Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 14, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Reign Sapphire Corp | |
Entity Central Index Key | 1,642,159 | |
Document Type | 10-Q | |
Trading Symbol | RSAP | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 70,772,408 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash | $ 8,127 | $ 9,592 |
Accounts receivable | 1,102 | 9,730 |
Inventory | 723,595 | 726,140 |
Prepaid expenses | 2,500 | 15,086 |
Total current assets | 735,324 | 760,548 |
Equipment, net | 16,668 | 25,278 |
Intangible assets, net | 633,099 | 803,306 |
Goodwill | 481,947 | 481,947 |
Total assets | 1,867,038 | 2,071,079 |
Current liabilities: | ||
Accounts payable | 44,547 | 194,023 |
Due to related party | 1,101,555 | 721,434 |
Accrued compensation - related party | 1,174,750 | 1,036,000 |
Deferred revenue | 20,616 | 81,455 |
Common stock payable | 79,625 | |
Short term notes payable, less unamortized debt issuance costs of $54,500 and $70,000 at September 30, 2018 and December 31, 2017, respectively | 87,958 | 19,051 |
Convertible notes payable, less unamortized debt discount of $19,726 and $224,904 at September 30, 2018 and December 31, 2017, respectively | 1,711,778 | 1,212,600 |
Derivative liabilities | 31,875 | 470,839 |
Estimated fair value of contingent payments, net | 279,026 | 287,957 |
Other current liabilities | 97,272 | 61,969 |
Total current liabilities | 4,549,377 | 4,164,953 |
Total liabilities | 4,549,377 | 4,164,953 |
Commitments and contingencies | ||
Shareholders' deficit | ||
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 1 and 1 share issued and outstanding at September 30, 2018 and December 31, 2017, respectively | ||
Common stock, $0.0001 par value, 150,000,000 shares authorized; 70,622,408 and 53,276,676 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively | 7,063 | 5,328 |
Additional paid-in-capital | 9,094,279 | 8,281,793 |
Accumulated deficit | (11,783,681) | (10,380,995) |
Total shareholders' deficit | (2,682,339) | (2,093,874) |
Total liabilities and shareholders' deficit | $ 1,867,038 | $ 2,071,079 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Debt issuance costs on note payable, current | $ 54,500 | $ 70,000 |
Debt discount on convertible notes, current | $ 19,726 | $ 224,904 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Preferred stock, issued | 1 | 1 |
Preferred stock, outstanding | 1 | 1 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 150,000,000 | 150,000,000 |
Common stock, issued | 70,622,408 | 53,276,676 |
Common stock, outstanding | 70,622,408 | 53,276,676 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Net revenues | $ 90,451 | $ 255,975 | $ 540,631 | $ 960,497 |
Cost of Sales | 12,660 | 98,465 | 166,242 | 372,670 |
Gross Profit | 77,791 | 157,510 | 374,389 | 587,827 |
Operating expenses: | ||||
Advertising and marketing expenses | 38,726 | 171,285 | 337,724 | 394,579 |
Stock based compensation - related party | 32,370 | 211,505 | 112,293 | 619,156 |
General and administrative | 275,447 | 354,933 | 997,283 | 1,110,740 |
Total operating expenses | 346,543 | 737,723 | 1,447,300 | 2,124,475 |
Loss from operations | (268,752) | (580,213) | (1,072,911) | (1,536,648) |
Other (income) expense: | ||||
Change in fair value of warrant liabilities | 366,505 | 226,893 | ||
Change in fair value of derivative liabilities | 531,010 | (498,963) | 283,495 | |
Extinguishment of debt | (23,966) | 524,458 | 691,371 | |
Interest expense | 111,201 | 19,971 | 304,280 | 337,610 |
Total other expense (income), net | 87,235 | 917,486 | 329,775 | 1,539,369 |
Loss before income taxes | (355,987) | (1,497,699) | (1,402,686) | (3,076,017) |
Income taxes | ||||
Net loss | $ (355,987) | $ (1,497,699) | $ (1,402,686) | $ (3,076,017) |
Net loss per share, basic and diluted (in dollars per share) | $ (0.01) | $ (0.03) | $ (0.02) | $ (0.07) |
Weighted average number of shares outstanding Basic and diluted (in shares) | 65,460,451 | 48,034,278 | 61,710,263 | 45,372,823 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (1,402,686) | $ (3,076,017) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Stock based compensation issued to employees | 7,742 | 5,760 |
Stock based compensation - related party | 2,390 | 45,391 |
Preferred share issued to CEO - related party | 270,000 | |
Depreciation expense | 9,470 | 10,266 |
Amortization expense | 175,786 | 162,270 |
Accretion of debt discount | 293,740 | 333,472 |
Change in derivative liabilities | (498,963) | 283,495 |
Change in warrant liabilities | 226,893 | |
Loss on extinguishment of debt | 548,425 | 691,371 |
Amortization of stock issued for future services | 11,250 | |
Estimated fair market value of stock issued for services | 148,211 | 338,422 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 8,628 | (17,322) |
Inventory | 2,545 | (2,537) |
Prepaid expenses | 1,336 | 1,667 |
Accounts payable | (61,311) | 155,525 |
Due to related party | 380,121 | 331,137 |
Accrued compensation - related party | 138,750 | 195,000 |
Deferred revenue | (60,839) | (37,486) |
Estimated fair value of contingent payments, net | (8,931) | (118,598) |
Other current liabilities | 5,903 | 20,240 |
Net cash used in operating activities | (298,433) | (181,051) |
Cash flows from investing activities: | ||
Acquisition of intangible assets | (5,579) | (67,388) |
Purchases of computer equipment | (860) | (940) |
Net cash used in investing activities | (6,439) | (68,328) |
Cash flows from financing activities: | ||
Proceeds from short-term convertible notes, net of debt issuance costs | 250,000 | |
Proceeds from short-term notes, net of debt issuance costs | 155,020 | 147,504 |
Repayments of short term notes | (101,613) | (25,872) |
Net cash provided by financing activities | 303,407 | 121,632 |
Net decrease in cash | (1,465) | (127,747) |
Cash at beginning of period | 9,592 | 149,607 |
Cash at end of period | 8,127 | 21,860 |
Cash paid during the period for: | ||
Interest | ||
Income taxes | ||
Non-cash investing and financing activities: | ||
Common stock issued for payment of accounts payable | 88,165 | 14,985 |
Common stock and warrants issued in conjunction with convertible notes payable | 169,066 | |
Common stock issued to third party in conjunction with debt issuance | 55,500 | 105,000 |
Warrants issued to third party in conjunction with convertible notes payable | 36,739 | |
Debt issuance costs in conjunction with convertible notes payable | 44,000 | |
Deferred interest payable issued in conjunction with convertible notes payable | 29,400 | |
Reclassification of common stock payable to equity for shares issued | $ 156,656 |
ORGANIZATION AND PRINCIPAL ACTI
ORGANIZATION AND PRINCIPAL ACTIVITIES | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES Corporate History and Background On December 1, 2016, substantially all of the operating assets of Coordinates Collection, Inc. (“CCI” or “Coordinates Collection”) was acquired by Reign Sapphire ( RGNP (see “ is a Beverly Hills-based, direct-to-consumer, branded and custom jewelry company. The ve been presented on a comparative basis RGNP is a Beverly Hills-based, direct-to-consumer, branded and custom jewelry company with 4 niche brands: Reign Sapphires: ethically produced, source-to-consumer sapphire jewelry targeting millennials, Coordinates Collection: custom jewelry, inscribed with location coordinates commemorating life’s special moments, Le Bloc: classic customized jewelry, and athleisure jewelry brand ION Collection. Reign Sapphire Corporation was established on December 15, 2014 in the State of Delaware as a vertically integrated “source to retail” model for sapphires – rough sapphires to finished jewelry; a color gemstone brand; and a jewelry brand featuring Australian sapphires. The Company acquired its Coordinates Collection and Le Bloc brands and the assets related to the production and sale of it on December 1, 2016. The Company is focusing its marketing initiatives on: (1) Direct-to-Consumer (“D2C”) ecommerce marketing to attract customers to the reignsappires.com website, (2) Business-to-Business (“B2B”) marketing and sales efforts, to establish distribution partners such as high-end fashion retailers. The Company started as UWI Holdings Corporation (previously known as Australian Sapphire Corporation) (“UWI”) and was established on May 31, 2013 in the Province of New Brunswick, Canada. On December 31, 2014, UWI entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations with Reign Corporation, pursuant to which UWI transferred all of its net assets to Reign. The sole shareholder of UWI along with his spouse retained 100% ownership of Reign and were issued 27,845,000 of Reign common shares in exchange for the 16,000,250 outstanding shares of UWI. There was no significant tax consequence to this exchange. As a result, Reign is considered to be the continuation of the predecessor UWI. All historical financial information prior to the reorganization is that of UWI. Prior to the reorganization, the Company was authorized to issue 50,000,000 shares of common stock and 5,000,000 shares of preferred stock. On May 8, 2015, the Company’s Articles of incorporation were amended to increase the authorized common shares to 100,000,000 and preferred shares to 10,000,000. On December 22, 2015, the Company’s Articles of Incorporation were amended to increase the authorized number common shares to 150,000,000 with the authorized number of preferred shares remaining at 10,000,000. On March 17, 2017, the shareholders of the Company approved an amendment to the Company’s Certificate of Incorporation to designate 1 share of the Company’s authorized 10,000,000 shares of Preferred Stock as Series A Preferred Stock (“Series A Preferred Stock”), which shall vote with the Common Stock, and shall be entitled to fifty-one percent (51%) of the total votes of Common Stock on all such matters voted on. On May 23, 2017, the Company issued the share of Series A Preferred Stock to Joseph Segelman. The Company has begun its planned principal operations, and accordingly, the Company has prepared its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | NOTE 2 – BASIS OF PRESENTATION The included (a) condensed consolidated balance sheet as of December 31, 2017, which has been derived from audited financial statements, and (b) the unaudited condensed financial statements as of September 30, 2018 and 2017, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s December 31, 2017 and 2016 audited financial statements filed on Form 10-K on April 2, 2018. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full year. Notes to the condensed consolidated financial statements which substantially duplicate the disclosure contained in the financial statements as reported in the Annual Report on Form 10-K for the year ended December 31, 2017 as filed on April 2, 2018, have been omitted. The Company currently operates in one business segment. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker, the Chief Executive Officer, who comprehensively manages the entire business. The Company does not currently operate any separate lines of businesses or separate business entities. Going Concern The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of approximately $11,784,000 and $10,381,000 at September 30, 2018 and December 31, 2017, respectively, had a working capital deficit of approximately $3,814,000 and $3,404,000 at September 30, 2018 and December 31, 2017, respectively, had a net loss of approximately $1,403,000 and $3,076,000 for the nine months ended September 30, 2018 and 2017, respectively, and net cash used in operating activities of approximately $298,000 and $181,000 for the nine months ended September 30, 2018 and 2017, respectively, with limited revenue earned since inception, and a lack of operational history. These matters raise substantial doubt about the Company’s ability to continue as a going concern. While the Company is attempting to expand operations and increase revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues. Our current burn rate to maintain the minimal level of operations for us to be in a position to execute our business plan upon funding is anticipated to be no greater than $25,000 per month in cash. Joseph Segelman, our President and CEO, has agreed to underwrite these costs, if necessary, until we are then able to begin execution of our business plan. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s condensed consolidated financial statements. The condensed consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the condensed consolidated financial statements. Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Reign Brands, Inc. All significant intercompany accounts and transactions are eliminated in consolidation. Use of Estimates The preparation of these condensed consolidated financial statements in accordance with GAAP 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 dates of the condensed consolidated financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: inventory valuation, derivative liabilities, warrant liabilities, common stock and option valuation, valuation of acquired intangible assets, and the recoverability of intangibles. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Income Taxes Income taxes are accounted for under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Balance Sheets in accordance with Accounting Standards Codification (“ASC”) 740, which established financial accounting and reporting standards for the effect of income taxes. The likelihood that its deferred tax assets will be recovered from future taxable income must be assessed and, to the extent that recovery is not likely, a valuation allowance is established. Changes in the valuation allowance in a period are recorded through the income tax provision in the condensed consolidated Statements of Operations. ASC 740-10-30 was adopted from the date of its inception. