Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 20, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | TEO Foods Inc. | |
Entity Central Index Key | 1,612,188 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity an Emerging Growth Company? | true | |
Is Entity a Small Business? | true | |
Entity Ex Transition Period | false | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 16,914,693 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Unaudited Balance Sheets
Unaudited Balance Sheets - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 2,412 | $ 0 |
Total current assets | 2,412 | 0 |
Prepayment for purchase of Targa | 160,000 | 0 |
Total Assets | 162,412 | 0 |
Current liabilities: | ||
Accounts payable and accrued expenses | 5,785 | 0 |
Advances from related party | 274 | 0 |
License fee payable - current portion | 909,000 | 370,000 |
Notes payable | 100,000 | 30,000 |
Convertible note payable | 100,000 | |
Total current liabilities | 1,115,059 | 400,000 |
License fee payable - long-term portion | 0 | 600,000 |
Total Liabilities | 1,115,059 | 1,000,000 |
Stockholders' deficit | ||
Preferred shares, $0.001 par value, 10,000,000 shares authorized, 9,022,900 and 10,000,000 shares issued and outstanding, respectively | 9,023 | 10,000 |
Common stock, $0.001 par value, 490,000,000 shares authorized, 10,334,745 and 0 shares issued and outstanding, respectively | 10,335 | 0 |
Additional paid-in capital | 47,017 | 0 |
Accumulated deficit | (1,019,022) | (1,010,000) |
Total stockholders' deficit | (952,647) | (1,000,000) |
Total liabilities and stockholders' deficit | $ 162,412 | $ 0 |
Unaudited Balance Sheets (Paren
Unaudited Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Stockholders' equity (deficit): | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock shares, authorized | 10,000,000 | 10,000,000 |
Preferred stock shares, issued | 9,022,900 | 9,022,900 |
Preferred stock shares, outstanding | 9,022,900 | 9,022,900 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock shares, authorized | 490,000,000 | 490,000,000 |
Common stock shares, issued | 10,334,745 | 0 |
Unaudited Statements of Operati
Unaudited Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Unaudited Statements Of Operations | ||||
Revenues | $ 0 | $ 0 | $ 0 | $ 0 |
Operating expenses | ||||
General and administrative expenses | 1,452 | 4,226 | ||
Operating loss | (1,452) | (4,226) | ||
Interest expense | 3,626 | 4,796 | ||
Net Loss | $ (5,078) | $ (9,022) | ||
Basic and diluted loss per share | $ 0 | $ 0 | $ 0 | $ 0 |
Weighted average common shares outstanding - basic and diluted | 10,150,915 | 6,713,612 |
Unaudited Statements of Cash Fl
Unaudited Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (9,022) | |
Change in operating assets and liabilities: | ||
Accounts payable and accrued expenses | 7,160 | |
Net cash used in operating activities | (1,862) | |
Prepayment for purchase of Targa | (160,000) | |
Net cash used in investing activities | (160,000) | |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Advance from related party | 274 | |
Proceeds from notes payable | 125,000 | |
Proceeds from convertible note payable | 100,000 | |
Payment of deemed dividend to Teo Inc. for license | (61,000) | |
Net cash provided by financing activities | 164,274 | |
Net increase for the period | 2,412 | |
Cash at beginning of the period | ||
Cash at end of the period | 2,412 | |
SUPPLEMENTAL INFORMATION | ||
Cash paid for income taxes | ||
Cash paid for Interest | ||
Non-cash investing and financing transactions: | ||
Conversion of preferred stock to common stock | 977 | |
Conversion of notes and accrued interest to common stocks | 56,375 | |
CASH FLOWS FROM INVESTING ACTIVITIES | $ (1,862) |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION Teo Foods Inc. ("TEO Foods" or the "Company") was incorporated in the state of Nevada on December 27, 2012. The Company's principal activity is to produce and sell packaged food products for retail in the frozen, refrigerated and shelf stable categories. The Company has a license to use the TEO name and logo on food products it sells and to apply the TEO pasteurization/sterilization processes to its products for improved shelf life and safety. These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has suffered recurring losses from operations and has insufficient working capital as of September 30, 2018 to develop its business plan and meet its obligation of the next 12 months. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders, the Company's ability to obtain necessary equity or debt financing to continue operations, and ultimately the Company's ability to generate profit from sales of packaged food products. These financial statements do not include any adjustments to classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company plans to obtain funds for operations through continued financial support from its stockholders, debt and private offerings of its equity. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The accompanying interim financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements. The December 31, 2017 balance sheet included herein was derived from audited financial statements as of that date. