,000 shares of common stock had been issued, of which 10,000 shares of common stock were improperly issued and were booked as shares to be rescinded. In April 2015, the Company issued 960,337 shares of its common stock to certain accredited and unaccredited investors, pursuant to which, the Company received gross proceeds of $576,200. The Company terminated this offering as of April 17, 2015. The Company compensated Chardan Capital Markets, LLC $20,000 cash and 262,560 shares of common stock as commission for this placement. On April 28, 2015, the Company entered into a consulting agreement with Torrey Hills Capital. Under the terms of the agreement, Torrey Hills Capital was issued 75,000 shares of common stock for setting-up non-deal roadshows for the Company. On May 12, 2015, the Company entered into a consulting agreement with Caro Capital. Under the terms of the agreement, Caro was issued 200,000 shares of common stock for setting-up non-deal roadshows for the Company for a period of one year. On June 15, 2015, the Company entered into a consulting agreement with Demeter Capital. Under the terms of the agreement, Demeter Capital was issued 100,000 shares of common stock for consulting services. From June to July 2015, the Company issued 1,540,672 shares of its unregistered common stock to certain accredited investors for gross proceeds of $1,140,502. In connection with this offering, Chardan Capital received $27,200 in cash and 80,560 shares of common stock as commission for the placement. On November 9, 2015, the Company sold 815,500 shares of its common stock, with warrants to purchase 407,475 shares of its common stock, in a registered offering to certain unaccredited and accredited investors for gross proceeds of $1,019,375 to the Company. MassRoots did not utilize a placement agent in this transaction. As of December 31, 2015, 781,500 shares of common stock had been issued and 34,000 shares of commons stock were recorded as to be issued. During the year ended December 31, 2015, the Company issued 1,340,000 shares of its common stock for the exercise of $0.40 warrants; 1,086,341 shares of its common stock for the exercise of $0.001 warrants; and 41,995 shares of its common stock for the cashless exercise of $1.00 warrants. During the year ended December 31, 2015, the Company issued 230,000 shares of its common stock to six employees and consultants under the Companys 2014 Equity Incentive Plan (the 2014 Plan). During the same time period, the Company granted 540,000 shares of its common stock to ten employees and consultants under the Companys 2015 Equity Incentive Plan (the 2015 Plan). As of December 31, 2015, none of the share issuances under the 2015 Plan had been made and 540,000 shares of common stock were recorded as to be issued. In October 2015, the holder of 50,000 options at $0.10 per share exercised their right to purchase common stock for $5,000. These shares of common stock were recorded as to be issued as of December 31, 2015. During the year ended December 31, 2016, the Company issued an aggregate of 624,000 shares of its common stock which was previously classified as shares to be issued as of December 31, 2015. During the year ended December 31, 2016, the Company issued an aggregate of 4,225,675 shares of its common stock for services rendered and recorded another 1,740,000 shares to be issued for services rendered at an average stock price of $0.70 per share. During the year ended December 31, 2016, the Company issued an aggregate of 639,051 shares of its common stock for the cashless exercise of stock warrants. During the year ended December 31, 2016, the Company issued an aggregate of 5,242,393 shares of its common stock for the cash exercise of stock warrants. During the year ended December 31, 2016, the Company issued an aggregate of 264,158 shares of its common stock for the cashless exercises of stock options. During the year ended December 31, 2016, the Company issued an aggregate of 210,000 shares of its common stock for the cash exercise of stock options. The Company issued an aggregate of 10,350,376 shares of its common stock for net sales proceeds of $5,000,275. The Company issued an aggregate of 3,108,229 shares of its common stock in settlement of $1,359,891 secured convertible debentures (see Note 5). The Company issued an aggregate of 304,523 shares of its common stock in payment of penalties relating to secured convertible debentures of $163,621 (see Note 5). |
8. WARRANTS
8. WARRANTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||
8. WARRANTS | NOTE 9 – WARRANTS Warrants outstanding and exercisable at September 30, 2017 are as follows: Warrants Outstanding Warrants Exercisable Weighted Average Exercisable Exercise Number of Remaining Life Number of Price Warrants In Years Warrants $ 0.50 3,056,670 4.42 3,056,670 0.60 50,000 2.52 50,000 0.65 2,364,000 4.81 2,364,000 0.83 100,000 3.30 100,000 0.90 5,070,002 1.97 5,070,002 1.00 670,000 0.22 670,000 1.06 146,200 1.23 146,200 3.00 407,475 1.11 407,475 11,864,347 3.04 11,864,347 A summary of the warrant activity for the nine months ended September 30, 2017 is as follows Weighted-Average Weighted-Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value Outstanding at December 31, 2016 15,448,056 $ 0.81 2.4 4,225,936 Grants 4,484,000 0.58 — Exercised (7,248,668 ) 0.68 Expired (819,041 ) 0.48 Outstanding at September 30, 2017 11,864,347 $ 0.83 3.0 $ — Vested and expected to vest at September 30, 2017 11,864,347 $ 0.83 3.0 $ — Exercisable at September 30, 2017 11,864,347 $ 0.83 3.0 $ — The aggregate intrinsic value outstanding stock warrants was $0, based on warrants with an exercise price less than the Company’s stock price of $0.332 as of September 30, 2017, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date. On July 21, 2017, upon the sale of the Company’s common stock, the Company issued 2,394,000 warrants to purchase the Company’s common stock at $0.65 per share, exercisable through July 21, 2022. These warrants contain certain anti-dilutive (reset) provisions (See Note 7). On August 24, 2017, in connection with the issuance of convertible notes, the Company granted to the same investors five year warrants to purchase an aggregate of 2,090,000 shares of the Company’s common stock at $0.50 per share. The warrants may be exercised any time after the issuance through and including the fifth (5 th | NOTE 8 – WARRANTS From September 2014 to March 31, 2015, in connection to the sale of 1,722,000 shares of common stock, the Company granted three−year warrants to purchase an aggregate of 861,000 shares of its common stock at $1.00 per share. The warrants may be exercised any time after the issuance through and including the third (3 rd $ On February 27, 2015, the Company issued warrants for a nominal amount to purchase 100,000 shares of common stock at $0.50 per share to certain service providers, valued at $43,704. On April 8, 2015, the Company issued warrants to purchase 50,000 shares of its common stock at $0.60 per share to certain service providers, valued at $51,378. In July 2015, a shareholder retired 1,000,000 shares of registered common stock in exchange for 1,000,000 warrants exercisable at $0.001 per share for a period of three years. On July 30, 2015, the Company issued warrants to purchase 175,000 shares of its common stock at $0.90 per share to certain service providers, valued at $100,340 On November 9, 2015, in connection to the sale of 815,500 shares of its common stock, the Company granted three−year warrants to purchase an aggregate of 407,475 shares of its common stock at $3.00 per share. The warrants may be exercised any time after the issuance through and including the third (3 rd In December 2015, the Company issued 146,200 three-year warrants with an exercise price of $1.06 to our holders of outstanding warrants issued in conjunction with our September 15, 2014 to March 11, 2015 offering. These warrants were issued in exchange for the holder agreeing to waive certain provisions providing price protection of the warrant received in the September 15, 2014 to March 11, 2015 offering. During the year ended December 31, 2015, warrants to purchase 1,340,000 shares of common stock at $0.40 per share were exercised for gross proceeds to the Company of $536,000. Over the same time period, warrants to purchase 1,086,341 shares of common stock at $0.001 per share were exercised for gross proceeds to the Company of $1,086. In October 2015, a shareholder exercised 100,000 warrants to purchase shares of common stock at $1.00 per share through the warrant’s cashless provision pursuant to which