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s consolidated financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, the Company does not have a liability for unrecognized income tax benefits. Comprehensive Income The Company reports comprehensive income in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 220 “Comprehensive Income,” which established standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. Total comprehensive income is defined as all changes in shareholders’ equity during a period, other than those resulting from investments by and distributions to shareholders (i.e., issuance of equity securities and dividends). Generally, for the Company, total comprehensive income (loss) equals net income (loss) plus or minus adjustments for currency translation. There are no items other than net loss affecting comprehensive loss for the three and nine months ended September 30, 2018 and 2017, respectively. Foreign Currency - Functional and Presentation Currency The functional currency represents the currency of the primary economic environment in which the entity operates. Management has determined the functional currency of the Company to be the USD, as sales prices and major costs of operating expenses are primarily influenced by fluctuations in the USD, and with its Chief Executive Officer and director (“CEO”), and employees of the Company headquartered and operating in the United States. The results of transactions in foreign currency are remeasured into the functional currency at the average rate of exchange during the reporting period. The Company had no aggregate net foreign currency remeasurements included in general and administrative expenses in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017, respectively. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into the Company’s reporting currency of USD at the exchange rates prevailing at the balance sheet date. All translation adjustments resulting from the translation of the financial statements into the reporting currency at USD are dealt with as a separate component within shareholders’ equity. There were no translation adjustments for the three and nine months ended September 30, 2018 and 2017. Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Codification ASC 606 (“ASC 606”), Revenue from Contracts with Customers, Revenue Recognition The Company generates all of its revenue from contracts with customers. The Company recognizes revenue when we satisfy a performance obligation by transferring control of the promised services to a customer in an amount that reflects the consideration that we expect to receive in exchange for those services. The Company determines revenue recognition through the following steps: 1. Identification of the contract, or contracts, with a customer. 2. Identification of the performance obligations in the contract. 3. Determination of the transaction price. 4. Allocation of the transaction price to the performance obligations in the contract 5. Recognition of revenue when, or as, we satisfy a performance obligation. At contract inception, the Company assesses the services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a service (or bundle of services) that is distinct. To identify the performance obligations, the Company considers all of the services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company allocates the entire transaction price to a single performance obligation. A description of our principal revenue generating activities are as follows: Retail sales Wholesale sales Revenue is recognized from retail and wholesale sales when the product is shipped to the customer, provided that collection of the resulting receivable is reasonably assured. Credit is granted for wholesale sales generally for terms of 7 to 90 days, based on credit evaluations. No allowance has been provided for uncollectible accounts. Management has evaluated the receivables and believes they are collectable based on the nature of the receivables, historical experience of credit losses, and all other currently available evidence. Discounts are recorded as a reduction of the transaction price. Revenue excludes any amounts collected on behalf of third parties, including sales taxes. The Company evaluates whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily obligated in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded at the gross sale price. The Company generally records the net amounts as commissions earned if we are not primarily obligated and do not have latitude in establishing prices. The Company records all revenue transactions at the gross sale price. There is a no return policy. The return policy is currently being evaluated to be more in line with industry standards. Deferred revenue Deferred revenue consists of customer orders paid in advance of the delivery of the order. Deferred revenue is classified as short-term as the typical order ships within approximately three weeks of placing the order. Deferred revenue is recognized as revenue when the product is shipped to the customer and all other revenue recognition criteria have been met. Deferred revenue as of December 31, 2017 was $81,455, which was recognized as revenue during the nine months ended September 30, 2018, including adjustments related to the new revenue recognition guidance. Deferred revenue totaling $20,616 and $81,455 as of September 30, 2018 and December 31, 2017, respectively, is included in current liabilities in the accompanying condensed consolidated Balance Sheets. Inventories Reign Sapphires Inventories are stated at the lower of cost or market on a lot basis each quarter. A lot is determined by the cut, clarity, size, and weight of the sapphires. Inventory consists of sapphire jewels that meet rigorous grading criteria and are of cuts and sizes most commonly used in the jewelry industry. As of September 30, 2018 and December 31, 2017, the Company carried primarily loose sapphire jewels and loose sapphire jewels held as samples. Samples are used to show potential customers what the jewelry would look like. Promotional items given to customers that are not expected to be returned will be removed from inventory and expensed. There have been no promotional items given to customers during the nine months ended September 30, 2018. The Company performs its own in-house assessment based on gem guide and the current market price for metals to value its inventory on an annual basis or if circumstances dictate sooner to determine if the estimated fair value is greater or less than cost. In addition, the inventory is reviewed each quarter by the Company against industry prices from gem-guide and if there is a potential impairment, the Company would appraise the inventory. The estimated fair value is subject to significant change due to changes in popularity of cut, perceived grade of the clarity of the sapphires, the number, type and size of inclusions, the availability of other similar quality and size sapphires, and other factors. As a result, the internal assessed value of the sapphires could be significantly lower from the current estimated fair value. Loose sapphire jewels do not degrade in quality over time and are not subject to fashion trends. The estimated fair value per management’s internal assessment is greater than the cost, therefore, there is no indicator of impairment as of September 30, 2018. CCI, Le Bloc and ION Collection CCI, Le Bloc and ION Collection products are outsourced to a third party for manufacture, made to order, and, when completed, are shipped to the customer. The inventory for CCI, Le Bloc and ION Collection are considered immaterial as of September 30, 2018 and December 31, 2017. Property and Equipment Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally five years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. Fixed assets are examined for the possibility of decreases in value when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. Business Combinations Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management, including expected future cash flows. We allocate any excess purchase price over the fair value of the net assets and liabilities acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the condensed consolidated financial statements from the acquisition date. Intangible Assets and Goodwill Goodwill is the cost of an acquisition less the fair value of the net assets of the acquired business. Intangible assets consist primarily of tradenames, proprietary designs, developed technology – website, and developed technology – Ipad application. Our intangible assets are being amortized on a straight-line basis over a period of three to ten years. Impairment of Long-lived Assets and Goodwill We evaluate goodwill for impairment annually in the fourth quarter, and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying amount. The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value, including goodwill. We typically use discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those we believe hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. There are no impairments as of September 30, 2018 and December 31, 2017. We periodically evaluate whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount 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. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value. There are no impairments as of September 30, 2018 and December 31, 2017. Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third party comparable sales and discounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future. Advertising and Marketing Expenses Advertising and marketing expenses are recorded as marketing expenses when they are incurred. Advertising and marketing expense was approximately $38,700 and $337,700, and $171,300 and $394,600, for the three and nine months ended September 30, 2018 and 2017, respectively. Fair Value of Financial Instruments The Company applies the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of September 30, 2018 and December 31, 2017, the fair value of cash, accounts receivable, accounts payable and accrued expenses, notes payable, and convertible debt approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates. Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: ● Level 1 – Quoted prices in active markets for identical assets or liabilities. ● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The embedded derivative liabilities are recognized at fair value on a recurring basis at September 30, 2018 and are Level 3 measurements. There have been no transfers between levels. Debt The Company issues debt that may have separate warrants, conversion features, or no equity-linked attributes. Debt with warrants Convertible debt – derivative treatment If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using Monte Carlo Method upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible debt derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The convertible debt derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the statement of operations. The debt discount is amortized through interest expense over the life of the debt. Convertible debt – beneficial conversion feature If the conversion feature does not qualify for either the derivative treatment or as a BCF, the convertible debt is treated as traditional debt. Employee Stock Based Compensation Stock based compensation issued to employees and members of our board of directors is measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. The grant date fair value of a stock based award is recognized as an expense over the requisite service period of the award on a straight-line basis. For purposes of determining the variables used in the calculation of stock based compensation issued to employees , Non-Employee Stock Based Compensation Issuances of the Company’s common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. Although situations may arise in which counter performance may be required over a period of time, the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instruments fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates. Non-Cash Equity Transactions Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to contemporaneous cash sale of stock. Earnings per Share Diluted earnings (loss) per share are computed on the basis of the weighted average number of common shares (including common stock subject to redemption) plus dilutive potential common shares outstanding for the reporting period. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. The total number of potential additional dilutive securities outstanding for the three and nine months ended September 30, 2018 and 2017, was none since the Company had net losses and any additional potential common shares would have an anti-dilutive effect. Related Parties Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. Concentrations, Risks, and Uncertainties Business Risk The Company is subject to the substantial business risks and uncertainties inherent to such an entity, including the potential risk of business failure. The Company is headquartered and operates in the United States. As the Company generates significant revenues from operations, business activities will also include Australia and Asia and geographic segment reporting will be provided. There can be no assurance that the Company will be able to successfully continue to manufacture its products and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. Also, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general economic conditions, price of raw material, competition, governmental and political conditions, and changes in regulations. Because the Company is dependent on foreign trade in Australia and Asia, the Company is subject to various additional political, economic and other uncertainties. Among other risks, the Company’s operations will be subject to risk of restrictions on transfer of funds, domestic and international customs, changing taxation policies, foreign exchange restrictions, and political and governmental regulations. The Company has business activities in Australia and Asia, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between USD and the Australian currency AUD. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting period. Aggregate net foreign currency transactions included in the condensed consolidated Statements of Operations was immaterial for the three and nine months ended September 30, 2018 and 2017. Interest rate risk Financial assets and liabilities do not have material interest rate risk. Credit risk The Company is exposed to credit risk from its cash in bank and accounts receivable. The credit risk on cash in banks is limited because the counterparties are recognized financial institutions. The Company had no customers that accounted for 10% or more of total revenues for the three and months ended September 30, 2018. The Company had one customer that accounted for 10%, comprising 10% and 14%, or more of total revenue for the three and nine months ended September 30, 2017, respectively. The Company had no customers that accounted for 10% or more of total accounts receivable at December 31, 2018 and 2017, respectively. Foreign currency risk The Company has transactions settled in AUD. Thus, the Company has foreign currency risk exposure. Seasonality The business is subject to substantial seasonal fluctuations. Historically, a significant portion of net sales and net earnings have been realized during the period from October through December. Recent Accounting Pronouncements FASB ASU 2017-11 “ Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815) FASB ASU 2017-09 “ Scope of Modification Accounting (Topic 718) FASB ASU 2017-04 “Simplifying the Test for Goodwill Impairment (Topic 350)” FASB ASU 2017-01 “Clarifying the Definition of a Business (Topic 805)” FASB ASU 2016-15 “Statement of Cash Flows (Topic 230)” – FASB ASU 2016-12 “Revenue from Contracts with Customers (Topic 606)” FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)” FASB ASU 2016-10 “Revenue from Contracts with Customers (Topic 606)” FASB ASU 2016-02 “Leases (Topic 842)” – FASB ASU 2015-17 “Income Taxes (Topic 740)” – |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORY | NOTE 4 – INVENTORY Inventories consisted of the following as of: September 30, 2018 December 31, 2017 Raw materials $ 468,039 $ 474,983 Work-in-process 121,411 117,012 Samples 134,145 134,145 $ 723,595 $ 726,140 |