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim financial statements are read in conjunction with the audited financial statements and notes for the year ended December 31, 2017. In the opinion of management, the unaudited interim financial statements reflect all the adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company's financial position as of September 30, 2018 and the results of operations for the nine months ended September 30, 2018 and 2017. Cash and Cash Equivalents The Company considers all highly liquid debt instruments and other short-term investments with a maturity date of three months or less, when purchased, to be cash equivalents. Beneficial Conversion Feature of Convertible Notes Payable A beneficial conversion feature ("BCF") exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note. BCF of a convertible note is a reduction of the carrying amount of the convertible note, as a debt discount, and is credited to additional paid-in-capital. Such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense. A contingent beneficial conversion feature in a convertible note payable with conversion terms that change upon the occurrence of a future event (ex: fair value of the underlying stock declines after the note issuance date) is recognized when the contingency is resolved. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments Fair value is defined as the price that would be received in the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has categorized all investments recorded at fair value based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: ● Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date. ● Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by observable data as of the reporting date. ● Level 3: Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective resources and reflect the reporting entity's assumptions about the assumptions market participants would use in pricing the asset or liability. The Company's financial instruments consist of advances from a related party, notes payable, convertible note payable and license fee payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of the respective instruments. Loss Per Common Share Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. The calculation of diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Securities with anti-dilutive effects on net earnings (loss) per share are excluded. As of September 30, 2018, preferred shares convertible to 90,229,000 common shares and convertible note convertible into a maximum of 500,000 common shares were excluded from the calculation of loss per common share because its inclusion would have been anti-dilutive. As of December 31, 2017, preferred shares convertible to 100,000,000 common shares were excluded from the calculation of loss per common share because its inclusion would have been anti-dilutive. There was no common shares outstanding at September 30, 2017. Accounting Pronouncements Recently Adopted and Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In March 2016, the FASB issued the final guidance to clarify the principal versus agent guidance (i.e., whether an entity should report revenue gross or net). In April 2016, the FASB issued final guidance to clarify identifying performance obligation and the licensing implementation guidance. In May 2016, FASB updated the guidance in ASU No. 2014-09, which updated implementation of certain narrow topics within ASU 2014-09. Finally, in December 2016, the FASB issued several technical corrections and improvements, which clarify the previously issued standards and corrected unintended application of previous guidance. These standards (collectively "ASC 606") are effective for annual periods beginning after December 15, 2017. We adopted this ASU on January 1, 2018 and the adoption did not have any impact to the Company's financial statements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02 Leases (ASU 2016-2), which establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and is not expected to have a significant impact on our financial statements or disclosures. |
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
STOCK PURCHASE AGREEMENT | NOTE 3 – STOCK PURCHASE AGREEMENT On July 30, 2018, the Company entered into a Stock Purchase Agreement with NERYS USA Inc. to purchase all of the issued and outstanding equity of Commercial Targa S.A. De C.V. ("Targa"). The purchase price included $500,000 in cash, a $740,000 Secured Convertible Promissory note and 15,000,000 common shares of the Company. The closing of the transaction is to be held on the later of October 1, 2018 or the satisfaction or waiver of the conditions specified in the Stock Purchase Agreement. Management expects the transaction will be closed in early 2019. On November 9, 2018, the agreement was amended changing the cash term to $160,000 adding a promissory note of $220,000 and increasing the Secured Convertible Promissory note to $860,000. The Company paid the $160,000 in cash on August 2, 2018 and issued a $220,000 promissory note on November 20, 2018. There can be no assurance as to when or if the acquisition of Targa will ever occur. |
ROYALTY AND LICENSE AGREEMENT
ROYALTY AND LICENSE AGREEMENT | 9 Months Ended |
Sep. 30, 2018 | |
Research and Development [Abstract] | |