he was issued 41,995 shares of common stock at $1.00 per share for no gross proceeds to the Company. In January 2016, the Company issued warrants to purchase 100,000 shares of common stock at $0.83 per share to certain service providers. The estimated fair value of $68,369 was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 1.46% risk-free interest, 0% dividend yield, 119.14% volatility, and expected life of five years. In February 2016, the Company issued warrants to purchase 35,000 shares of common stock at $1.00 per share to a service provider. The estimated fair value of $24,301was charged to current period operations. The fair market value was calculated using the Black Scholes Option Pricing Model, assuming approximately 0.71% risk-free interest, 0% dividend yield, 117.43% volatility, and expected life of 3 years. On March 24, 2016, in connection with the issuance of convertible notes, the Company granted to the same investors five-year warrants to purchase an aggregate of 1,514,669 shares of the Company’s common stock at $1.00 per share. The warrants may be exercised any time after the issuance through and including the fifth (5 th In August and September 2016, the Company issued an aggregate of 3,385,002 warrants to purchase the Company’s common stock at $0.90 per share, exercisable for three years in connection with the sale of common stock. In August 2016, upon the sale of the Company’s common stock, the Company issued an additional 1,514,669 warrants to purchase the Company’s common stock at $0.50 per share, exercisable through March 14, 2021. The exercise price of the previously issued 1,514,669 warrants issued in connection with the debt was reset from $1.00 per share to $0.50. In October 2016, upon the sale of the Company’s common stock, the Company issued an additional 6,659,000 warrants to purchase the Company’s common stock at $0.90 per share, exercisable through October 26, 2019. Warrants outstanding and exercisable on December 31, 2016 are as follows: Warrants Outstanding Warrants Exercisable Weighted Average Exercisable Exercise Number of Remaining Life Number of Price Warrants In Years Warrants $ 0.001 1,000,000 1.53 1,000,000 0.40 1,604,041 0.23 1,604,041 0.50 1,619,338 4.14 1,619,338 0.60 50,000 3.27 50,000 0.83 100,000 4.04 100,000 0.90 9,725,002 2.76 9,725,002 1.00 796,000 0.93 796,000 1.06 146,200 1.98 146,200 3.00 407,475 1.86 407,475 15,448,056 2.44 15,448,056 A summary of the warrant activity for the two years ended December 31, 2016 is as follows: Weighted-Average Weighted-Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value Outstanding at January 1, 2015 9,324,000 $ 0.26 4.3 Grants 2,220,950 0.11 5.0 Exercised (2,526,341 ) 0.25 1.3 Canceled - - - Outstanding at December 31, 2015 9,018,609 $ 0.42 2.26 6,857,509 Grants 13,164,340 0.72 2.51 - Exercised (6,734,893 ) 0.25 Canceled - Outstanding at December 31, 2016 15,448,056 $ 0.81 2.4 $ 4,225,936 Vested and expected to vest at December 31, 2016 15,448,056 $ 0.81 2.4 $ 4,225,936 Exercisable at December 31, 2016 15,448,056 $ 0.81 2.4 $ 4,225,936 The aggregate intrinsic value outstanding stock warrants was $4,225,936, based on warrants with an exercise price less than the Company’s stock price of $1.03 as of December 31, 2016, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date. |
9. EMPLOYEE EQUITY INCENTIVE PL
9. EMPLOYEE EQUITY INCENTIVE PLAN | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Employee Equity Incentive Plan | ||
9. EMPLOYEE EQUITY INCENTIVE PLAN | NOTE 10 – EMPLOYEE EQUITY INCENTIVE PLANS The Company’s shareholders approved our 2014 Plan in June 2014, our 2015 Plan in December 2015, our 2016 Equity Incentive Plan (“2016 Plan”) in October 2016 and our 2017 Equity Incentive Plan in December 2016 (“2017 Plan”, together with the 2014 Plan, 2015 Plan and 2016 Plan, the “Plans”). The Plans are identical, except for number of shares reserved for issuance under each. As of September 30, 2017, the Company had granted an aggregate of 37,950,282 securities under the plans, with 2,150,149 available for future issuances. The Plans provide for the grant of incentive stock options to our employees and our parent and subsidiary corporations’ employees, and for the grant of non-statutory stock options, stock bonus awards, restricted stock awards, performance stock awards and other forms of stock compensation to our employees, including officers, consultants and directors. Our Plans also provide that the grant of performance stock awards may be paid out in cash as determined by the Committee. The summary terms of the issuances are as follows: Exercise Number of Vesting Price Options Terms $ 0.50 80,000 Immediately 0.50 100,000 Quarterly over one year 0.50 605,000 Quarterly over two years 0.81 5,000 Immediately 0.82 150,000 Quarterly over two years 0.85 150,000 Quarterly over one year 0.87 125,000 Immediately 0.89 425,000 Monthly over one year 0.89 90,000 Quarterly over two years 0.95 400,000 Quarterly over two years 0.98 24,000 Monthly over two years 1.05 50,000 Immediately 1.05 95,000 Monthly over two years 1.05 60,000 Monthly over one year 1.06 60,000 Monthly over one year 1.07 110,000 Monthly over one year 1.07 325,000 Monthly over two years 0.83 2,854,000 On June 21, 2017, the Company accelerated vesting of 5,000,000 options to fully vesting. As a result, the Company charged $2,544,741 to operations during the nine months ended September 30, 2017. Stock options outstanding and exercisable on September 30, 2017 are as follows: Exercise Number of Remaining Life Number of Price Options In Years Options Exercisable $ 0.10 1,056,786 6.68 806,786 0.50 689,631 7.99 689,631 0.51 1,891,779 9.02 1,891,779 0.60 105,000 7.53 105,000 0.77 758,331 9.20 683,331 0.80 145,000 8.30 145,000 0.81 5,000 9.45 5,000 0.82 37,500 9.46 37,500 0.85 150,000 9.42 75,000 0.86 5,204,165 9.22 5,204,165 0.87 125,000 9.48 125,000 0.89 577,500 9.28 285,000 0.90 1,745,413 8.20 1,745,413 0.95 125,000 9.38 125,000 0.98 24,000 9.32 8,000 1.00 837,494 8.22 837,494 1.05 430,838 8.66 415,838 1.06 30,000 9.35 30,000 1.07 168,326 9.28 164,993 14,106,763 8.77 13,379,930 A summary of the stock option activity for the nine months ended September 30, 2017: Weighted-Average Weighted-Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value Outstanding at December 31, 2016 14,824,158 0.52 9.37 $ 4,566,717 Grants 2,854,000 0.50 9.71 — Exercised (522,428 ) 0.16 Forfeiture/Canceled (3,048,967 ) $ 0.73 — Outstanding at September 30, 2017 14,106,763 $ 0.76 8.77 $ 245,174 Exercisable at September 30, 2017 13,379,930 $ 0.76 8.79 $ 187,174 The aggregate intrinsic value of outstanding stock options was based on options with an exercise price less than the Company’s common stock price of $0.332 as of September 30, 2017, which would have been received by the option holders had those option holders exercised their options as of that date. Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived historical data. The Company accounts for the expected life of options based on the contractual life of options for non-employees. The fair value of all options vesting during the nine months ended September 30, 2017 and 2016 of $5,678,272 and $1,974,710, respectively. Unrecognized compensation expense of $286,153 at September 30, 2017 will be expensed in future periods. | NOTE 9 EMPLOYEE EQUITY INCENTIVE PLANS The Companys shareholders approved our 2014 Plan in June 2014, our 2015 Plan in December 2015, our 2016 Equity Incentive Plan (2016 Plan) in October 2016 and our 2017 Equity Incentive Plan (2017 Plan, together with the 2014 Plan, 2015 Plan and 2016 Plan, the Plans) in December 2016. The Plans are identical, except for number of shares reserved for issuance under each. As of December 31, 2016, the Company had granted an aggregate of 16,564,585 securities under the plans, with 13,676,083 available for future issuances. The Plans provide for the grant of incentive stock options to our employees and our parent and subsidiary corporations employees, and for the grant of non-statutory stock options, stock bonus awards, restricted stock awards, performance stock awards and other forms of stock compensation to our employees, including officers, consultants and directors. Our Plans also provide that the grant of performance stock awards may be paid out in cash as determined by the Committee. During the year ended December 31, 2016, the Company granted options to purchase 9,958,031 for ten years. The fair value of $6,450,317, was determined using the Black-Scholes Option Pricing Model, assuming approximately 1.75% to 2.10% risk-free interest, 0% dividend yield, 107.63% to 