EQUIPMENT
EQUIPMENT | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
EQUIPMENT | NOTE 5 – Equipment Equipment consisted of the following as of: Estimated Life September 30, 2018 December 31, 2017 Office equipment 5 years $ 3,391 $ 3,391 Computer equipment 3 years 40,171 39,311 Accumulated depreciation (26,894 ) (17,424 ) $ 16,668 $ 25,278 Depreciation expense was $3,157 and $9,470, and $3,445 and $10,266 for the three and nine months ended September 30, 2018 and 2017, respectively, and is classified in general and administrative expenses in the condensed consolidated Statements of Operations. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 6 – INTANGIBLE ASSETS Intangible assets consisted of the following as of: Estimated Life September 30, 2018 December 31, 2017 Trademarks 3.3 – 4.5 years $ 260,000 $ 260,000 Website 3 years 118,832 113,253 Acquired tradename 10 years 365,000 365,000 Acquired proprietary design 5 years 80,000 80,000 Acquired developed technology - website 3 years 117,500 117,500 Acquired developed technology – Ipad application 3 years 117,500 117,500 Accumulated amortization (425,733 ) (249,947 ) $ 633,099 $ 803,306 Estimated Life September 30, 2018 December 31, 2017 Goodwill indefinite $ 481,947 $ 481,947 Future amortization expense related to intangible assets are approximately as follows: Acquired Trademarks Website Intangibles Total 2018 (remainder of fiscal year) $ 32,593 $ 19,793 $ 65,417 $ 117,803 2019 62,907 38,919 124,306 226,132 2020 37,818 13,524 52,500 103,842 2021 12,606 916 51,167 64,689 2022 — — 36,500 36,500 Thereafter — — 142,957 142,957 $ 145,924 $ 73,152 $ 472,847 $ 691,923 Amortization expense was $58,901 and $175,786, and $55,284 and $162,270 for the three and nine months ended September 30, 2018 and 2017, respectively, and is classified in general and administrative expenses in the condensed consolidated Statements of Operations. |
DUE TO RELATED PARTY
DUE TO RELATED PARTY | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
DUE TO RELATED PARTY | NOTE 7 – DUE TO RELATED PARTY During the nine months ended September 30, 2018, the Company received no advances from its CEO/director, incurred business expenses that were paid by the CEO/director of $1,456,311 (comprised of operating expenses of $1,447,723, website development costs of $5,529, inventory purchases totaling $2,200, and equipment purchases of $860) and had repayments of $1,076,191. The Company has a balance owed to the related party of $1,101,555 and $721,434 at September 30, 2018 and December 31, 2017, respectively. During the nine months ended September 30, 2018, the Company incurred $135,000 of compensation related to the CEO/director’s employment agreement and $60,000 of deferred compensation related to the Secretary’s employment agreement. As of September 30, 2018 and December 31, 2017, accrued compensation-related party was $1,174,750 and $1,036,000, respectively. |
CONVERTIBLE NOTE PAYABLE
CONVERTIBLE NOTE PAYABLE | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE NOTE PAYABLE | NOTE 8 – CONVERTIBLE NOTES PAYABLE The following represents a summary of the convertible debt terms at September 30, 2018: Warrants Amount of Maturity Conversion Number of Exercise Exercisable Notes Debt Discount Dates thru Price Warrants Price thru January and February 2018 Notes $ 294,000 $ (19,726 ) 10/3/2018 to 11/16/2018 $ 0.08 1,960,000 $ 0.15 2/16/2023 November 2017 Notes 287,502 — 12/31/2018 $ 0.08 3,593,776 $ 0.15 11/10/2022 November 2016 Notes 287,502 — 12/31/2018 $ 0.08 3,593,776 $ 0.15 11/10/2022 December 2015 Notes 862,500 — 12/31/2018 $ 0.08 10,781,250 $ 0.15 11/10/2022 Total $ 1,731,504 $ (19,726 ) 19,928,802 January and February 2018 In January and February 2018, the Company entered into Securities Purchase Agreements (the “Purchase Agreement”) with respect to the sale and issuance to Crossover Capital Fund II, LLC (“Crossover”) totaling (i) 833,332 shares of the Company’s Common Stock (the “Commitment Shares”); (ii) 3,000,000 redeemable shares (the “Redeemable Shares”), (iii) $294,000 aggregate principal amount of a convertible promissory notes (the “Convertible Notes”) and (iv) Common Stock Purchase Warrants to purchase up to an aggregate of 1,960,000 shares of the Company’s common stock (the “Warrants”) for aggregate consideration of $250,000 cash . The January and February 2018 Convertible Notes mature on October 3, 2018 and November 16, 2018, respectively, and provide for interest to accrue at an interest rate equal to 18% per annum or the maximum rate permitted under applicable law after the occurrence of any event of default as provided in the Convertible Notes. At any time after 180 days from the issue date, the holder, at its option, may convert the outstanding principal balance and accrued interest into shares of common stock of the Company. The initial conversion price for the principal and interest in connection with voluntary conversions by a holder of the Convertible Notes is $0.08 per share, subject to adjustment as provided therein. There is also a one-time interest charge of 10% due at maturity. If the Convertible Notes are prepaid on or prior to the maturity dates, all of the Redeemable Shares shall be returned to the treasury shares of the Company, without any payment by the Company for the Redeemable Shares. Further, if the Company prepays a portion of the Convertible Notes, but not the entire Convertible Notes, on or before the maturity dates, a pro rata portion of the Redeemable Shares shall be returned to the Company’s treasury in proportion to the prepayment amount as it relates to the entire Convertible Notes balance. th The exercise price for the Warrants is $0.15, subject to adjustment, are exercisable for five years after the date of the Warrants and are exercisable Purchaser Conversion The January and February 2018 Convertible Notes convert the outstanding principal balance and accrued interest into shares of common stock of the Company January and February 2018 Convertible Notes th Interest The January and February 2018 Convertible Notes a one-time interest charge of 10% due at maturity totaling $29,400 that has been accrued within other current liabilities in the accompanying condensed consolidated balance sheets. Redeemable Shares The January and February 2018 Convertible Notes Common Stock The January and February 2018 Convertible Notes purchasers Warrants The Company calculates the fair value of the Warrants at $95,324 and $65,292 at January 3, 2018 and February 16, 2018, respectively, using the Black-Scholes option-pricing method. The Black-Scholes option-pricing method requires the use of subjective assumptions, including stock price volatility, the expected life of stock options, risk free interest rate and the fair value of the underlying common stock on the date of grant. The assumptions used in the Black-Scholes option-pricing method is set forth below: January 3, 2018 February 16, 2018 Common stock price $ 0.17 $ 0.13 Term 5 years 5 years Strike price $ 0.15 $ 0.15 Dividend yield 0 0 Risk free rate 2.25 % 2.63 % Volatility 62.5 % 62.5 % Dividend yield Volatility Risk-free interest rate Expected term of options Debt Discount The Company issued the January and February 2018 Convertible Notes January 3, 2018 February 16, 2018 Fair value Relative fair value Fair value Relative fair value Warrant $ 95,324 $ 19,784 $ 65,292 $ 16,955 Common sock $ 70,833 $ 14,701 $ 54,167 $ 14,066 Redeemable shares $ 255,000 $ 52,923 $ 195,000 $ 50,637 Remaining note value $ 110,300 $ 22,892 $ 110,300 $ 28,642 Total $ 531,457 $ 110,300 $ 424,759 $ 110,300 The Company recorded debt discount accretion of $80,822 and $222,740 and $0 and $0 to interest expense in the condensed consolidated Statements of Operations during the three and nine months ended September 30, 2018 and 2017, respectively, and has $19,726 of unamortized debt discount remaining as of September 30, 2018. November 2017 On November 10, 2017, the Company entered into a Securities Purchase Agreement (the “November 2017 Purchase Agreement”) with respect to the sale and issuance to certain institutional investors Alpha Capital Anstalt and Brio Capital Master Fund Ltd. (collectively “November 2017 Purchasers”) of up to (i) 833,354 shares of the Company’s Common Stock (the “November 2017 Incentive Shares”); (ii) $287,502 aggregate principal amount of Secured Convertible Notes (the “November 2017 Notes”) and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 3,593,776, shares of the Company’s Common Stock (the “November 2017 Warrants”). The November 2017 Incentive Shares, November 2017 Notes and November 2017 Warrants were issued on November 10, 2017 (the “November 2017 Original Issue Date”). November 2017 Purchasers received (i) November 2017 Incentive Shares at the rate of 2.8986 November 2017 Incentive Shares for each $1.00 of November 2017 Note principal issued to such November 2017 Purchaser; (ii) a November 2017 Note with a principal amount of $1.00 for each $0.86956 for each $1.00 paid by each purchaser for such purchaser’s November 2017 Note; and (iii) November 2017 Warrants to purchase up to a number of shares of Common Stock equal to 100% of such purchaser’s November 2017 Note principal amount divided by $0.08 (“Purchaser Conversion Price”), the conversion price in effect on the Initial Closing Date, with a per share exercise price equal to $0.15, as amended on November 16, 2017, subject to adjustment. The aggregate cash subscription amount received by the Company from the purchasers for the issuance of the November 2017 Incentive Shares, November 2017 Notes and November 2017 Warrants was approximately $250,002 (the “Subscription Amount”) which was issued at a $37,500 original issue discount from the face value of the Note. The November 2017 Notes mature on December 31, 2018, as amended on January 25, 2018, and provide for interest to accrue at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted under applicable law after the occurrence of any event of default as provided in the November 2017 Notes. At any time after the November 2017 Original Issue Date, the holders, at their option, may convert the outstanding principal balance and accrued interest into shares of our Common Stock. The initial conversion price for the principal and interest in connection with voluntary conversions by a holder of a Note is $0.08 per share, subject to adjustment as provided therein. Each November 2017 Note, for example, is subject to adjustment upon certain events such as stock splits and has full ratchet anti-dilution protections for issuance of securities by us at a price that is lower than the conversion price. Each November 2017 Note also contains certain negative covenants, including prohibitions on incurrence of indebtedness, liens, charter amendments, dividends, redemption. None of the holders of the November 2017 Note have the right to convert any portion of their November 2017 Note if it (together with its affiliates) would beneficially own in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise. The November 2017 Notes include customary events of default, including, among other things, payment defaults, covenant breaches, certain representations and warranties, certain events of bankruptcy, liquidation and suspension of the Company’s Common Stock from trading. If such an event of default occurs, the holders of the November 2017 Notes may be entitled to take various actions, which may include the acceleration of amounts due under the November 2017 Notes and accrual of interest as described above. The November 2017 Notes are collectively collateralized by substantially all of the Company’s assets and guarantees of payment of the November 2017 Notes have also been delivered by Joseph Segelman, the Chief Executive Officer and President of the Company, and Australian Sapphire Corporation (“ASC”), a shareholder of the Company which is wholly-owned by Joseph Segelman, guaranteed payment of all amounts owed under the November 2017 Notes, subject to the terms of such guaranty agreements. The November 2017 Purchase Agreement is being entered into in accordance with the halachically accepted exemptions on the paying of interest payments in business transactions known as “heter iska”. is still accounting for the interest in accordance with GAAP. Optional Redemption The November 2017 Notes provide that commencing six (6) months after the November 2017 Original Issue Date, the Company will have the option of prepaying the outstanding principal amount of the November 2017 Notes (an “November 2017 Optional Redemption”), in whole or in part, by paying to the holders a sum of money in cash equal to one hundred percent (100%) of the principal amount to be redeemed, together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable to the holder arising under the November 2017 Note through the November 2017 Redemption Payment Date and 2.8986 shares of the Company’s Common Stock for each $1.00 of November 2017 Note principal amount being redeemed. A Notice of Redemption, if given, may be given on the first Trading Day following twenty (20) consecutive Trading Days during which all of the “Equity Conditions”, as defined, have been in effect. The Company evaluated the Optional Redemption in ASC 815, and concluded that the Optional Redemption meets the criteria in ASC 815, and therefore, is accounted for as a liability. As of September 30, 2018, the Optional Redemption was recorded as a derivative liability on the condensed consolidated Balance Sheets using “Monte Carlo Method” modeling and at each subsequent reporting date, the fair value of the Optional Redemption liability will be re-measured and changes in the