ROYALTY AND LICENSE AGREEMENT | NOTE 4 – ROYALTY AND LICENSE AGREEMENT On September 30, 2017, the Company entered into a Master Agreement with TEO Inc. ("TEO"). TEO is the founder and majority controlling shareholder of the Company. The Master Agreement provides the Company a license to use the TEO name and logo on food products it sells and to apply TEO's pasteurization/sterilization processes to its products for improved shelf life and safety. Additional provisions provide the Company production rights to TEO's pasteurizer/sterilizer and rights to lease its own system when certain sales/production increase. Pursuant to the master agreement, the Company agreed to pay an initial $1 million fee in installments with $100,000 due on June 30, 2018, $300,000 due on December 31, 2018 and the remaining $600,000 due in 12 equal monthly payments with the first payment due on January 31, 2019. During the nine months ended September 30, 2018, the Company paid $61,000 toward its initial payment due June 30, 2018. Commencing January 1, 2020, a use/royalty and service fee of 5.5% of the Company's gross revenue for food sales processed using TEO's intellectual property is payable quarterly. The ongoing licensing is maintained by meeting minimum annual use/royalty and service fees. The Company may pay for the difference between the actual use and the minimum to maintain the license. The annual minimum is listed as follows: Year Minimum use/royalty and service fee 2020 $ 500,000 2021 750,000 2022 1,000,000 Thereafter Increase 10% per year As a result of TEO being the majority shareholder of the Company and TEO's basis in the license being $0, the Company recorded a deemed dividend of $1 million for the initial fee payable to TEO. As of September 30, 2018, the outstanding balance of the license fee payable was $909,000. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTE 5 - NOTES PAYABLE 4% Notes Payable Between October 2017 and March 2018, the Company issued notes for an aggregate principal of $55,000. These notes provided annual interest at 4% and matured on April 6, 2018. On July 31, 2018, the Company issued 563,745 common shares to the three note holders to settle the principal and interest due on eight notes totaling $55,000 and interest totaling $1,375. As of September 30, 2018, and December 31, 2017, the outstanding balance of these 4% notes was $0 and $30,000, respectively. 8% Note Payable On July 31, 2018, the Company issued a note for $100,000 in principal bearing interest at 8% maturing on October 31, 2018. This note was amended on November 11, 2018 extending the maturity date to January 3, 2019. As of September 30, 2018, the outstanding balance of 8% note was $100,000. |
CONVERTIBLE NOTES PAYABLE
CONVERTIBLE NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2018 | |
Notes to Financial Statements | |
CONVERTIBLE NOTES PAYABLE | NOTE 6 - CONVERTIBLE NOTES PAYABLE On June 28, 2018, the Company commenced an offering of up to $600,000 in debt through the sale of promissory notes. The notes are for a two-year term and bear an 8% interest rate due at maturity. The notes are convertible into the Company's common shares at a 20% discount to the 30-day average bid price of the Company's common shares as may be quoted on the OTCQB, OTCQX or listing on a national stock exchange and at no rate lower than $0.20 per share. As of September 30, 2018, the Company has sold $100,000 to one investor. The Company will evaluate the beneficial conversion feature of the note upon the conversion date. |
EQUITY
EQUITY | 9 Months Ended |
Sep. 30, 2018 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY | NOTE 7 – EQUITY Preferred Stock Each share of Class A Preferred Stock may be converted by the holder upon request of the holder into 10 shares of common stock. Each holder is entitled to 100 votes for each share of Class A Preferred Stock held on the record date for the determination of stockholders entitled to vote at each meeting of stockholders of the Company (and written actions of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Company for their action or consideration. The holders are entitled to dividends, if any, as declared by the Company and participate pari passu with the common stock of the Company at the conversion rate. Preferred Share Conversion On March 31, 2018, the Company issued, 9,771,000 common shares to TEO Inc. for the conversion of 977,100 Class A Preferred Stock. See Note 8. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 8 - RELATED PARTY TRANSACTIONS Preferred Share Issuance and Conversion On March 31, 2018, the Company issued 9,771,000 common shares to TEO Inc. for the conversion of 977,100 Class A Preferred Stock. TEO Inc. directed that the common shares resulting from the conversion be issued to the shareholders of TEO Inc. The common shares were issued to 31 shareholders with 78% of the shares controlled by our sole officer and director. |
CONCENTRATIONS
CONCENTRATIONS | 9 Months Ended |
Sep. 30, 2018 | |
Risks and Uncertainties [Abstract] | |
CONCENTRATIONS | NOTE 9 – CONCENTRATIONS Co-Pack Agreement On April 20, 2018, the Company entered into a co-packing agreement with Targa. Targa is located in Tijuana, Mexico and produces and sells its own brands of products in Mexico which includes the NERYS line of imported California cheese products, frozen pizzas, various pasta meals and other products sold in the major stores such as Walmart, 7 eleven, Soriana, OXXO and others. Targa is currently the Company's only vendor contracted to produce its products. The Company expects to maintain this relationship with Targa. Targa has informally agreed to support placement of the Company's non-competing products where its products are distributed. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 10 - SUBSEQUENT EVENTS Stock Purchase Agreement On November 9, 2018, the Company and NERYS USA Inc. amended the Stock Purchase Agreement dated July 30, 2018. See Note 3. Convertible Promissory Note On November 20, 2018, the Company issued a note for $220,000 in principal bearing interest at 8% maturing on December 31, 2019 to NERYS USA Inc. The note is convertible into the Company’s common stock at a 20% discount to the 30-day average bid price of the Common stock as may be quoted on the OTCQB, OTCQX or listing on a national stock exchange and in no case below a price of $0.2 per share. See Note 3. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Accounting The accompanying interim financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements. The December 31, 2017 balance sheet included herein was derived from audited financial statements as of that date. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim financial statements are read in conjunction with the audited financial statements and notes for the year ended December 31, 2017. In the opinion of management, the unaudited interim financial statements reflect all the adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company's financial position as of September 30, 2018 and the results of operations for the nine months ended September 30, 2018 and 2017. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid debt instruments and other short-term investments with a maturity date of three months or less, when purchased, to be cash equivalents. |
Beneficial Conversion Feature of Convertible Notes Payable | Beneficial Conversion Feature of Convertible Notes Payable A beneficial conversion feature ("BCF") exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note. BCF of a convertible note is a reduction of the carrying amount of the convertible note, as a debt discount, and is credited to additional paid-in-capital. Such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense. A contingent beneficial conversion feature in a convertible note payable with conversion terms that change upon the occurrence of a future event (ex: fair value of the underlying stock declines after the note issuance date) is recognized when the contingency is resolved. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is defined as the price that would be received in the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has categorized all investments recorded at fair value based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: ● Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date. ● Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by observable data as of the reporting date. ● Level 3: Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective resources and reflect the reporting entity's assumptions about the assumptions market participants would use in pricing the asset or liability. The Company's financial instruments consist of advances from a related party, notes payable, convertible note payable and license fee payable. The Company considers the carrying value of such amounts in the financial statements to approximate their fair value due to the short-term nature of the respective instruments. |
Loss Per Common Share | Loss Per Common Share Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. The calculation of diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Securities with anti-dilutive effects on net earnings (loss) per share are excluded. As of September 30, 2018, preferred shares convertible to 90,229,000 common shares and convertible note convertible into a maximum of 500,000 common shares were excluded from the calculation of loss per common share because its inclusion would have been anti-dilutive. As of December 31, 2017, preferred shares convertible to 100,000,000 common shares were excluded from the calculation of loss per common share because its inclusion would have been anti-dilutive. There was no common shares outstanding at September 30, 2017. |
Accounting Pronouncements Recently Adopted and Recent Accounting Pronouncements | Accounting Pronouncements Recently Adopted and Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In March 2016, the FASB issued the final guidance to clarify the principal versus agent guidance (i.e., whether an entity should report revenue gross or net). In April 2016, the FASB issued final guidance to clarify identifying performance obligation and the licensing implementation guidance. In May 2016, FASB updated the guidance in ASU No. 2014-09, which updated implementation of certain narrow topics within ASU 2014-09. Finally, in December 2016, the FASB issued several technical corrections and improvements, which clarify the previously issued standards and corrected unintended application of previous guidance. These standards (collectively "ASC 606") are effective for annual periods beginning after December 15, 2017. We adopted this ASU on January 1, 2018 and the adoption did not have any impact to the Company's financial statements. In February 2016, the FASB issued Accounting Standards Update No. 2016-02 Leases (ASU 2016-2), which establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and is not expected to have a significant impact on our financial statements or disclosures. |
ROYALTY AND LICENSE AGREEMENT (
ROYALTY AND LICENSE AGREEMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Research and Development [Abstract] | |
The annual minimum use/royalty and service fee | Year Minimum use/royalty and service fee 2020 $ 500,000 2021 750,000 2022 1,000,000 Thereafter Increase 10% per year |