119.16% volatility, and expected life of five to ten years and will be charged to operations over the vesting terms of the options. During the year ended December 31, 2015, the Company granted options to purchase 3,925,000 for seven to ten years. The fair value of $3,197,634, was determined using the Black-Scholes Option Pricing Model, assuming approximately 0.48% to 2.53% risk-free interest, 0% dividend yield, 119.43% to 129.88% volatility, and expected life of seven to ten years and will be charged to operations over the vesting terms of the options. The summary terms of the issuances are as follows: Exercise Number of Vesting Price Options Terms $ 0.51 600,000 50% immediately; 50% six months 0.51 1,566,781 Monthly over one year 0.77 1,600,000 Monthly over one year 0.80 160,000 Monthly over one year 0.83 100,000 Market contingent 0.86 5,400,000 Monthly over one year 0.89 100,000 Monthly over one year, beginning April 2017 1.00 50,000 Monthly over one year 1.05 381,250 Monthly over one year 0.78 9,958,031 Stock options outstanding and exercisable on December 31, 2016 are as follows: Options Outstanding Options Exercisable Weighted Average Exercisable Exercise Number of Remaining Life Number of Price Options In Years Options $ 0.10 1,500,000 7.43 1,000,000 0.50 628,220 8.08 628,220 0.51 2,166,781 9.76 1,456,769 0.60 105,000 8.27 105,000 0.77 1,600,000 9.95 99,999 0.80 145,000 9.04 145,000 0.83 100,000 9.05 - 0.86 5,400,000 9.97 1,312,499 0.89 100,000 9.98 - 0.90 1,860,413 8.95 1,860,413 1.00 837,494 8.97 237,494 1.05 381,250 9.22 373,436 14,824,158 9.37 7,218,830 A summary of the stock option activity for the two years ended December 31, 2016: Weighted-Average Weighted-Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value Outstanding at January 1, 2015 2,050,000 $ 0.10 9.6 Grants 3,925,000 0.80 9.9 Exercised (50,000 ) 0.10 9.3 Canceled (300,000 ) 0.10 8.6 Outstanding at December 31, 2015 5,625,000 0.59 9.30 $ 6,044,500 Grants 9,958,031 0.78 9.84 - Exercised (636,780 ) 0.50 8.80 Forfeiture/Canceled (122,093 ) $ 0.55 8.80 - Outstanding at December 31, 2016 14,824,158 $ 0.52 9.37 $ 4,566,717 Exercisable at December 31, 2016 7,218,830 $ 0.35 9.03 $ 2,596,395 The aggregate intrinsic value of outstanding stock options was based on options with an exercise price less than the Companys stock price of $1.03 as of December 31, 2016, which would have been received by the option holders had those option holders exercised their options as of that date. Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Companys own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees. The fair value of all options vesting during the year ended December 31, 2016 and 2015 of $3,112,156 and $1,273,393, respectively. Unrecognized compensation expense of $5,185,927 at December 31, 2016 will be expensed in future periods. |
10. COMMITMENTS AND CONTINCENCI
10. COMMITMENTS AND CONTINCENCIES | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
10. COMMITMENTS AND CONTINGENCIES | NOTE 10 COMMITMENTS AND CONTINGENCIES Operating leases On April 14, 2015, the Company completed the relocation of its headquarters to 1624 Market Street, Suite 201, Denver, CO 80202 which the Company leased on March 20, 2015 pursuant to a lease agreement with RVOF Market Center, LLC (201 Lease). Under the 201 Lease, MassRoots agreed to rent 3,552 square feet of office space at that location for a term of 37 months, under which the Company will pay a base rate of $0 for the first month, $8,288 for months two through 13, $8,584 for months 14 through 25, and $8,880 for months 26 through 37. The Company did not incur a significant cost related to the move to this location. The Company amended this lease in January 2016 to include Suite 203, also located at 1624 Market Street in Denver, CO 80202, which allows us to expand our headquarters by an additional 1,508 square feet of office space. For this expansion (and in addition to the rent paid under the 201 Lease), the Company will pay $0 until May 30, 2016, $3,644 for each month from June 1, 2016 to May 30, 2017, $3,770 for each month from June 1, 2017 to May 30, 2018, and $3,896 for each month from June 1, 2018 to November 30, 2018. Pursuant to the amendment, the lease on suite 201 was extended to November 30, 2018 Rent expense charged to operations during the year ended December 31, 2016 and 2015 was $138,818 and $64,438, respectively. Future minimum lease payments under these two agreements are as follows: Year Ending December 31, 2017 149,395 2018 139,904 $ 289,299 Litigation The Company is subject at times to other legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. There was no outstanding litigation as of December 31, 2016. |
11. RELATED PARTY TRANSACTIONS
11. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
11. RELATED PARTY TRANSACTIONS | NOTE 11 RELATED PARTY TRANSACTIONS On August 31, 2016, Isaac Dietrich, the Companys Chief Executive Officer, participated in the Companys registered offering that took place beginning August 12, 2016 and continued until October 24, 2016, whereby Mr. Dietrich purchased $5,000 of the Companys securities consisting of 10,000 shares of the Companys common stock and warrants to purchase 10,000 shares at $0.90 per share. |
12. INCOME TAXES
12. INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
12. INCOME TAXES | NOTE 12 INCOME TAXES At December 31, 2016, the Company has available for federal income tax purposes a net operating loss carry forward of approximately $12,500,000, expiring in the year 2036, that may be used to offset future taxable income. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized. Due to possible significant changes in the Companys ownership, the future use of its existing net operating losses may be limited. All or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits. During the year ended December 31, 2016, the Company has increased the valuation allowance from $2,374,000 to $4,946,000. Tax position that meet the more likely than not threshold are then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income tax returns that were considered to be uncertain. Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), provide for annual limitations on the utilization of net operating loss and credit carryforwards if the Company were to undergo an ownership change, as defined in Section 382 of the Code. In general, an ownership change occurs whenever the percentage of the shares of a corporation owned, directly or indirectly, by 5-percent shareholders, as defined in Section 382 of the Code, increases by more than 50 percentage points over the lowest percentage of the shares of such corporation owned, directly or indirectly, by such 5-percent shareholders at any time over the preceding three years. In the event such ownership change occurs, the annual limitation may result in the expiration of the net operating losses prior to full utilization. The Company is required to file income tax returns in the U.S. Federal jurisdiction and in Colorado. The Company is no longer subject to income tax examinations by tax authorities for tax years ending before December 31, 2012. The Companys deferred taxes as of December 31, 2016 and 2015 consist of the following: 2016 2015 Non-Current deferred tax asset: Net operating loss carry-forwards $ 4,946,000 $ 2,374,000 Valuation allowance (4,946,000 ) (2,374,000 ) Net non-current deferred tax asset $ $ |
13. SUBSEQUENT EVENTS
13. SUBSEQUENT EVENTS | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Subsequent Events [Abstract] | ||