fair value will be recorded in the condensed consolidated Statements of Operations. The Optional Redemption liability fair value was originally valued at $6,375 and was re-measured at fair value to be $6,375 at September 30, 2018. During the three and nine months ended September 30, 2018 and 2017, the Company recorded $0 and $0, and $0 and $0, respectively, on Optional Redemption valuation. The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 Expected dividend yield 0.00 % Expected stock-price volatility 47.5 % Risk-free interest rate 2.11 % Expected term of options (years) 0.5 Stock price $ 0.019 Conversion price $ 0.08 Purchaser Conversion The November 2017 Purchaser has the right at any time after the November 2017 Original Issue Date until the outstanding balance of the Note has been paid in full, to convert all or any part of the outstanding balance into shares (“November 2017 Purchaser Conversion Shares”) of the Company’s common stock, of the portion of the outstanding balance being converted (the “November 2017 Conversion Amount”) divided by the November 2017 Purchaser Conversion Price of $0.08, subject to potential future adjustments described below. If the total outstanding balance of the November 2017 Note were convertible as of September 30, 2018, the November 2017 Note would have been convertible into 3,593,776 shares of our common stock. The Company evaluated the note under the requirements of ASC 480 “Distinguishing Liabilities From Equity” and concluded that the Note does not fall within the scope of ASC 480. The Company next evaluated the November 2017 Note under the requirements of ASC 815 “Derivatives and Hedging”. Due to the existence of the anti-dilution provision which reduces the November 2017 Purchaser Conversion Price in the event of subsequent dilutive issuances by the Company below the November 2017 Purchaser Conversion Price as described above, the November 2017 Purchaser Conversion feature does not meet the definition of “indexed to” our stock, and the scope exception to ASC 815’s derivative accounting provisions does not apply. The Company also evaluated the embedded derivative criteria in ASC 815, and concluded that the Purchaser Conversion feature meets all of the embedded derivative criteria in ASC 815, and therefore, the November 2017 Purchaser Conversion feature meets the definition of an embedded derivative that should be separated from the note and accounted for as a derivative liability. The embedded derivative was recorded as a derivative liability on the condensed consolidated Balance Sheet at its fair value of $165,000 at the date of issuance. At each subsequent reporting date, the fair value of the embedded derivative liability will be remeasured and changes in the fair value will be recorded in the condensed consolidated Statements of Operations. At September 30, 2018, the embedded derivative was re-measured at fair value that was determined to be $0. During the three and nine months ended September 30, 2018 and 2017, the Company recorded a gain of $0 and $75,000 and $0 and $0, respectively, on embedded derivative re-valuation. On November 16, 2017, the November 2017 Notes were modified in accordance with ASC 470-50-40 and ASC 815 and the Company re-measured the embedded derivative at fair value, which was determined to be $155,000 and recorded a modification of derivative liability charge of $5,000. On January 25, 2018, the November 2017 Notes, November 2016 Notes, and December 2015 Notes were again modified in accordance with ASC 470-50-40 and ASC 815 in which the Company issued a total of 2,395,650 restricted common shares, valued at $263,522 (based on the Company’s stock price on the measurement date) in consideration of the maturity date of the outstanding November 2017, November 2016, and December 2015 convertible notes being extended to December 31, 2018. The Company re-measured the embedded derivative at fair value just prior to and subsequent to the modification and recorded an extinguishment of debt of $12,000 in the nine months ended September 30, 2018. In addition, the value of the restricted common shares of $263,522 was recorded as an extinguishment of debt in the nine months ended September 30, 2018. The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 December 31, 2017 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.11 % 1.53 % Expected term of options (years) 0.5 0.5 Stock price $ 0.019 $ 0.12 Conversion price $ 0.08 $ 0.08 November 2017 Purchaser Warrants The November 2017 Purchaser Warrants allow the November 2017 Purchaser to purchase up to a number of shares of common stock equal to 100% of such purchaser’s Note principal amount divided by $0.08, with a per share exercise price equal to $0.15, subject to adjustment. The term of the Purchaser Warrants is at any time on or after the six (6) month anniversary of the November 2017 Original Issue Date and on or prior to the five (5) year anniversary of the November 2017 Initial Trading Date of our common stock on a Trading Market. The exercise price of the November 2017 Purchaser Warrants is $0.15 per share of our common stock, as may be adjusted from time to time pursuant to the antidilution provisions of the November 2017 Purchaser Warrants. The November 2017 Purchaser Warrants are exercisable by the November 2017 Purchaser in whole or in part, as either a cash exercise or as a “cashless” exercise. The Company evaluated the November 2017 Warrants under ASC 480 “Distinguishing Liabilities From Equity” and ASC 815 “Derivatives and Hedging”. Due to the existence of the antidilution provision, which reduces the November 2017 Exercise Price and November 2017 Conversion Price in the event of subsequent November 2017 Dilutive Issuances, the November 2017 Purchaser Warrants are not indexed to our common stock, and the Company has determined that the November 2017 Purchaser Warrants meet the definition of a derivative under ASC 815. Accordingly, the November 2017 Purchaser Warrants were recorded as derivative liabilities in the condensed consolidated Balance Sheet at their fair value of $290,612 at the date of issuance. At each subsequent reporting date, the fair value of the Purchaser Warrants will be remeasured and changes in the fair value will be reported in the condensed consolidated Statements of Operations. On November 16, 2017, the November 2017 Warrants were modified in accordance with ASC 470-50-40 and ASC 815 which eliminated the antidilution provision of the exercise price, fixed the exercise price at $0.15 per share, and fixed the number of shares the warrants can be exercised into; thereby eliminating the requirement for derivative accounting and liability classification. As a result, the warrant re-valuation was reclassified to additional paid-in-capital resulting in a warrant liability of $0 as of November 16, 2017. November 2017 Purchaser Common Stock The November 2017 Purchasers were issued a total of 833,354 shares of the Company’s common stock, valued at $163,171 (based on the stock price on the date of issuance). Debt Discount The Company issued the November 2017 Notes with warrants and conversion features that required liability treatment under ASC 815. As such, the proceeds of the notes were allocated, based on fair values, as follows: original issue discount of $37,497, $163,171 to the common shares issued; $290,612 to the warrants granted; and $165,000 to the embedded derivative, resulting in a debt discount to such notes of $287,502 with the remaining amount of approximately $369,000 expensed at inception of the note. The debt discount is accreted over the term of the convertible notes to interest expense in the accompanying condensed consolidated Statements of Operations. On January 25, 2018, the November 2017 Notes were modified in accordance with ASC 470-50-40 and ASC 815. As a result, the Company recorded the elimination of debt discount of $224,904 to extinguishment of debt in the condensed consolidated Statements of Operations during the nine months ended September 30, 2018 with a debt discount of $0 as of September 30, 2018. November 2016 As of December 31, 2016, the Company previously entered into a Securities Purchase Agreement (the “November 2016 Purchase Agreement”) with respect to the sale and issuance to certain institutional investors Alpha Capital Anstalt and Brio Capital Master Fund Ltd. (collectively “November 2016 Purchasers”) of up to (i) 833,354 shares of the Company’s Common Stock (the “November 2016 Incentive Shares”); (ii) $287,502 aggregate principal amount of Secured Convertible Notes (the “November 2016 Notes”) and (iii) Common Stock Purchase Warrants to purchase up to an aggregate of 3,593,775, as amended, shares of the Company’s Common Stock (the “November 2016 Warrants”). The November 2016 Incentive Shares, November 2016 Notes and November 2016 Warrants were issued on November 10, 2016 (the “November 2016 Original Issue Date”). November 2016 Purchasers received (i) November 2016 Incentive Shares at the rate of 2.8986 November 2016 Incentive Shares for each $1.00 of November 2016 Note principal issued to such November 2016 Purchaser; (ii) a November 2016 Note with a principal amount of $1.00 for each $0.86956 for each $1.00 paid by each purchaser for such purchaser’s November 2016 Note; and (iii) November 2016 Warrants to purchase up to a number of shares of Common Stock equal to 100% of such purchaser’s November 2016 Note principal amount divided by $0.12 (“Purchaser Conversion Price”), the conversion price in effect on the Initial Closing Date, as amended on May 30, 2017 to $0.08, with a per share exercise price equal to $0.30, subject to adjustment. The aggregate cash subscription amount received by the Company from the purchasers for the issuance of the November 2016 Incentive Shares, November 2016 Notes and November 2016 Warrants was approximately $244,945 (the “Subscription Amount”) which was issued at a $42,557 original issue discount from the face value of the Note. The November 2016 Notes mature on December 31, 2018, as amended on January 25, 2018, and provide for interest to accrue at an interest rate equal to the lesser of 15% per annum or the maximum rate permitted under applicable law after the occurrence of any event of default as provided in the November 2016 Notes. At any time after the November 2016 Original Issue Date, the holders, at their option, may convert the outstanding principal balance and accrued interest into shares of our Common Stock. The initial conversion price for the principal and interest in connection with voluntary conversions by a holder of a Note was $0.12 per share, as amended on May 30, 2017 to $0.08, subject to adjustment as provided therein. Each November 2016 Note, for example, is subject to adjustment upon certain events such as stock splits and has full ratchet anti-dilution protections for issuance of securities by us at a price that is lower than the conversion price. Each November 2016 Note also contains certain negative covenants, including prohibitions on incurrence of indebtedness, liens, charter amendments, dividends, redemption. None of the holders of the November 2016 Note have the right to convert any portion of their November 2016 Note if it (together with its affiliates) would beneficially own in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise. The November 2016 Notes include customary events of default, including, among other things, payment defaults, covenant breaches, certain representations and warranties, certain events of bankruptcy, liquidation and suspension of the Company’s Common Stock from trading. If such an event of default occurs, the holders of the November 2016 Notes may be entitled to take various actions, which may include the acceleration of amounts due under the November 2016 Notes and accrual of interest as described above. The November 2016 Notes are collectively collateralized by substantially all of the Company’s assets and guarantees of payment of the November 2016 Notes have also been delivered by Joseph Segelman, the Chief Executive Officer and President of the Company, and Australian Sapphire Corporation (“ASC”), a shareholder of the Company which is wholly-owned by Joseph Segelman, guaranteed payment of all amounts owed under the November 2016 Notes, subject to the terms of such guaranty agreements. The November 2016 Purchase Agreement is being entered into in accordance with the halachically accepted exemptions on the paying of interest payments in business transactions known as “heter iska”. is still accounting for the interest in accordance with GAAP. As a result of the failure to timely file our 2016 Form 10-K for the year ended December 31, 2016 and our Form 10-Q for the three month period ended March 31, 2017, the November 2016 and December 2015 Notes were in default. On May 30, 2017, the Company entered into a Second Consent, Waiver and Modification Agreement (the “Agreement”) with certain purchasers of convertible promissory notes (the “Notes”) pursuant to securities purchase agreements dated December 23, 2015 and November 10, 2016, which were amended pursuant to a Consent, Waiver and Modification Agreement dated October 13, 2016. The waivers contained in the Agreement were related to a waiver of the right to participate in additional offerings by the Company, allowing shares of the Company’s common stock to be issued pursuant to a private offering at a price of not less than $0.08 per share as well as warrants exercisable for a period of five years at $0.15 per share, as amended on November 16, 2017, adjusting the conversion price of the Notes issued to the purchasers to $0.08 per share, extending the maturity date of the December 23, 2015 convertible promissory notes to December 31, 2018 and waiving default provisions listed in the Notes related to the Company’s failure to timely file its Form 10-K for the year ended December 31, 2016 and the Form 10-Q for the three month period ended March 31, 2017. Based on ASC 470-50-40, Extinguishments of Debt Optional Redemption The November 2016 Notes provide that commencing six (6) months after the November 2016 Original Issue Date, the Company will have the option of prepaying the outstanding principal amount of the November 2016 Notes (an “November 2016 Optional Redemption”), in whole or in part, by paying to the holders a sum of money in cash equal to one hundred percent (100%) of the principal amount to be redeemed, together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable to the holder arising under the November 2016 Note through the November 2016 Redemption Payment Date and 2.8986 shares of the Company’s Common Stock for each $1.00 of November 2016 Note principal amount being