13. SUBSEQUENT EVENTS | NOTE 11 – SUBSEQUENT EVENTS On October 4, 2017 and October 5, 2017, the Company entered into a Simple Agreement for Future Tokens with two accredited investors, relating to the future right to purchase $25,000 and $100,000 in units of a cryptographic token (a “Token”), respectively, at a discount, if the Company conducts a public sale of its Tokens. Pursuant to the agreements, in the event the Company conducts such a public sale of its Tokens, it will automatically issue to each investor a number of Tokens equal to such investor’s investment, based on a rate that is fifty percent (50%) of the price per Token in the public sale. In the event the Company sells Tokens in the public sale at different prices, each investor’s Tokens shall be determined based on the most advantageous rate publicly marketed. On October 5, 2017, the Company issued 394,858 shares of its common stock to a member of the Board of Directors in connection with a cashless exercise of 443,214 shares pursuant to a Stock Option Agreement, dated June 4, 2014. The shares are reflected as shares to be issued as of September 30, 2017 (See Note 8). On October 5, 2017, the Company issued 45,000 shares to a former employee for services rendered. The shares are reflected as shares to be issued as of September 30, 2017 (See Note 8). On October 17, 2017, the Company issued stock certificates for, in the aggregate, 349,000 shares of its common stock which had been sold in connection with an offering of up to $2,000,000 of its common stock and warrants conducted in July 2017, and closed on July 21, 2017. Such shares were inadvertently not issued following such closing. One of the stock certificates noted above was issued for 70,000 shares of the Company’s common stock, but should have been issued for 30,000 shares, so the Company will rescind 40,000 of such shares. The 309,000 shares (which does not include the 40,000 shares of common stock issued in error) are reflected as shares to be issued as of September 30, 2017 (See Note 8). | NOTE 13 SUBSEQUENT EVENTS Acquisition On December 15, 2016, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Whaxy Inc., a wholly-owned subsidiary of the Company (Merger Subsidiary), DDDigtal Inc, a Colorado corporation (DDDigtal), Zachary Marburger, an individual acting solely in his capacity as Stockholder Representative, and all of the stockholders of DDDigtal. Pursuant to the Merger Agreement, the parties agreed to merge Merger Subsidiary with and into DDDigtal, whereby DDDigtal would survive as a wholly-owned subsidiary of MassRoots (the Merger). On January 25, 2017 (the Effective Date), the Merger was completed and became effective upon the filing of certificates of merger with the respective Secretary of State of the States of Delaware and Colorado, in such forms as required by, and executed in accordance with, the relevant provisions of the Delaware General Corporation Law and the Colorado Business Corporation Act. Pursuant to the terms of the Merger Agreement, each share of DDDigtals common stock was to be exchanged for a number of shares of the Companys common stock (or a fraction thereof), based on an exchange ratio, as ultimately calculated, equal to approximately 5.273-for-1, such that 1 share of the Companys common stock was issued for every 5.273 shares of DDDigtals common stock. On the Effective Date, the Company issued 2,926,829 shares of the Companys common stock pro rata Also pursuant to the terms of the Merger Agreement, the Company paid cash consideration of $40,000 to Zachary Marburger and $20,000 to Micah Davidson, as repayment of outstanding debts owed by DDDigtal to the individuals. As a condition to the closing of the Merger, the Company hired Zachary Marburger as its new Vice President of Strategy, and engaged Micah Davidson as a Senior Software Engineer. As a condition of Mr. Marburgers employment and pursuant to the Merger Agreement, the Company will pay Mr. Marburger an additional $40,000 following the one-year anniversary of his constant employment with the Company. From January 1 to March 31, 2017, the Company issued 1,740,000 shares recorded as to be issued as of December 31, 2016; 2,926,829 shares to all stockholders of DDDigtal; received exercises for 2,750,000 shares of the Companys $0.90 warrants for cash proceeds to the Company of $2,475,000; received exercises for 1,000,000 shares of the Companys $0.001 warrants for cash proceeds to the Company of $1,000; received exercises for 1,043,041 shares of the Companys $0.40 warrants for cash proceeds to the Company of $417,216; received exercises for 682,668 shares of the Companys $0.50 warrants for cash proceeds to the Company of $0 with total shares issued of 355,689 shares; received exercises for 50,000 shares of the Companys $0.50 options for cash proceeds to the Company of $0 with total shares issued of 28,337 shares; issued 958,232 shares under the Companys 2017 Employee Stock Option Program; and 1,081,000 shares for received conversions for $108,100 in convertible debt at $0.10 per share. The Company had 63,183 shares recorded as to be issued on March 31, 2017. From January 1 to March 31, 2017, the Company issued 2,354,000 options to purchase common stock at a weighted average exercise price of $0.84 per share to employees of the Company under the 2017 Plan. On February 23, 2017, the Company subscribed to 23,810 shares of Class A Common Stock of High Times Holding Corporation for $100,002. |
1. SUMMARY OF SIGNIFICANT ACC21
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||
Business and organization | Business and organization MassRoots, Inc. (MassRoots or the Company) has created a technology platform for the cannabis industry focused on enabling users to share their cannabis content, follow their favorite dispensaries, and stay connected with the legalization movement. The Company was incorporated in the State of Delaware on April 26, 2013. | |
Use of estimates | Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates. | Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Companys stock, stock-based compensation, fair values relating to derivative liabilities and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates. |
Fair Value for Financial Instruments | Fair Value of Financial Instruments Accounting Standards Codification (“ASC”) subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. The Company follows ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value. | Fair Value of Financial Instruments Accounting Standards Codification (ASC) subtopic 825-10, Financial Instruments (ASC 825-10) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed. The Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures (ASC 820-10) and ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value. |
Cash and Cash Equivalents | Cash and Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. | Cash and Cash Equivalents For purposes of the Statement of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. As of September 30, 2017 and December 31, 2016, based upon the review of the outstanding accounts receivable, the Company has determined that an allowance for doubtful accounts is not required. | Accounts Receivable and Allowance for Doubtful Accounts The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Companys ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Companys customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. As of December 31, 2016 and December 31, 2015, based upon the review of the outstanding accounts receivable, the Company has determined that an allowance for doubtful accounts is not required. |
Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit. At December 31, 2016 and 2015, deposits in excess of FDIC limits were $124,490 and $136,316, respectively. | |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered and all required milestones achieved, (iii) the sales price is fixed and determinable, and (iv) collectability is reasonably assured. The Company primarily generates revenue by charging businesses to advertise on the network. The Company has the ability to target advertisements directly to a clients’ target audience, based on their location, on their mobile devices. In cases where clients sign advertising contracts for an extended period of time, the Company only realizes revenue for services provided during that quarter and defers all other revenue to future quarters. | Revenue Recognition The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered and all required milestones achieved, (iii) the sales price is fixed and determinable, and (iv) collectability is reasonably assured. The Company primarily generates revenue by charging businesses to advertise on the network. The Company has the ability to target advertisements directly to a clients target audience, based on their location, on their mobile devices. In cases where clients sign advertising contracts for an extended period of time, the Company only realizes revenue for services provided during that period and defers all other revenue to future periods. The Companys secondary source of income is merchandise sales. The objective with the sales is not to generate large profit margins, but to help offset the cost of marketing. Each t-shirt, sticker and jar the Company sells will likely lead to more downloads and active users. At December 31, 2016 and 2015, the Company had deferred revenues of $27,010 and $0, respectively. |
Cost of Revenues | Cost of Revenue The Companys main cost of revenue originates from its merchandise store, where often times the Company realizes low profit margins and is not the main focus of the Company. | |
Property and Equipment | Property and Equipment Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. | Property and Equipment Property and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of three to five years. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. |
Long-Lived Assets | Long-Lived Assets The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. | Long-Lived Assets The Company follows ASC 360-10-15-3, Impairment or Disposal of Long-lived Assets, which established a primary asset approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. |
Derivative Financial Instruments | Derivative Financial Instruments The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company’s own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. The Company’s free standing derivatives consisted of warrants to purchase common stock that were issued in connection with the issuance of debt and sale of common stock, and of embedded conversion options with convertible debentures. The Company evaluated these derivatives to assess their proper classification in the balance sheet as of September 30, 2017 using the applicable classification criteria enumerated under ASC 815-Derivatives and Hedging. The Company determined that certain embedded conversion and/or exercise features do not contain fixed settlement provisions. The convertible debentures contain a conversion feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands. As such, the Company was required to record the derivatives which do not have fixed settlement provisions as liabilities and mark to market all such derivatives to fair value at the end of each reporting period. | Derivative Financial Instruments The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Companys own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Companys control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under applicable ASC 480-10: Accounting for Redeemable Equity Instruments: Distinguishing Liabilities from Equity. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Companys free standing derivatives consisted of warrants to purchase common stock that were issued in connection with the issuance of debt and of embedded conversion options with convertible debentures. The Company evaluated these derivatives to assess their proper classification in the balance sheet as of December 31, 2016 using the applicable classification criteria enumerated under ASC 815, Derivatives and Hedging. The Company determined that certain embedded conversion and/or exercise features do not contain fixed settlement provisions. Certain outstanding warrants at December 31, 2016 contain an anti-dilutive (reset) feature such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion demands. |
Stock Based Compensation | Stock Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. | Stock Based Compensation The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. |
Net Income (loss) Per Common Share | Net Earnings (Loss) Per Common Share The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic and diluted income (loss) per share as of September 30, 2017 and 2016 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: September 30, 2017 September 30, 2016 Common stock issuable upon conversion of convertible debentures 3,538,894 2,744,432 Options to purchase common stock 14,574,977 5,569,883 Warrants to purchase common stock 11,864,347 14,079,715 Totals 29,978,218 22,394,030 | Net Earnings (Loss) Per Common Share The Company computes earnings (loss) per share under ASC 260-10, Earnings Per Share (ASC 260-10). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the treasury stock and/or if converted methods as applicable. The computation of basic and diluted income (loss) per share as of December 31, 2016 and 2015 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: 2016 2015 Common stock issuable upon conversion of convertible debentures 1,081,000 2,091,000 Options to purchase common stock 14,824,158 5,625,000 Warrants to purchase common stock 15,448,056 9,018,609 Totals 31,353,214 16,734,609 |
Advertising | Advertising The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $985,342 and $717,773 as advertising costs for the year ended December 31, 2016 and 2015, respectively. | |
Income Taxes | Income Taxes The Company follows ASC subtopic 740-10, Income Taxes- (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. | Income Taxes The Company follows ASC 740-10, Income Taxes (ASC 740-10) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. |
Reclassification | Reclassification Certain reclassifications have been made to the prior years’ data to conform to the current year presentation. These reclassifications had no effect on reported income (losses). | Reclassification Certain reclassifications have been made to the prior years data to conform to the current year presentation. These reclassifications had no effect on reported income (losses). |
Recent Accounting Pronouncements | Recent Accounting Pronouncements There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. | Recent Accounting Pronouncements In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern, which is included in Accounting Standards Codification (ASC) 205, Presentation of Financial Statements The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The adoption of this standard is not expected to have a material impact on the Companys financial position and results of operations. The FASB issued ASU 2016-02, Leases (Topic 842) The FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. In November 2016, the FASB issued ASU No. 2016-18, S tatement of Cash Flows (Topic 230): Restricted Cash In April 2015, the FASB issued ASU No. 2015-03 (ASU 2015-03), Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Companys financial position, results of operations or cash flows. |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of MassRoots, Inc. and its wholly owned operating subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation. | |
Convertible Instruments | Convertible Instruments U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional, as that term is described under ASC 480-10. When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. | |
Indefinite Lived Intangibles and Goodwill Assets | Indefinite Lived Intangibles and Goodwill Assets The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. | |
Segment Reporting | Segment Reporting Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company’s core business. | |
Subsequent Events | Subsequent Events The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. |
1. NATURE OF OPERATIONS AND B22
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Nature Of Operations And Basis Of Presentation Tables | |
Schedule of acquisition | A summary of consideration is as follows: Cash (paid in December 2016) $ 60,000 2,926,830 shares of the Company’s common stock 2,883,220 Liabilities assumed 40,140 Total purchase price $ 2,983,360 |
Schedule of fair value of assets acquired and liabilities assumed | The following summarizes the current estimates of fair value of assets acquired and liabilities assumed: Cash $ 8,672 Accounts receivable 3,583 Property and equipment 3,333 Goodwill 2,967,772 Assets acquired $ 2,983,360 |
Schedule of pro forma results | The following tables set forth the unaudited pro forma results of the Company as if the acquisition of DDDigtal had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented. Three months ended September 30, 2017 Three months ended September 30, 2016 Total revenues $ 11,516 $ 209,003 Net loss (7,077,066 ) (3,452,664 ) Basic and diluted net loss per common share $ (0.07 ) $ (0.07 ) Nine months ended September 30, 2017 Nine months ended September 30, 2016 Total revenues $ 289,130 $ 794,621 Net loss (26,154,897 ) (8,277,114 ) Basic and diluted net loss per common share $ (0.28 ) $ (0.17 ) A summary of consideration is as follows: Cash and costs incurred $ 40,570 2,926,830 shares of the Company’s common stock 1,966,250 Total purchase price $ 2,006,820 The following summarizes the current estimates of fair value of assets acquired and liabilities assumed: Cash $ 2,601 Goodwill 2,004,219 Assets acquired $ 2,006,820 The following tables set forth the unaudited pro forma results of the Company as if the acquisition of Odava had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented. Three months ended September 30, 2017 Three months ended September 30, 2016 Total revenues $ 11,516 $ 209,003 Net loss (7,077,066 ) (3,452,664 ) Basic and diluted net loss per common share $ (0.07 ) $ (0.07 ) Nine months ended September 30, 2017 Nine months ended September 30, 2016 Total revenues $ 289,130 $ 794,621 Net loss (26,154,897 ) (8,277,114 ) Basic and diluted net loss per common share $ (0.28 ) $ (0.17 ) |