redeemed. A Notice of Redemption, if given, may be given on the first Trading Day following twenty (20) consecutive Trading Days during which all of the “Equity Conditions”, as defined, have been in effect. The Company evaluated the Optional Redemption in ASC 815, and concluded that the Optional Redemption meets the criteria in ASC 815, and therefore, is accounted for as a liability. As of September 30, 2018, the Optional Redemption was recorded as a derivative liability on the condensed consolidated Balance Sheets using “Monte Carlo Method” modeling and at each subsequent reporting date, the fair value of the Optional Redemption liability will be re-measured and changes in the fair value will be recorded in the condensed consolidated Statements of Operations. The Optional Redemption liability fair value was originally valued at $35,015 and was re-measured at fair value to be $6,375 at September 30, 2018. During the three and nine months ended September 30, 2018 and 2017, the Company recorded a gain of $0 and $32,585 and a loss of $27,139 and $12,235, respectively, on Optional Redemption valuation in the change in fair value of derivative liabilities in the accompanying condensed consolidated Statements of Operations. The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 December 31, 2017 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.11 % 1.53 % Expected term of options (years) 0.50 0.5 Stock price $ 0.019 $ 0.12 Conversion price $ 0.08 $ 0.08 Purchaser Conversion The November 2016 Purchaser has the right at any time after the November 2016 Original Issue Date until the outstanding balance of the Note has been paid in full, to convert all or any part of the outstanding balance into shares (“November 2016 Purchaser Conversion Shares”) of the Company’s common stock, of the portion of the outstanding balance being converted (the “November 2016 Conversion Amount”) divided by the November 2016 Purchaser Conversion Price of $0.08, as amended on May 30, 2017, subject to potential future adjustments described below. If the total outstanding balance of the November 2016 Note were convertible as of September 30, 2018, the November 2016 Note would have been convertible into 3,593,775 shares of our common stock. The Company evaluated the note under the requirements of ASC 480 “Distinguishing Liabilities From Equity” and concluded that the Note does not fall within the scope of ASC 480. The Company next evaluated the November 2016 Note under the requirements of ASC 815 “Derivatives and Hedging”. Due to the existence of the anti-dilution provision which reduces the November 2016 Purchaser Conversion Price in the event of subsequent dilutive issuances by the Company below the November 2016 Purchaser Conversion Price as described above, the November 2016 Purchaser Conversion feature does not meet the definition of “indexed to” our stock, and the scope exception to ASC 815’s derivative accounting provisions does not apply. The Company also evaluated the embedded derivative criteria in ASC 815, and concluded that the Purchaser Conversion feature meets all of the embedded derivative criteria in ASC 815, and therefore, the November 2016 Purchaser Conversion feature meets the definition of an embedded derivative that should be separated from the note and accounted for as a derivative liability. The embedded derivative was recorded as a derivative liability on the condensed consolidated Balance Sheet at its fair value of $32,016 at the date of issuance. At each subsequent reporting date, the fair value of the embedded derivative liability will be remeasured and changes in the fair value will be recorded in the condensed consolidated Statements of Operations. At September 30, 2018, the embedded derivative was re-measured at fair value that was determined to be $0. During the three and nine months ended September 30, 2018 and 2017, the Company recorded a gain of $0 and $75,000 and a loss of $93,875 and $39,163, respectively, on embedded derivative re-valuation. On January 25, 2018, the November 2017 Notes, November 2016 Notes, and December 2015 Notes were again modified in accordance with ASC 470-50-40 and ASC 815 in which the Company issued a total of 2,395,650 restricted common shares, valued at $263,522 (based on the Company’s stock price on the measurement date) in consideration of the maturity date of the outstanding November 2017, November 2016, and December 2015 convertible notes being extended to December 31, 2018. The Company re-measured the embedded derivative at fair value just prior to and subsequent to the modification and recorded an extinguishment of debt of $12,000 in the three and nine months ended September 30, 2018. In addition, the value of the restricted common shares of $263,522 was recorded as an extinguishment of debt in the nine months ended September 30, 2018. The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 December 31, 2017 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.11 % 1.53 % Expected term of options (years) 0.50 0.5 Stock price $ 0.019 $ 0.12 Conversion price $ 0.08 $ 0.08 November 2016 Purchaser Warrants The November 2016 Purchaser Warrants allow the November 2016 Purchaser to purchase up to a number of shares of common stock equal to 100% of such purchaser’s Note principal amount divided by $0.08, as amended on May 30, 2017, with a per share exercise price equal to $0.15, as amended on November 16, 2017, subject to adjustment. The term of the Purchaser Warrants is at any time on or after the six (6) month anniversary of the November 2016 Original Issue Date and on or prior to the five (5) year anniversary of the November 2016 Initial Trading Date of our common stock on a Trading Market. The exercise price of the November 2016 Purchaser Warrants is $0.15, as amended on November 16, 2017, per share of our common stock, as may be adjusted from time to time pursuant to the antidilution provisions of the November 2016 Purchaser Warrants. The November 2016 Purchaser Warrants are exercisable by the November 2016 Purchaser in whole or in part, as either a cash exercise or as a “cashless” exercise. The Company evaluated the November 2016 Warrants under ASC 480 “Distinguishing Liabilities From Equity” and ASC 815 “ |
SHORT TERM NOTES PAYBALE
SHORT TERM NOTES PAYBALE | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
SHORT TERM NOTES PAYBALE | NOTE 9 – SHORT TERM NOTES PAYBALE On June 30, 2017, the Company entered into a Loan Agreement, a Secured Promissory Note (“Note”) and a personal guarantee with respect to the funding by certain institutional investors of up to $1,125,000 in debt. The Company, until December 31, 2018, has the ability to request quarterly advances of up to the lesser of (i) $250,000 or (ii) one sixth (1/6) of the revenue reported in the Form 10-Q or 10-K for the previous calendar quarter or previous fiscal year, whichever is most recent, provided that such revenue generated a profit of at least 10 percent (10%). The investors may advance the funds in their absolute discretion. In June 2017, the Company was advanced $125,005. The Note shall become due and payable 18 months from each advance date. The Company must make payments to the investors in an amount of $350, including interest at 10% per annum, every business day from the date of the first advance, which shall be increased proportionately upon each advance. The Note is secured with the assets of the Company pursuant to a security agreement dated December 23, 2015. In addition, the Company’s CEO has personally guaranteed the Note. As additional consideration for the loan, the investors received 1,500,000 shares of restricted common stock, in aggregate, valued at $105,000 . In January 2018, the Company was advanced an additional $60,010 under the Note with no additional shares issued. In March 2018, the Company was advanced an additional $60,010 under the Note with 600,000 additional shares to be issued. As of March 31, 2018, the Company had not issued the shares and recorded a common stock payable and a debt discount of $55,500 (based on our stock price on the date of grant). The shares were issued in April 2018 and the shares were reclassed from common stock payable to equity. The debt discount is accreted to interest expense over the term of the note. The note payable balance net of debt discount of $54,500 at September 30, 2018 was $83,740 with an availability of approximately $880,000 on the Note. The Agreement and Note are being entered into in accordance with the halachically accepted exemptions on the paying of interest payments in business transactions known as “heter iska”. is still accounting for the interest in accordance with GAAP. The Company borrows funds from third parties from time to time for working capital purposes with an upfront fee of approximately $400, paying no interest, and with no length of repayment. For the nine months ended September 30 September 30 |
STOCK TRANSACTIONS
STOCK TRANSACTIONS | 9 Months Ended |
Sep. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
STOCK TRANSACTIONS | NOTE 10 – STOCK TRANSACTIONS Preferred Stock On March 17, 2017, the Company held an annual meeting of its shareholders. At the annual meeting, the majority shareholders of the Company approved an amendment to the articles of incorporation, authorizing one share of Series A Preferred stock, which would be issued to Joseph Segelman. The share of Series A Preferred stock shall vote together as a single class with the holders of the Company’s common stock, and the holders of any other class or series of shares entitled to vote with the common stock, with the holder of the Series A Preferred stock being entitled to fifty-one percent (51%) of the total votes on all such matters regardless of the actual number of shares of Series A Preferred stock then outstanding, and the holders of the common stock and any other shares entitled to vote shall be entitled to their proportional share of the remaining forty-nine percent (49%) of the total votes based on their respective voting power. The share of Series A Preferred stock shall not be entitled to receive any distributions in the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary. The share of Series A Preferred stock shall not be eligible to receive dividends. The class of Series A Preferred stock shall be automatically cancelled ten (10) years after the initial issue date of such Series A Preferred stock. On May 19, 2017, the Company received the file stamped certificate of amendment from the state of Delaware, which lists an effective date of March 20, 2017. On May 23, 2017, the Company issued the share of Series A Preferred stock to Joseph Segelman, valued at $270,000 Common Stock During the nine months ended September 30, 2018, the Company issued 4,750,000 restricted common shares for services rendered of $126,680 (based on our stock price on the measurement date). On September 1, 2018, the Company issued 5,000,000 restricted common shares for payment of accounts payable of $88,165. On July 8, 2018, the Company issued 100,000 restricted common shares to an Advisor, valued at $2,390 (based on the estimated fair value of the stock on the measurement date) for outside advisory and consulting services pursuant to the Company’s 2015 Equity Incentive Plan (see Note 11). In January and February 2018, the Company entered into Securities Purchase Agreements with respect to the sale and issuance to Crossover Capital Fund II, LLC totaling (i) 833,332 shares of the Company’s Common Stock; (ii) 3,000,000 redeemable shares, (iii) $294,000 aggregate principal amount of a convertible promissory note and (iv) Common Stock Purchase Warrants to purchase up to an aggregate of 1,960,000 shares of the Company’s common stock for a net aggregate consideration of $250,000 cash (see Note 8). In January 2018, we issued 2,395,650 restricted common shares, valued at $263,522 (based on the Company’s stock price on the measurement date), in consideration for the modification of the existing short term convertible notes and recorded as an extinguishment of debt (see Note 8). On June 30, 2017, the Company entered into an Agreement and Note by certain institutional investors of up to $1,125,000 in debt. In March 2018, as additional consideration for the note, the investors received 600,000 shares of restricted common stock, in aggregate, valued at $55,500 . On July 14, 2017, the Company entered into a contract with a third party for consulting services. The consulting agreement provides for the consultant to receive 487,500 shares for entering into the agreement that were valued at $34,125 (based on our stock price on the date of grant) and 162,500 restricted common shares each month beginning month four through month twelve. Through September 30, 2018, the consultant vested in 568,750 shares (162,500 shares vested in 2018), valued at $101,156 (based on our stock price on the date of each grant). As of January 26, 2018, the Company had not issued the shares and recorded a common stock payable of $101,156. The shares were issued in April 2018 and the shares were reclassed from common stock payable to equity. The contract was terminated at January 26, 2018. |