1. SUMMARY OF SIGNIFICANT ACC23
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Summary Of Significant Accounting Policies Tables | ||
Net Income (loss) Per Common Share | September 30, 2017 September 30, 2016 Common stock issuable upon conversion of convertible debentures 3,538,894 2,744,432 Options to purchase common stock 14,574,977 5,569,883 Warrants to purchase common stock 11,834,347 14,079,715 Totals 29,948,218 22,394,030 | 2016 2015 Common stock issuable upon conversion of convertible debentures 1,081,000 2,091,000 Options to purchase common stock 14,824,158 5,625,000 Warrants to purchase common stock 15,448,056 9,018,609 Totals 31,353,214 16,734,609 |
4. PROPERTY AND EQUIPMENT (Tabl
4. PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
PROPERTY AND EQUIPMENT | September 30, 2016 December 31, 2016 Computers $ 125,089 $ 72,124 Office equipment 44,253 36,850 Subtotal 169,342 108,974 Less accumulated depreciation (52,497 ) (31,652 ) Property and equipment, net $ 116,845 $ 77,322 | 2016 2015 Computers $ 72,124 $ 58,141 Office equipment 36,850 27,083 Subtotal 108,974 85,224 Less accumulated depreciation (31,652 ) (12,201 ) Property and equipment, net $ 77,322 $ 73,023 |
5. CONVERTIBLE DEBENTURES (Tabl
5. CONVERTIBLE DEBENTURES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Convertible Debentures Tables | |
Convertible Debentures | 2016 2015 Note payable dated March 24, 2014 $ 108,100 $ 209,100 Less: current portion Long term portion $ 108,100 $ 209,100 |
6. DERIVATIVE LIABILITIES AND26
6. DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Notes to Financial Statements | ||
Fair value of financial liabilities | September 30, 2017 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability $ 1,506,414 $ — $ — $ 1,506,414 December 31, 2016 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability $ 1,301,138 $ — $ — $ 1,301,138 Balance, January 1, 2017 $ 1,301,138 Transfers in due to issuance of liability warrants in connection with sale of common stock 1,003,870 Transfers in due to issuance of convertible notes and warrants with embedded conversion and reset options 798,431 Transfers out due to warrant exercise (610,967 ) Mark to market to September 30, 2017 (986,058 ) Balance, September 30, 2017 $ 1,506,414 Gain on change in warrant liabilities for the nine months ended September 30, 2017 $ 986,058 | December 31, 2015 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability $ - $ - $ - $ - December 31, 2016 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability $ 1,301,138 $ - $ - $ 1,301,138 Balance, January 1, 2015 $ 1,099,708 Transfers out due to term modifications (3,336,109 ) Mark-to-market 2,236,401 Balance, December 31, 2015 Transfers in to Level 3: 2,720,375 Transfers out due to conversions and payoffs (2,001,149 ) Mark to market to December 31, 2016 581,912 Balance, December 31, 2016 $ 1,301,138 Loss on change in warrant and derivative liabilities for the year ended December 31, 2016 $ (581,912 ) |
8. WARRANTS (Tables)
8. WARRANTS (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Summary of Investments, Other than Investments in Related Parties [Abstract] | ||
Stock Warrants | Warrants Outstanding Warrants Exercisable Weighted Average Exercisable Exercise Number of Remaining Life Number of Price Warrants In Years Warrants $ 0.50 3,056,670 4.42 3,056,670 0.60 50,000 2.52 50,000 0.65 2,364,000 4.81 2,364,000 0.83 100,000 3.30 100,000 0.90 5,070,002 1.97 5,070,002 1.00 670,000 0.22 670,000 1.06 146,200 1.23 146,200 3.00 407,475 1.11 407,475 11,864,347 3.04 11,864,347 | Warrants Outstanding Warrants Exercisable Weighted Average Exercisable Exercise Number of Remaining Life Number of Price Warrants In Years Warrants $ 0.001 1,000,000 1.53 1,000,000 0.40 1,604,041 0.23 1,604,041 0.50 1,619,338 4.14 1,619,338 0.60 50,000 3.27 50,000 0.83 100,000 4.04 100,000 0.90 9,725,002 2.76 9,725,002 1.00 796,000 0.93 796,000 1.06 146,200 1.98 146,200 3.00 407,475 1.86 407,475 15,448,056 2.44 15,448,056 |
Strock warrant activity | Weighted-Average Weighted-Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value Outstanding at December 31, 2016 15,448,056 $ 0.81 2.4 4,225,936 Grants 4,484,000 0.58 — Exercised (7,248,668 ) 0.68 Expired (819,041 ) 0.48 Outstanding at September 30, 2017 11,864,347 $ 0.83 3.0 $ — Vested and expected to vest at September 30, 2017 11,864,347 $ 0.83 3.0 $ — Exercisable at September 30, 2017 11,864,347 $ 0.83 3.0 $ — | Weighted-Average Weighted-Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value Outstanding at January 1, 2015 9,324,000 $ 0.26 4.3 Grants 2,220,950 0.11 5.0 Exercised (2,526,341 ) 0.25 1.3 Canceled - - - Outstanding at December 31, 2015 9,018,609 $ 0.42 2.26 6,857,509 Grants 13,164,340 0.72 2.51 - Exercised (6,734,893 ) 0.25 Canceled - Outstanding at December 31, 2016 15,448,056 $ 0.81 2.4 $ 4,225,936 Vested and expected to vest at December 31, 2016 15,448,056 $ 0.81 2.4 $ 4,225,936 Exercisable at December 31, 2016 15,448,056 $ 0.81 2.4 $ 4,225,936 |
9. EMPLOYEE EQUITY INCENTIVE 28
9. EMPLOYEE EQUITY INCENTIVE PLAN (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Employee Equity Incentive Plan Tables | ||
Employee Equity Incentive Plan | Exercise Number of Vesting Price Options Terms $ 0.50 80,000 Immediately 0.50 100,000 Quarterly over one year 0.50 605,000 Quarterly over two years 0.81 5,000 Immediately 0.82 150,000 Quarterly over two years 0.85 150,000 Quarterly over one year 0.87 125,000 Immediately 0.89 425,000 Monthly over one year 0.89 90,000 Quarterly over two years 0.95 400,000 Quarterly over two years 0.98 24,000 Monthly over two years 1.05 50,000 Immediately 1.05 95,000 Monthly over two years 1.05 60,000 Monthly over one year 1.06 60,000 Monthly over one year 1.07 110,000 Monthly over one year 1.07 325,000 Monthly over two years 0.83 2,854,000 | Exercise Number of Vesting Price Options Terms $ 0.51 600,000 50% immediately; 50% six months 0.51 1,566,781 Monthly over one year 0.77 1,600,000 Monthly over one year 0.80 160,000 Monthly over one year 0.83 100,000 Market contingent 0.86 5,400,000 Monthly over one year 0.89 100,000 Monthly over one year, beginning April 2017 1.00 50,000 Monthly over one year 1.05 381,250 Monthly over one year 0.78 9,958,031 |
Employee stock option activity | Exercise Number of Remaining Life Number of Price Options In Years Options Exercisable $ 0.10 1,056,786 6.68 806,786 0.50 689,631 7.99 689,631 0.51 1,891,779 9.02 1,891,779 0.60 105,000 7.53 105,000 0.77 758,331 9.20 683,331 0.80 145,000 8.30 145,000 0.81 5,000 9.45 5,000 0.82 37,500 9.46 37,500 0.85 150,000 9.42 75,000 0.86 5,204,165 9.22 5,204,165 0.87 125,000 9.48 125,000 0.89 577,500 9.28 285,000 0.90 1,745,413 8.20 1,745,413 0.95 125,000 9.38 125,000 0.98 24,000 9.32 8,000 1.00 837,494 8.22 837,494 1.05 430,838 8.66 415,838 1.06 30,000 9.35 30,000 1.07 168,326 9.28 164,993 14,106,763 8.77 13,379,930 | Options Outstanding Options Exercisable Weighted Average Exercisable Exercise Number of Remaining Life Number of Price Options In Years Options $ 0.10 1,500,000 7.43 1,000,000 0.50 628,220 8.08 628,220 0.51 2,166,781 9.76 1,456,769 0.60 105,000 8.27 105,000 0.77 1,600,000 9.95 99,999 0.80 145,000 9.04 145,000 0.83 100,000 9.05 - 0.86 5,400,000 9.97 1,312,499 0.89 100,000 9.98 - 0.90 1,860,413 8.95 1,860,413 1.00 837,494 8.97 237,494 1.05 381,250 9.22 373,436 14,824,158 9.37 7,218,830 |
Fair value of granted options | Weighted-Average Weighted-Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value Outstanding at December 31, 2016 14,824,158 0.52 9.37 $ 4,566,717 Grants 2,854,000 0.50 9.71 — Exercised (522,428 ) 0.16 Forfeiture/Canceled (3,048,967 ) $ 0.73 — Outstanding at September 30, 2017 14,106,763 $ 0.76 8.77 $ 245,174 Exercisable at September 30, 2017 13,379,930 $ 0.76 8.79 $ 187,174 | Weighted-Average Weighted-Average Remaining Aggregate Shares Exercise Price Contractual Term Intrinsic Value Outstanding at January 1, 2015 2,050,000 $ 0.10 9.6 Grants 3,925,000 0.80 9.9 Exercised (50,000 ) 0.10 9.3 Canceled (300,000 ) 0.10 8.6 Outstanding at December 31, 2015 5,625,000 0.59 9.30 $ 6,044,500 Grants 9,958,031 0.78 9.84 - Exercised (636,780 ) 0.50 8.80 Forfeiture/Canceled (122,093 ) $ 0.55 8.80 - Outstanding at December 31, 2016 14,824,158 $ 0.52 9.37 $ 4,566,717 Exercisable at December 31, 2016 7,218,830 $ 0.35 9.03 $ 2,596,395 |
10. COMMITMENTS AND CONTINCEN29
10. COMMITMENTS AND CONTINCENCIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments And Contincencies Tables | |