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK BASED COMPENSATION | NOTE 11 – STOCK BASED COMPENSATION 2015 Equity Incentive Plan As of June 30, 2018, the board of directors and shareholders of the Company previously authorized the adoption and implementation of the Company’s 2015 Equity Incentive Plan (the “2015 Plan”). The principal purpose of the 2015 Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its related companies by providing them the opportunity to acquire a proprietary interest in the Company and to link their interests and efforts to the long-term interests of the Company’s shareholders. Under the 2015 Plan, an aggregate of 20,000,000 shares of the Company’s common stock have initially been reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and other stock and cash-based awards. The exercise price for each option may not be less than fair market value of the common stock on the date of grant, and shall vest as determined by the Company’s board of directors but shall not exceed a ten-year period. During the nine months ended September 30, 2018, the Company issued a total of 98,000 restricted common shares to its employees, valued at $7,742 (based on our stock price on the date of grant) as compensation pursuant to the Company’s 2015 Equity Incentive Plan. In July 2018, the Company issued a total of 100,000 restricted common shares, valued at $2,390 (based on our stock price on the date of grant), to a member of its advisory committee (“Advisors”) as compensation pursuant to the Company’s 2015 Equity Incentive Plan. As of September 30, 2018, the Company issued a total of 100,000 restricted common shares to Advisors, valued at $15,000 (based on the estimated fair value of the stock on the date of grant) for outside advisory and consulting services pursuant to the Company’s 2015 Equity Incentive Plan. One-twelfth (1/12) of the shares will be earned each month. The Company will revalue the shares at each vesting period and recognize expense for the portion of the shares earned. The Company recognized compensation expense of $3,750 and $11,250 under general and administrative expenses in the accompanying condensed consolidated Statements of Operations for the three and nine months ended September 30, 2018 with $2,500 remaining to be amortized. As of September 30, 2018, the Advisors had vested in 83,333 shares with 16,667 shares to vest over the remaining vesting period. As of September 30, 2018, the Company previously granted to its CEO, options to purchase 10,000,000 shares of our common stock under the 2015 Plan, valued at $2,500,000 (based on the Black Scholes valuation model on the date of grant). The Black-Scholes option-pricing model used the following weighted average assumptions as of December 31, 2016: (i) no dividend yield for each year, (ii) volatility of 35.6 percent, (iii) risk-free interest rate of 1.87 percent, (iv) stock price of $0.25, (v) exercise price of $0.005, and (vi) expected life of 6.0 years. The options will vest 50% on the first anniversary of the grant date (“First Year Vest”) and the remaining 50% of the shares shall vest in twelve (12) equal installments on the first day of each calendar month following the first anniversary of the grant date beginning on June 1, 2016 and ending on June 1, 2017 (“Second Year Vest”), provided that CEO is continuously employed by the Company from the grant date through such applicable vesting date. Notwithstanding the foregoing, 100% of the shares of the Company’s common stock subject to the option shall fully vest if the Company shall successfully sell all of the shares of its common stock included in the primary offering of such common stock by the Company pursuant to the registration statement on Form S-1 to be filed with the Securities and Exchange Commission within ninety (90) days of the grant date. The First Year Vest options will amortize to expense over a 12 month period beginning May 2015 through April 2016 and the Second Year Vest options will amortize to expense over a 24 month period beginning May 2015 through April 2017. The Company recognized expense of $0 and $0, and $4,560 and $45,391 for the three and nine months ended September 30, 2018 and 2017, respectively, within stock based compensation – related party in the accompanying condensed consolidated Statements of Operations with no amounts remaining to be recognized. The following represents a summary of the Options outstanding at September 30, 2018 Options Weighted Average Exercise Price Aggregate Intrinsic Value * Outstanding at December 1, 2017 10,000,000 $ 0.005 $ 1,100,000 Granted — — — Exercised — — — Expired/Forfeited — — — Outstanding at December 31, 2017 10,000,000 $ 0.005 $ 1,200,000 Granted — — — Exercised — — — Expired/Forfeited — — — Outstanding at September 30, 2018 10,000,000 $ 0.005 $ 120,000 Exercisable at September 30, 2018 10,000,000 $ — $ — Expected to be vested 10,000,000 $ 0.005 $ — * Based on the Company’s stock price on September 30, 2018, December 31, 2017, and December 1, 2017, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 12 – Related Party Transactions Other than as set forth below, and as disclosed in Notes 7, 8, 9, 10 and 11, the Company has not entered into or been a participant in any transaction in which a related person had or will have a direct or indirect material interest. Employment Agreements The Company previously had a consulting agreement with its CEO under which he was compensated $120,000 per annum. Beginning June 20, 2013, this contract was to continue unless and until terminated at any time by either the Company or CEO giving two month notice in writing. Such consulting agreement was terminated by mutual agreement as of May 1, 2015 and superseded by the employment agreement effective May 1, 2015. The initial term of employment agreement expires on December 31, 2018, unless earlier terminated by either party. The agreement provides for automatic one-year renewals, unless either party gives notice of their intention not to extend at least 90 days prior to the expiration of any term. Under this employment agreement, the CEO receives a minimum annual base salary of $180,000, is eligible to receive an annual performance bonus each year, if performance goals established by the Company’s board of directors are met, and is entitled to participate in customary benefit plans. There have been no performance goals established. If the Company terminates the CEO’s employment without cause, he will be entitled to the following: (i) payment of (x) accrued compensation and unpaid base salary through the date of such termination, (y) any amounts previously deferred by CEO and (z) the payment or reimbursement for expenses incurred prior to the date of such termination; (ii) an amount equal to 200% of the base salary and (iii) continued participation, at the Company’s expense, in the Company’s health and welfare programs for a period of two years after the date of termination. The Company incurred compensation expense of $45,000 and $90,000, and $45,000 $90,000 for the three and nine months ended September 30, 2018 and 2017, respectively. Deferred compensation totaling $787,750 as of September 30, 2018, is included in Accrued Compensation in the accompanying condensed consolidated Balance Sheet. Deferred compensation includes $573,750 related to the employment agreement and $214,000 related to the consulting agreement. In addition, we incurred employee benefits on behalf of the CEO totaling approximately $3,600 and $9,100, and $3,531 and $11,977 for the three and nine months ended September 30, 2018 and 2017, respectively. Employee benefits include health and dental coverage, use of a car, car insurance, and a gym membership. The Company previously had a consulting agreement with its secretary and director (“Secretary”) under which she was compensated $60,000 per annum. Beginning June 20, 2013, this contract was to continue unless and until terminated at any time by either the Company or Secretary giving two month notice in writing. Such consulting agreement was terminated by mutual agreement as of May 1, 2015 and superseded by the employment agreement effective May 1, 2015. The initial term of employment agreement expires on December 31, 2018, unless earlier terminated by either party. The agreement provides for automatic one-year renewals, unless either party gives notice of their intention not to extend at least 90 days prior to the expiration of any term. Under this employment agreement, the Secretary receives a minimum annual base salary of $80,000. If the Company terminates the Secretary’s employment without cause, she will be entitled to the following: (i) payment of (x) accrued compensation and unpaid base salary through the date of such termination, (y) any amounts previously deferred by Secretary and (z) the payment or reimbursement for expenses incurred prior to the date of such termination; (ii) an amount equal to 50% of the base salary and (iii) continued participation, at the Company’s expense, in the Company’s health and welfare programs for a period of two years after the date of termination. The Company incurred compensation expense of $20,000 and $40,000, $20,000 and $40,000 for the three and nine months ended September 30, 2018 and 2017, respectively. Deferred compensation totaling $387,000 as of September 30, 2018, is included in Accrued Compensation in the accompanying condensed consolidated Balance Sheets. Deferred compensation includes $273,333 related to the employment agreement and $113,667 related to the consulting agreement. In addition, we incurred employee benefits on behalf of the Secretary totaling approximately $1,800 and $5,400, and $1,798 and $5,378 for the three and nine months ended September 30, 2018 and 2017, respectively. Employee benefits include use of a car and car insurance. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | NOTE 13 – EARNINGS PER SHARE FASB ASC Topic 260, Earnings Per Share Basic earnings (loss) per share are computed by dividing net earnings available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. Basic and diluted earnings (loss) per share are the same since the Company had net losses for all periods presented and including the additional potential common shares would have an anti-dilutive effect. The following table sets forth the computation of basic and diluted net income per share: For the Nine Months Ended September 30, For the Three Months Ended September 30, 2018 2017 2018 2017 Net loss attributable to the common stockholders $ (1,402,686 ) $ (3,076,017 ) $ (355,987 ) $ (1,497,699 ) Basic weighted average outstanding shares of common stock 61,710,263 45,372,823 65,460,451 48,034,278 Dilutive effect of options and warrants — — — — Diluted weighted average common stock and common stock equivalents 61,710,263 45,372,823 65,460,451 48,034,278 Loss per share: Basic and diluted $ (0.02 ) $ (0.07 ) $ (0.01 ) $ (0.03 ) |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 14 – COMMITMENTS AND CONTINGENCIES Contingent Payments On December 1, 2016, we acquired substantially all of the operating assets of CCI. As part of the purchase price of the operating assets of CCI, there is a cash payment of $500,000 contingent upon a future offering and earn out payments for all sales of CCI and RGNP products sold via CCI sales channels for the 2017, 2018, 2019 and 2020 calendar years. The estimated fair value of the contingent payments totaled $424,511 and was recognized as a liability in the accompanying condensed consolidated balance sheets as of December 31, 2016. During the three and nine months ended September 30, 2018, ASK Gold and CCI each earned $4,165 and $8,931, respectively, of earn out payments for a total of $100,930. In addition, the Company paid $95,020 in reimbursement expenses (“Reimbursement Expenses”) that were the responsibility of CCI and will be applied against current and future earn out payments to CCI. The Company applied $50,465 of earn out payments owed to CCI against the Reimbursement Expenses for a net balance of $44,555 owed by CCI to the Company as of September 30, 2018 that is recorded in estimated fair value of contingent payments, net in the accompanying condensed consolidated balance sheets. As September 30, 2018, estimated fair value of contingent payments, net was $279,026. Operating Leases The Company has month-to month leases for its headquarters and its sales and marketing office. The total rent is approximately $1,955 per month. The Company’s customer service and distribution facility is located at 1933 S. Broadway. Los Angeles, California. This facility is subleased on a month-to-month basis for $4,000 per month from a third party. Rent expense was approximately $6,013 and $34,056, and $18,138 and $85,811 for the three and nine months ended September 30, 2018 and 2017, respectively. Legal From time to time, various lawsuits and legal proceedings may arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any legal proceedings or claims that it believes will have a material adverse effect on its business, financial condition or operating results. Guarantees T he Co ny ’ s Co v e b e ote s P yab e are co at a ze y s b s ta t a y of e Com a y ’ s a s se s a are pe so l y g ua nte e d y e Co pan y ’ s CE O an A s r a an Sapphire Corpora i o , a s ha ho der o the Company w h is wholly o w ned by t e Comp a n y’s CEO. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 15 – SUBSEQUENT EVENTS In October 2018, the Company issued 150,000 restricted common shares for services rendered, valued at $2,685 (based on our stock price on the date of grant). In October 2018, the January 2018 Crossover Purchase Agreement was amended to extend the maturity date to December 31, 2018 and to remove the right of the Company to 1,500,000 of the Redeemable Shares. There were no other events subsequent to September 30, 2018, and up to the date of this filing that would require disclosure. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Consolidation | Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Reign Brands, Inc. All significant intercompany accounts and transactions are eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of these condensed consolidated financial statements in accordance with GAAP 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 dates of the condensed consolidated financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: inventory valuation, derivative liabilities, warrant liabilities, common stock and option valuation, valuation of acquired intangible assets, and the recoverability of intangibles. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. |
Income Taxes | Income Taxes Income taxes are accounted for under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Balance Sheets in accordance with Accounting Standards Codification (“ASC”) 740, which established financial accounting and reporting standards for the effect of income taxes. The likelihood that its deferred tax assets will be recovered from future taxable income must be assessed and, to the extent that recovery is not likely, a valuation allowance is established. Changes in the valuation allowance in a period are recorded through the income tax provision in the condensed consolidated Statements of Operations. ASC 740-10-30 was adopted from the date of its inception. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s consolidated financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, the Company does not have a liability for unrecognized income tax benefits. |
Comprehensive Income | Comprehensive Income The Company reports comprehensive income in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 220 “Comprehensive Income,” which established standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. Total comprehensive income is defined as all changes in shareholders’ equity during a period, other than those resulting from investments by and distributions to shareholders (i.e., issuance of equity securities and dividends). Generally, for the Company, total comprehensive income (loss) equals net income (loss) plus or minus adjustments for currency translation. There are no items other than net loss affecting comprehensive loss for the three and nine months ended September 30, 2018 and 2017, respectively. |