Commitment and Contingencies | Year Ending December 31, 2017 149,395 2018 139,904 $ 289,299 |
12. INCOME TAXES (Tables)
12. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes Tables | |
Income Taxes | 2016 2015 Non-Current deferred tax asset: Net operating loss carry-forwards $ 4,946,000 $ 2,374,000 Valuation allowance (4,946,000 ) (2,374,000 ) Net non-current deferred tax asset $ $ |
1. NATURE OF OPERATIONS AND B31
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Cash (paid in December 2016) | $ 267,322 | $ 374,490 | $ 126,615 | $ 386,316 | $ 141,928 |
Acquisition [Member] | |||||
Cash (paid in December 2016) | 60,000 | ||||
2,926,830 shares of the Company's common stock | 2,883,220 | ||||
Liabilities assumed | 40,140 | ||||
Total purchase price | $ 2,983,360 |
1. NATURE OF OPERATIONS AND B32
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details 1) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Cash | $ 267,322 | $ 374,490 | $ 126,615 | $ 386,316 | $ 141,928 |
Accounts receivable | 3,306 | 39,500 | |||
Property and equipment | 116,845 | $ 77,322 | $ 73,023 | ||
Fair Value | |||||
Cash | 8,672 | ||||
Accounts receivable | 3,583 | ||||
Property and equipment | 3,333 | ||||
Goodwill | 2,967,772 | ||||
Assets acquired | $ 2,983,360 |
1. NATURE OF OPERATIONS AND B33
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Net loss | $ (7,077,066) | $ (3,452,664) | $ (26,154,897) | $ (8,255,104) | $ (18,030,124) | $ (8,472,898) |
Basic and diluted net loss per common share | $ (0.07) | $ (0.07) | $ (0.28) | $ (0.17) | $ (0.34) | $ (0.19) |
Pro Forma Odava | ||||||
Total revenues | $ 11,516 | $ 209,003 | $ 289,130 | $ 794,621 | ||
Net loss | $ (7,077,066) | $ (3,452,664) | $ (26,154,897) | $ (8,277,114) | ||
Basic and diluted net loss per common share | $ (0.07) | $ (0.07) | $ (0.28) | $ (0.17) | ||
Pro Forma DD Digital | ||||||
Total revenues | $ 11,516 | $ 232,313 | $ 289,031 | $ 833,304 | ||
Net loss | $ (7,077,066) | $ (7,263,951) | $ (26,239,951) | $ (8,373,192) | ||
Basic and diluted net loss per common share | $ (0.07) | $ (0.07) | $ (0.28) | $ (0.17) |
1. SUMMARY OF SIGNIFICANT ACC34
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 |
Summary Of Significant Accounting Policies Details | ||||
Common stock issuable upon conversion of convertible debentures | $ 3,538,894 | $ 1,081,000 | $ 2,744,432 | $ 2,091,000 |
Options to purchase common stock | 14,574,977 | 14,824,158 | 5,569,883 | 5,625,000 |
Warrants to purchase common stock | 11,864,347 | 15,448,056 | 14,079,715 | 9,018,609 |
Totals | $ 29,978,218 | $ 31,353,214 | $ 22,394,030 | $ 16,734,609 |
4. PROPERTY AND EQUIPMENT (Deta
4. PROPERTY AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Property and equipment, gross | $ 169,342 | $ 108,974 | $ 85,224 |
Less: Accumulated depreciation | (52,497) | (31,652) | (12,201) |
Property and equipment, net | 116,845 | 77,322 | 73,023 |
Office Equipment | |||
Property and equipment, gross | 44,253 | 36,850 | 27,083 |
Computers | |||
Property and equipment, gross | $ 125,089 | $ 72,124 | $ 58,141 |
5. CONVERTIBLE DEBENTURES (Deta
5. CONVERTIBLE DEBENTURES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Convertible Debentures Details | ||
Note payable dated March 24, 2014 | $ 108,100 | $ 209,100 |
Less: current portion | ||
Long term portion | $ 108,100 | $ 209,100 |
7. DERIVATIVE LIABILITIES AND F
7. DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Derivative liability | $ 1,506,414 | $ 1,301,138 |
Fair Value, Inputs, Level 3 [Member] | ||
Derivative liability | $ 1,506,414 | $ 1,301,138 |
6. DERIVATIVE LIABILITIES AND38
6. DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS (Details 1) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Notes to Financial Statements | |||
Beginning Balance | $ 1,099,708 | ||
Transfers | $ 719,226 | (3,336,109) | |
Mark-to-market | 581,912 | $ 2,236,401 | |
Ending Balance | $ 1,506,414 | $ 1,301,138 |
7. DERIVATIVE LIABILITIES AND39
7. DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS (Details 2) | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Derivative Liabilities And Fair Value Measurements Details 1 | |
Balance, January 1, 2017 | $ 1,301,138 |
Transfers in due to issuance of liability warrants in connection with sale of common stock | 1,003,870 |
Transfers in due to issuance of convertible notes and warrants with embedded conversion and reset options | 798,429 |
Transfers out due to warrant exercise | (610,965) |
Mark to market to September 30, 2017 | (986,058) |
Balance, September 30, 2017 | 1,506,414 |
Gain on change in warrant and derivative liabilities for the nine months ended September 30, 2017 | $ 986,058 |
9. WARRANTS (Details)
9. WARRANTS (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Number of Warrant, Outstanding | 14,106,763 | 15,448,056 |
Remaining Life in Years, Outstanding | 8 years 9 months 7 days | 2 years 5 months 9 days |
Shares Under warrants, Exercisable | 13,379,930 | 15,448,056 |
Warrant 5 [Member] | ||
Exercise Price per Share, Outstanding | $ 0.83 | |
Number of Warrant, Outstanding | 100,000 | |
Remaining Life in Years, Outstanding | 4 years 15 days | |
Shares Under warrants, Exercisable | 100,000 | |
Warrant 4 [Member] | ||
Remaining Life in Years, Outstanding | 3 years 3 months 8 days | |
Warrant 6 [Member] | ||
Exercise Price per Share, Outstanding | $ 0.9 | |
Number of Warrant, Outstanding | 9,725,002 | |
Remaining Life in Years, Outstanding | 2 years 9 months 3 days | |
Shares Under warrants, Exercisable | 9,725,002 | |
Warrant 7 [Member] | ||
Exercise Price per Share, Outstanding | $ 1 | |
Number of Warrant, Outstanding | 796,000 | |
Remaining Life in Years, Outstanding | 11 months 4 days | |
Shares Under warrants, Exercisable | 796,000 | |
Warrant 5 [Member] | ||
Exercise Price per Share, Outstanding | $ 0.9 | |
Number of Warrant, Outstanding | 5,070,002 | |
Remaining Life in Years, Outstanding | 1 year 11 months 19 days | |
Shares Under warrants, Exercisable | 5,070,002 | |
Warrant 4 [Member] | ||
Exercise Price per Share, Outstanding | $ 0.83 | $ 0.6 |
Number of Warrant, Outstanding | 100,000 | 50,000 |
Remaining Life in Years, Outstanding | 2 years 6 months 7 days | |
Shares Under warrants, Exercisable | 100,000 | 50,000 |
Warrant 1 [Member] | ||
Exercise Price per Share, Outstanding | $ 0.5 | $ 0.001 |
Number of Warrant, Outstanding | 3,056,670 | 1,000,000 |
Remaining Life in Years, Outstanding | 2 years 6 months 7 days | 1 year 6 months 10 days |
Shares Under warrants, Exercisable | 3,056,670 | 1,000,000 |
Warrant 2 [Member] | ||
Exercise Price per Share, Outstanding | $ 0.6 | $ 0.4 |
Number of Warrant, Outstanding | 50,000 | 1,604,041 |
Remaining Life in Years, Outstanding | 4 years 9 months 22 days | 2 months 23 days |
Shares Under warrants, Exercisable | 50,000 | 1,604,041 |
Warrant 3 [Member] | ||
Exercise Price per Share, Outstanding | $ 0.65 | $ 0.5 |
Number of Warrant, Outstanding | 2,364,000 | 1,619,338 |
Remaining Life in Years, Outstanding | 3 years 3 months 19 days | 4 years 1 month 20 days |
Shares Under warrants, Exercisable | 2,364,000 | 1,619,338 |
Warrant Total | ||
Number of Warrant, Outstanding | 11,864,347 | |
Remaining Life in Years, Outstanding | 3 years 15 days | |
Shares Under warrants, Exercisable | 11,864,347 | |
Warrant 6 [Member] | ||
Exercise Price per Share, Outstanding | $ 1 | |
Number of Warrant, Outstanding | 670,000 | |
Remaining Life in Years, Outstanding | 2 months 19 days | |
Shares Under warrants, Exercisable | 670,000 | |
Warrant 7 [Member] | ||
Exercise Price per Share, Outstanding | $ 1.06 | |
Number of Warrant, Outstanding | 146,200 | |
Remaining Life in Years, Outstanding | 1 year 2 months 23 days | |
Shares Under warrants, Exercisable | 146,200 | |
Warrant 8 [Member] | ||
Exercise Price per Share, Outstanding | $ 3 | $ 1.06 |
Number of Warrant, Outstanding | 407,475 | 146,200 |
Remaining Life in Years, Outstanding | 1 year 1 month 9 days | 1 year 11 months 23 days |
Shares Under warrants, Exercisable | 407,475 | 146,200 |
Warrant 9 [Member] | ||
Exercise Price per Share, Outstanding | $ 3 | |
Number of Warrant, Outstanding | 407,475 | |
Remaining Life in Years, Outstanding | 1 year 10 months 10 days | |
Shares Under warrants, Exercisable | 407,475 |
8. WARRANTS (Details 1)
8. WARRANTS (Details 1) - $ / shares | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Warrants-Number of Shares | |||
Beginning Balance | 14,824,158 | ||
Granted | 2,854,000 | ||
Exercised | (522,428) | ||
Cancelled | (3,048,967) | ||
Ending Balance | 14,106,763 | 14,824,158 | |
Warrants Outstanding-Weighted Average Exercise Price | |||
Beginning Balance | $ 0.52 | ||
Granted | 0.5 | ||
Exercised | 0.16 | ||
Cancelled | 0.73 | ||
Ending Balance | $ 0.76 | $ 0.52 | |
Weighted Average Remaining Contractual Term | 8 years 9 months 14 days | ||
Warrants | |||
Warrants-Number of Shares | |||
Beginning Balance | 15,448,056 | 9,018,609 | 9,324,000 |
Granted | 4,484,000 | 13,164,340 | 2,220,950 |
Exercised | (7,248,668) | (6,734,893) | (2,526,341) |
Cancelled | (819,041) | ||
Ending Balance | 11,864,347 | 15,448,056 | 9,018,609 |
Warrants Outstanding-Weighted Average Exercise Price | |||
Beginning Balance | $ 0.81 | $ 0.42 | $ 0.26 |
Granted | 0.58 | 0.72 | 0.11 |
Exercised | 0.68 | 0.25 | 0.25 |
Cancelled | 0.48 | ||
Ending Balance | $ 0.83 | $ 0.81 | $ 0.42 |
Exercisable December 31, Shares | 11,864,347 | 15,448,056 | |
Exercisable December 31, Exercise Price | $ 0.83 | $ 0.81 | |
Weighted Average Remaining Contractual Term | 3 years | 2 years 4 months 24 days | 2 years 3 months 4 days |
10. EMPLOYEE EQUITY INCENTIVE P
10. EMPLOYEE EQUITY INCENTIVE PLAN (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Number of Options, Outstanding | 14,106,763 | 15,448,056 |
Remaining Life in Years, Outstanding | 8 years 9 months 7 days | 2 years 5 months 9 days |
Number of Options, Exercisable | 13,379,930 | 15,448,056 |
Option 10 | ||
Exercise Price per Share, Outstanding | $ 0.86 | $ 0.9 |
Number of Options, Outstanding | 5,204,165 | 1,860,413 |
Remaining Life in Years, Outstanding | 9 years 2 months 19 days | 8 years 11 months 12 days |
Number of Options, Exercisable | 5,204,165 | 1,860,413 |
Option 1 | ||
Exercise Price per Share, Outstanding | $ 0.1 | $ 0.1 |
Number of Options, Outstanding | 1,056,786 | 1,500,000 |
Remaining Life in Years, Outstanding | 6 years 8 months 5 days | 7 years 5 months 5 days |
Number of Options, Exercisable | 806,786 | 1,000,000 |
Option 2 | ||
Exercise Price per Share, Outstanding | $ 0.5 | $ 0.5 |
Number of Options, Outstanding | 689,631 | 628,220 |
Remaining Life in Years, Outstanding | 7 years 11 months 26 days | 8 years 29 days |
Number of Options, Exercisable | 689,631 | 628,220 |
Option 3 | ||
Exercise Price per Share, Outstanding | $ 0.51 | $ 0.51 |
Number of Options, Outstanding | 1,891,779 | 2,166,781 |
Remaining Life in Years, Outstanding | 9 years 7 days | 9 years 9 months 3 days |
Number of Options, Exercisable | 1,891,779 | 1,456,769 |
Option 4 | ||
Exercise Price per Share, Outstanding | $ 0.6 | $ 0.6 |
Number of Options, Outstanding | 105,000 | 105,000 |
Remaining Life in Years, Outstanding | 7 years 6 months 10 days | 8 years 3 months 8 days |
Number of Options, Exercisable | 105,000 | 105,000 |
Option 5 | ||
Exercise Price per Share, Outstanding | $ 0.77 | $ 0.77 |
Number of Options, Outstanding | 758,331 | 1,600,000 |
Remaining Life in Years, Outstanding | 9 years 2 months 12 days | 9 years 11 months 12 days |
Number of Options, Exercisable | 683,331 | 99,999 |
Option 6 | ||
Exercise Price per Share, Outstanding | $ 0.8 | $ 0.8 |
Number of Options, Outstanding | 145,000 | 145,000 |
Remaining Life in Years, Outstanding | 8 years 3 months 19 days | 9 years 15 days |
Number of Options, Exercisable | 145,000 | 145,000 |
Option 7 | ||
Exercise Price per Share, Outstanding | $ 0.81 | $ 0.83 |
Number of Options, Outstanding | 5,000 | 100,000 |
Remaining Life in Years, Outstanding | 9 years 5 months 12 days | 9 years 18 days |
Number of Options, Exercisable | 5,000 | |
Option 8 | ||
Exercise Price per Share, Outstanding | $ 0.82 | $ 0.86 |
Number of Options, Outstanding | 37,500 | 5,400,000 |
Remaining Life in Years, Outstanding | 9 years 5 months 16 days | 9 years 11 months 19 days |
Number of Options, Exercisable | 37,500 | 1,312,499 |
Option 9 | ||
Exercise Price per Share, Outstanding | $ 0.85 | $ 0.89 |
Number of Options, Outstanding | 150,000 | 100,000 |
Remaining Life in Years, Outstanding | 9 years 5 months 1 day | 9 years 11 months 23 days |
Number of Options, Exercisable | 75,000 | |
Option 19 | ||
Exercise Price per Share, Outstanding | $ 1.07 | |
Number of Options, Outstanding | 168,326 | |
Remaining Life in Years, Outstanding | 9 years 3 months 11 days | |
Number of Options, Exercisable | 164,993 | |
Option 11 | ||
Exercise Price per Share, Outstanding | $ 0.87 | $ 1 |
Number of Options, Outstanding | 125,000 | 837,494 |
Remaining Life in Years, Outstanding | 9 years 5 months 23 days | 8 years 11 months 19 days |
Number of Options, Exercisable | 125,000 | 237,494 |
Option 12 | ||
Exercise Price per Share, Outstanding | $ 0.89 | $ 1.05 |
Number of Options, Outstanding | 577,500 | 381,250 |
Remaining Life in Years, Outstanding | 9 years 3 months 11 days | 9 years 2 months 19 days |
Number of Options, Exercisable | 285,000 | 373,436 |
Option 13 | ||
Exercise Price per Share, Outstanding | $ 0.9 | |
Number of Options, Outstanding | 1,745,413 | |
Remaining Life in Years, Outstanding | 8 years 2 months 12 days | |
Number of Options, Exercisable | 1,745,413 | |
Option 14 | ||
Exercise Price per Share, Outstanding | $ 0.95 | |
Number of Options, Outstanding | 125,000 | |
Remaining Life in Years, Outstanding | 9 years 4 months 17 days | |
Number of Options, Exercisable | 125,000 | |
Option 15 | ||
Exercise Price per Share, Outstanding | $ 0.98 | |
Number of Options, Outstanding | 24,000 | |
Remaining Life in Years, Outstanding | 9 years 3 months 26 days | |
Number of Options, Exercisable | 8,000 | |
Option 16 | ||
Exercise Price per Share, Outstanding | $ 1 | |
Number of Options, Outstanding | 837,494 | |
Remaining Life in Years, Outstanding | 8 years 2 months 19 days | |
Number of Options, Exercisable | 837,494 | |
Option 17 | ||
Exercise Price per Share, Outstanding | $ 1.05 | |
Number of Options, Outstanding | 430,838 | |
Remaining Life in Years, Outstanding | 8 years 7 months 28 days | |
Number of Options, Exercisable | 415,838 | |
Option 18 | ||
Exercise Price per Share, Outstanding | $ 1.06 | |
Number of Options, Outstanding | 30,000 | |
Remaining Life in Years, Outstanding | 9 years 4 months 6 days | |
Number of Options, Exercisable | 30,000 | |
Stock Options | ||
Number of Options, Outstanding | 14,824,158 | |
Remaining Life in Years, Outstanding | 9 years 4 months 13 days | |
Number of Options, Exercisable | 7,218,830 |
9. EMPLOYEE EQUITY INCENTIVE 43
9. EMPLOYEE EQUITY INCENTIVE PLAN (Details 1) - $ / shares | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Options Outstanding-Number of Shares | |||
Beginning Balance | 14,824,158 | ||
Granted | 2,854,000 | ||
Exercised | (522,428) | ||
Cancelled | (3,048,967) | ||
Ending Balance | 14,106,763 | 14,824,158 | |
Options Outstanding-Weighted Average Exercise Price | |||
Beginning Balance | $ 0.52 | ||
Granted | 0.5 | ||
Exercised | 0.16 | ||
Cancelled | 0.73 | ||
Ending Balance | $ 0.76 | $ 0.52 | |
Balance as of December 31 | 8 years 9 months 14 days | ||
Employee Stock Options | |||
Options Outstanding-Number of Shares | |||
Beginning Balance | 14,824,158 | 5,625,000 | 2,050,000 |
Granted | 9,958,031 | 3,925,000 | |
Exercised | (636,780) | (50,000) | |
Cancelled | (122,093) | (300,000) | |
Ending Balance | 14,824,158 | 5,625,000 | |
Options Outstanding-Weighted Average Exercise Price | |||
Beginning Balance | $ 0.52 | $ 0.59 | $ 0.1 |
Granted | 0.78 | 0.8 | |
Exercised | 0.5 | 0.1 | |
Cancelled | 0.55 | 0.1 | |
Ending Balance | $ 0.52 | $ 0.59 | |
Balance as of December 31 | 9 years 11 days | 9 years 3 months 19 days |
10. EMPLOYEE EQUITY INCENTIVE44
10. EMPLOYEE EQUITY INCENTIVE PLAN (Details 2) | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Options Outstanding-Number of Shares | |
Beginning Balance | shares | 14,824,158 |
Grants | shares | 2,854,000 |
Exercised | shares | (522,428) |
Forfeiture/Canceled | shares | (3,048,967) |
Ending Balance | shares | 14,106,763 |
Options Outstanding-Weighted Average Exercise Price | |
Beginning Balance | $ / shares | $ 0.52 |
Grants | $ / shares | 0.5 |
Exercised | $ / shares | 0.16 |
Forfeiture/Canceled | $ / shares | 0.73 |
Ending Balance | $ / shares | $ 0.76 |
Ending Exercisable, Shares | shares | 0.76 |
Ending Exercisable, Exercise Price | $ / shares | $ 0.76 |
Weighted Average Remaining Contractual Term | 8 years 9 months 14 days |
10. COMMITMENTS AND CONTINCEN45
10. COMMITMENTS AND CONTINCENCIES (Details) | Dec. 31, 2016USD ($) |
Commitments And Contincencies Details | |
2,017 | $ 149,395 |
2,018 | 139,904 |
Total | $ 289,299 |
12. INCOME TAXES (Details)
12. INCOME TAXES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Non-Current deferred tax asset: | ||
Net operating loss carry-forwards | $ 4,946,000 | $ 2,374,000 |
Valuation allowance | (4,946,000) | (2,374,000) |
Net non-current deferred tax asset |