Foreign Currency - Functional and Presentation Currency | Foreign Currency - Functional and Presentation Currency The functional currency represents the currency of the primary economic environment in which the entity operates. Management has determined the functional currency of the Company to be the USD, as sales prices and major costs of operating expenses are primarily influenced by fluctuations in the USD, and with its Chief Executive Officer and director (“CEO”), and employees of the Company headquartered and operating in the United States. The results of transactions in foreign currency are remeasured into the functional currency at the average rate of exchange during the reporting period. The Company had no aggregate net foreign currency remeasurements included in general and administrative expenses in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and 2017, respectively. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into the Company’s reporting currency of USD at the exchange rates prevailing at the balance sheet date. All translation adjustments resulting from the translation of the financial statements into the reporting currency at USD are dealt with as a separate component within shareholders’ equity. There were no translation adjustments for the three and nine months ended September 30, 2018 and 2017. |
Revenue Recognition | Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Codification ASC 606 (“ASC 606”), Revenue from Contracts with Customers, Revenue Recognition The Company generates all of its revenue from contracts with customers. The Company recognizes revenue when we satisfy a performance obligation by transferring control of the promised services to a customer in an amount that reflects the consideration that we expect to receive in exchange for those services. The Company determines revenue recognition through the following steps: 1. Identification of the contract, or contracts, with a customer. 2. Identification of the performance obligations in the contract. 3. Determination of the transaction price. 4. Allocation of the transaction price to the performance obligations in the contract 5. Recognition of revenue when, or as, we satisfy a performance obligation. At contract inception, the Company assesses the services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a service (or bundle of services) that is distinct. To identify the performance obligations, the Company considers all of the services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company allocates the entire transaction price to a single performance obligation. A description of our principal revenue generating activities are as follows: Retail sales Wholesale sales Revenue is recognized from retail and wholesale sales when the product is shipped to the customer, provided that collection of the resulting receivable is reasonably assured. Credit is granted for wholesale sales generally for terms of 7 to 90 days, based on credit evaluations. No allowance has been provided for uncollectible accounts. Management has evaluated the receivables and believes they are collectable based on the nature of the receivables, historical experience of credit losses, and all other currently available evidence. Discounts are recorded as a reduction of the transaction price. Revenue excludes any amounts collected on behalf of third parties, including sales taxes. The Company evaluates whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily obligated in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded at the gross sale price. The Company generally records the net amounts as commissions earned if we are not primarily obligated and do not have latitude in establishing prices. The Company records all revenue transactions at the gross sale price. There is a no return policy. The return policy is currently being evaluated to be more in line with industry standards. |
Deferred revenue | Deferred revenue Deferred revenue consists of customer orders paid in advance of the delivery of the order. Deferred revenue is classified as short-term as the typical order ships within approximately three weeks of placing the order. Deferred revenue is recognized as revenue when the product is shipped to the customer and all other revenue recognition criteria have been met. Deferred revenue as of December 31, 2017 was $81,455, which was recognized as revenue during the nine months ended September 30, 2018, including adjustments related to the new revenue recognition guidance. Deferred revenue totaling $20,616 and $81,455 as of September 30, 2018 and December 31, 2017, respectively, is included in current liabilities in the accompanying condensed consolidated Balance Sheets. |
Inventories | Inventories Reign Sapphires Inventories are stated at the lower of cost or market on a lot basis each quarter. A lot is determined by the cut, clarity, size, and weight of the sapphires. Inventory consists of sapphire jewels that meet rigorous grading criteria and are of cuts and sizes most commonly used in the jewelry industry. As of September 30, 2018 and December 31, 2017, the Company carried primarily loose sapphire jewels and loose sapphire jewels held as samples. Samples are used to show potential customers what the jewelry would look like. Promotional items given to customers that are not expected to be returned will be removed from inventory and expensed. There have been no promotional items given to customers during the nine months ended September 30, 2018. The Company performs its own in-house assessment based on gem guide and the current market price for metals to value its inventory on an annual basis or if circumstances dictate sooner to determine if the estimated fair value is greater or less than cost. In addition, the inventory is reviewed each quarter by the Company against industry prices from gem-guide and if there is a potential impairment, the Company would appraise the inventory. The estimated fair value is subject to significant change due to changes in popularity of cut, perceived grade of the clarity of the sapphires, the number, type and size of inclusions, the availability of other similar quality and size sapphires, and other factors. As a result, the internal assessed value of the sapphires could be significantly lower from the current estimated fair value. Loose sapphire jewels do not degrade in quality over time and are not subject to fashion trends. The estimated fair value per management’s internal assessment is greater than the cost, therefore, there is no indicator of impairment as of September 30, 2018. CCI, Le Bloc and ION Collection CCI, Le Bloc and ION Collection products are outsourced to a third party for manufacture, made to order, and, when completed, are shipped to the customer. The inventory for CCI, Le Bloc and ION Collection are considered immaterial as of September 30, 2018 and December 31, 2017. |
Property and Equipment | Property and Equipment Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally five years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. Fixed assets are examined for the possibility of decreases in value when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. |
Business Combinations | Business Combinations Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management, including expected future cash flows. We allocate any excess purchase price over the fair value of the net assets and liabilities acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the condensed consolidated financial statements from the acquisition date. |
Intangible Assets and Goodwill | Intangible Assets and Goodwill Goodwill is the cost of an acquisition less the fair value of the net assets of the acquired business. Intangible assets consist primarily of tradenames, proprietary designs, developed technology – website, and developed technology – Ipad application. Our intangible assets are being amortized on a straight-line basis over a period of three to ten years. |
Impairment of Long-lived Assets and Goodwill | Impairment of Long-lived Assets and Goodwill We evaluate goodwill for impairment annually in the fourth quarter, and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying amount. The goodwill impairment test consists of a two-step process, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value, including goodwill. We typically use discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those we believe hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine the amount of impairment loss, if any. The second step compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an impairment charge is recognized in an amount equal to that excess. There are no impairments as of September 30, 2018 and December 31, 2017. We periodically evaluate whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount 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. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value. There are no impairments as of September 30, 2018 and December 31, 2017. Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third party comparable sales and discounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future. |
Advertising and Marketing Expenses | Advertising and Marketing Expenses Advertising and marketing expenses are recorded as marketing expenses when they are incurred. Advertising and marketing expense was approximately $38,700 and $337,700, and $171,300 and $394,600, for the three and nine months ended September 30, 2018 and 2017, respectively. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company applies the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of September 30, 2018 and December 31, 2017, the fair value of cash, accounts receivable, accounts payable and accrued expenses, notes payable, and convertible debt approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates. |
Fair Value Measurements | Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows: ● Level 1 – Quoted prices in active markets for identical assets or liabilities. ● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The embedded derivative liabilities are recognized at fair value on a recurring basis at September 30, 2018 and are Level 3 measurements. There have been no transfers between levels. |
Debt | Debt The Company issues debt that may have separate warrants, conversion features, or no equity-linked attributes. Debt with warrants Convertible debt – derivative treatment If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using Monte Carlo Method upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible debt derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The convertible debt derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the statement of operations. The debt discount is amortized through interest expense over the life of the debt. Convertible debt – beneficial conversion feature If the conversion feature does not qualify for either the derivative treatment or as a BCF, the convertible debt is treated as traditional debt. |
Employee Stock Based Compensation | Employee Stock Based Compensation Stock based compensation issued to employees and members of our board of directors is measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. The grant date fair value of a stock based award is recognized as an expense over the requisite service period of the award on a straight-line basis. For purposes of determining the variables used in the calculation of stock based compensation issued to employees , |
Non-Employee Stock Based Compensation | Non-Employee Stock Based Compensation Issuances of the Company’s common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. Although situations may arise in which counter performance may be required over a period of time, the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instruments fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates. |
Non-Cash Equity Transactions | Non-Cash Equity Transactions Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to contemporaneous cash sale of stock. |
Earnings per Share | Earnings per Share Diluted earnings (loss) per share are computed on the basis of the weighted average number of common shares (including common stock subject to redemption) plus dilutive potential common shares outstanding for the reporting period. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. The total number of potential additional dilutive securities outstanding for the three and nine months ended September 30, 2018 and 2017, was none since the Company had net losses and any additional potential common shares would have an anti-dilutive effect. |
Related Parties | Related Parties Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. |
Concentrations, Risks, and Uncertainties | Concentrations, Risks, and Uncertainties Business Risk The Company is subject to the substantial business risks and uncertainties inherent to such an entity, including the potential risk of business failure. The Company is headquartered and operates in the United States. As the Company generates significant revenues from operations, business activities will also include Australia and Asia and geographic segment reporting will be provided. There can be no assurance that the Company will be able to successfully continue to manufacture its products and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. Also, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general economic conditions, price of raw material, competition, governmental and political conditions, and changes in regulations. Because the Company is dependent on foreign trade in Australia and Asia, the Company is subject to various additional political, economic and other uncertainties. Among other risks, the Company’s operations will be subject to risk of restrictions on transfer of funds, domestic and international customs, changing taxation policies, foreign exchange restrictions, and political and governmental regulations. The Company has business activities in Australia and Asia, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between USD and the Australian currency AUD. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting period. Aggregate net foreign currency transactions included in the condensed consolidated Statements of Operations was immaterial for the three and nine months ended September 30, 2018 and 2017. Interest rate risk Financial assets and liabilities do not have material interest rate risk. Credit risk The Company is exposed to credit risk from its cash in bank and accounts receivable. The credit risk on cash in banks is limited because the counterparties are recognized financial institutions. The Company had no customers that accounted for 10% or more of total revenues for the three and months ended September 30, 2018. The Company had one customer that accounted for 10%, comprising 10% and 14%, or more of total revenue for the three and nine months ended September 30, 2017, respectively. The Company had no customers that accounted for 10% or more of total accounts receivable at December 31, 2018 and 2017, respectively. Foreign currency risk The Company has transactions settled in AUD. Thus, the Company has foreign currency risk exposure. Seasonality The business is subject to substantial seasonal fluctuations. Historically, a significant portion of net sales and net earnings have been realized during the period from October through December. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements FASB ASU 2017-11 “ Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815) FASB ASU 2017-09 “ Scope of Modification Accounting (Topic 718) FASB ASU 2017-04 “Simplifying the Test for Goodwill Impairment (Topic 350)” FASB ASU 2017-01 “Clarifying the Definition of a Business (Topic 805)” FASB ASU 2016-15 “Statement of Cash Flows (Topic 230)” – FASB ASU 2016-12 “Revenue from Contracts with Customers (Topic 606)” FASB ASU 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)” FASB ASU 2016-10 “Revenue from Contracts with Customers (Topic 606)” FASB ASU 2016-02 “Leases (Topic 842)” – FASB ASU 2015-17 “Income Taxes (Topic 740)” – |
INVENTORY (Tables)
INVENTORY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consisted of the following as of: September 30, 2018 December 31, 2017 Raw materials $ 468,039 $ 474,983 Work-in-process 121,411 117,012 Samples 134,145 134,145 $ 723,595 $ 726,140 |
EQUIPMENT (Tables)
EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of equipment | Equipment consisted of the following as of: Estimated Life September 30, 2018 December 31, 2017 Office equipment 5 years $ 3,391 $ 3,391 Computer equipment 3 years 40,171 39,311 Accumulated depreciation (26,894 ) (17,424 ) $ 16,668 $ 25,278 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | Intangible assets consisted of the following as of: Estimated Life September 30, 2018 December 31, 2017 Trademarks 3.3 – 4.5 years $ 260,000 $ 260,000 Website 3 years 118,832 113,253 Acquired tradename 10 years 365,000 365,000 Acquired proprietary design 5 years 80,000 80,000 Acquired developed technology - website 3 years 117,500 117,500 Acquired developed technology – Ipad application 3 years 117,500 117,500 Accumulated amortization (425,733 ) (249,947 ) $ 633,099 $ 803,306 Estimated Life September 30, 2018 December 31, 2017 Goodwill indefinite $ 481,947 $ 481,947 |
Future amortization expense related to intangible assets | Future amortization expense related to intangible assets are approximately as follows: Acquired Trademarks Website Intangibles Total 2018 (remainder of fiscal year) $ 32,593 $ 19,793 $ 65,417 $ 117,803 2019 62,907 38,919 124,306 226,132 2020 37,818 13,524 52,500 103,842 2021 12,606 916 51,167 64,689 2022 — — 36,500 36,500 Thereafter — — 142,957 142,957 $ 145,924 $ 73,152 $ 472,847 $ 691,923 |
CONVERTIBLE NOTE PAYABLE (Table
CONVERTIBLE NOTE PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Summary of convertible debt | The following represents a summary of the convertible debt terms at September 30, 2018: Warrants Amount of Maturity Conversion Number of Exercise Exercisable Notes Debt Discount Dates thru Price Warrants Price thru January and February 2018 Notes $ 294,000 $ (19,726 ) 10/3/2018 to 11/16/2018 $ 0.08 1,960,000 $ 0.15 2/16/2023 November 2017 Notes 287,502 — 12/31/2018 $ 0.08 3,593,776 $ 0.15 11/10/2022 November 2016 Notes 287,502 — 12/31/2018 $ 0.08 3,593,776 $ 0.15 11/10/2022 December 2015 Notes 862,500 — 12/31/2018 $ 0.08 10,781,250 $ 0.15 11/10/2022 Total $ 1,731,504 $ (19,726 ) 19,928,802 |
Schedule of fair value and relative fair value | January 3, 2018 February 16, 2018 Fair value Relative fair value Fair value Relative fair value Warrant $ 95,324 $ 19,784 $ 65,292 $ 16,955 Common sock $ 70,833 $ 14,701 $ 54,167 $ 14,066 Redeemable shares $ 255,000 $ 52,923 $ 195,000 $ 50,637 Remaining note value $ 110,300 $ 22,892 $ 110,300 $ 28,642 Total $ 531,457 $ 110,300 $ 424,759 $ 110,300 |
Schedule of optional redemption fair value assumptions | The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 Expected dividend yield 0.00 % Expected stock-price volatility 47.5 % Risk-free interest rate 2.11 % Expected term of options (years) 0.5 Stock price $ 0.019 Conversion price $ 0.08 The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 December 31, 2017 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.11 % 1.53 % Expected term of options (years) 0.50 0.5 Stock price $ 0.019 $ 0.12 Conversion price $ 0.08 $ 0.08 The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 December 31, 2017 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.11 % 1.53 % Expected term of options (years) 0.5 0.5 Stock price $ 0.019 $ 0.12 Conversion price $ 0.08 $ 0.08 |
Schedule of purchaser warrants fair value assumptions using monte carlo simulation | The assumptions used in the Black-Scholes option-pricing method is set forth below: January 3, 2018 February 16, 2018 Common stock price $ 0.17 $ 0.13 Term 5 years 5 years Strike price $ 0.15 $ 0.15 Dividend yield 0 0 Risk free rate 2.25 % 2.63 % Volatility 62.5 % 62.5 % The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 December 31, 2017 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.11 % 1.53 % Expected term of options (years) 0.5 0.5 Stock price $ 0.019 $ 0.12 Conversion price $ 0.08 $ 0.08 The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 December 31, 2017 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.11 % 1.53 % Expected term of options (years) 0.5 0.5 Stock price $ 0.019 $ 0.12 Conversion price $ 0.08 $ 0.08 The fair value of the embedded derivative liability is measured in accordance with ASC 820 “Fair Value Measurement”, using “Monte Carlo Method” modeling incorporating the following inputs: September 30, 2018 December 31, 2017 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.11 % 1.53 % Expected term of options (years) 0.50 0.5 Stock price $ 0.019 $ 0.12 Conversion price $ 0.08 $ 0.08 |
Schedule of changes in derivative and warrant liabilities | Changes in the derivative liabilities were as follows: Derivative liabilities: December 31, 2017 $ 470,839 Change due to extinguishment of debt 59,999 Valuation of November 2017 Optional Redemption shares 6,375 Decrease in fair value (505,338 ) September 30, 2018 $ 31,875 |
STOCK BASED COMPENSATION (Table
STOCK BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of options outstanding and changes during the period | The following represents a summary of the Options outstanding at September 30, 2018 Options Weighted Average Exercise Price Aggregate Intrinsic Value * Outstanding at December 1, 2017 10,000,000 $ 0.005 $ 1,100,000 Granted — — — Exercised — — — Expired/Forfeited — — — Outstanding at December 31, 2017 10,000,000 $ 0.005 $ 1,200,000 Granted — — — Exercised — — — Expired/Forfeited — — — Outstanding at September 30, 2018 10,000,000 $ 0.005 $ 120,000 Exercisable at September 30, 2018 10,000,000 $ — $ — Expected to be vested 10,000,000 $ 0.005 $ — * Based on the Company’s stock price on September 30, 2018, December 31, 2017, and December 1, 2017, respectively. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of computation of basic and diluted net income per share | The following table sets forth the computation of basic and diluted net income per share: For the Nine Months Ended September 30, For the Three Months Ended September 30, 2018 2017 2018 2017 Net loss attributable to the common stockholders $ (1,402,686 ) $ (3,076,017 ) $ (355,987 ) $ (1,497,699 ) Basic weighted average outstanding shares of common stock 61,710,263 45,372,823 65,460,451 48,034,278 Dilutive effect of options and warrants — — — — Diluted weighted average common stock and common stock equivalents 61,710,263 45,372,823 65,460,451 48,034,278 Loss per share: Basic and diluted $ (0.02 ) $ (0.07 ) $ (0.01 ) $ (0.03 ) |
ORGANIZATION AND PRINCIPAL AC_2
ORGANIZATION AND PRINCIPAL ACTIVITIES (Details Narrative) - $ / shares | Mar. 17, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 22, 2015 | May 08, 2015 | Dec. 31, 2014 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||
Common stock, issued | 70,622,408 | 53,276,676 | 27,845,000 | |||
Common stock, outstanding | 70,622,408 | 53,276,676 | 16,000,250 | |||
Preferred stock, authorized | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 | ||
Preferred stock, issued | 1 | 1 | 5,000,000 | |||
Common stock, authorized | 150,000,000 | 150,000,000 | 150,000,000 | 100,000,000 | 50,000,000 | |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | ||||
Description of shares amendment | <font style="font: 10pt Times New Roman, Times, Serif">Company's Certificate of Incorporation to designate 1 share of the Company’s authorized 10,000,000 shares of Preferred Stock as Series A Preferred Stock (“Series A Preferred Stock”), which shall vote with the Common Stock, and shall be entitled to fifty-one percent (51%) of the total votes of Common Stock on all such matters voted on. On May 23, 2017, the Company issued the share of Series A Preferred Stock to Joseph Segelman.</font></p>" id="sjs-B9"><p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif">Company's Certificate of Incorporation to designate 1 share of the Company’s authorized 10,000,000 shares of Preferred Stock as Series A Preferred Stock (“Series A Preferred Stock”), which shall vote with the Common Stock, and shall be entitled to fifty-one percent (51%) of the total votes of Common Stock on all such matters voted on. On May 23, 2017, the Company issued the share of Series A Preferred Stock to Joseph Segelman.</font></p> |
BASIS OF PRESENTATION (Details
BASIS OF PRESENTATION (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | |||||
Accumulated deficit | $ (11,783,681) | $ (11,783,681) | $ (10,380,995) | ||
Working capital deficit | (3,814,000) | $ (3,404,000) | |||
Net loss | (355,987) | $ (1,497,699) | (1,402,686) | $ (3,076,017) | |
Net cash used in operating activities | (298,433) | $ (181,051) | |||
Restricted cash | $ 25,000 | $ 25,000 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Deferred revenue | $ 20,616 | $ 20,616 | $ 81,455 | ||
Revenues | 90,451 | $ 255,975 | 540,631 | $ 960,497 | |
Impairments | 0 | 0 | |||
Advertising and marketing expenses | 38,726 | 171,285 | 337,724 | 394,579 | |
Retail sales [Member] | |||||
Revenues | 89,031 | 219,433 | 483,322 | 777,259 | |
Wholesale Sales [Member] | |||||
Revenues | $ 1,420 | $ 36,542 | $ 57,309 | $ 183,238 | |
Minimum [Member] | |||||
Estimated useful life of intangible assets | 3 years | ||||
Maximum [Member] | |||||
Estimated useful life of intangible assets | 10 years | ||||
Accounts Receivable [Member] | |||||
Concentration risk (in percent) | 0.00% | 0.00% | |||
Sales Revenue, Net [Member] | |||||
Concentration risk (in percent) | 0.00% | 0.00% | |||
One Customer [Member] | Sales Revenue, Net [Member] | |||||
Concentration risk (in percent) | 10.00% | 14.00% |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 468,039 | $ 474,983 |
Work-in-process | 121,411 | 117,012 |
Samples | 134,145 | 134,145 |
Inventory, net | $ 723,595 | $ 726,140 |
EQUIPMENT (Details)
EQUIPMENT (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Accumulated depreciation | $ (26,894) | $ (17,424) |
Total | 16,668 | 25,278 |
Office Equipment [Member] | ||
Total | $ 3,391 | 3,391 |
Estimated useful life | P5Y | |
Computer Equipment [Member] | ||
Total | $ 40,171 | $ 39,311 |
Estimated useful life | P3Y |
EQUIPMENT (Details Narrative)
EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Depreciation expense | $ 3,157 | $ 3,445 | $ 9,470 | $ 10,266 |
General and Administrative Expense [Member] | ||||
Depreciation expense | $ 9,470 | $ 10,266 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Accumulated amortization | $ (425,733) | $ (249,947) |
Intangible assets net | $ 633,099 | 803,306 |
Minimum [Member] | ||
Estimated life | 3 years | |
Maximum [Member] | ||
Estimated life | 10 years | |
Trademarks [Member] | ||
Intangible assets gross | $ 260,000 | 260,000 |
Trademarks [Member] | Minimum [Member] | ||
Estimated life | 3 years 3 months 19 days | |
Trademarks [Member] | Maximum [Member] | ||
Estimated life | 4 years 6 months | |
Website [Member] | ||
Estimated life | 3 years | |
Intangible assets gross | $ 118,832 | 113,253 |
Tradename [Member] | ||
Estimated life | 10 years | |
Intangible assets gross | $ 365,000 | 365,000 |
Proprietary Design [Member] | ||
Estimated life | 5 years | |
Intangible assets gross | $ 80,000 | 80,000 |
Developed Technology - Website [Member] | ||
Estimated life | 3 years | |
Intangible assets gross | $ 117,500 | 117,500 |
Developed Technology - Ipad Application [Member] | ||
Estimated life | 3 years | |
Intangible assets gross | $ 117,500 | 117,500 |
Goodwill [Member] | ||
Intangible assets gross | $ 481,947 | $ 481,947 |
INTANGIBLE ASSETS (Details 1)
INTANGIBLE ASSETS (Details 1) | Sep. 30, 2018USD ($) |
2018 (remainder of fiscal year) | $ 117,803 |
2,019 | 226,132 |
2,020 | 103,842 |
2,021 | 64,689 |
2,022 | 36,500 |
Thereafter | 142,957 |
Intangible Assets, Net | 691,923 |
Tradename [Member] | |
2018 (remainder of fiscal year) | 32,593 |
2,019 | 62,907 |
2,020 | 37,818 |
2,021 | 12,606 |
2,022 | |
Thereafter | |
Intangible Assets, Net | 145,924 |
Website [Member] | |
2018 (remainder of fiscal year) | 19,793 |
2,019 | 38,919 |
2,020 | 13,524 |
2,021 | 916 |
2,022 | |
Thereafter | |
Intangible Assets, Net | 73,152 |
Acquired Intangibles [Member] | |
2018 (remainder of fiscal year) | 65,417 |
2,019 | 124,306 |
2,020 | 52,500 |
2,021 | 51,167 |
2,022 | 36,500 |
Thereafter | 142,957 |
Intangible Assets, Net | $ 472,847 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
General and Administrative Expense [Member] | ||||
Amortization expense | $ 58,901 | $ 55,284 | $ 175,786 | $ 162,270 |
DUE TO RELATED PARTY (Details N
DUE TO RELATED PARTY (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Due to related party | $ 1,101,555 | $ 1,101,555 | $ 721,434 | ||
Operating expenses | 346,543 | $ 737,723 | 1,447,300 | $ 2,124,475 | |
Purchase of equipment | 860 | $ 940 | |||
Accrued compensation - related party | 1,174,750 | 1,174,750 | 1,036,000 | ||
Mr. Joseph Segelman [Member] | |||||
Advances received | 0 | ||||
Business expenses | 1,456,311 | ||||
Due to related party | 1,101,555 | 1,101,555 | $ 721,434 | ||
Inventory purchases | $ 2,200 | 2,200 | |||
Operating expenses | 1,447,723 | ||||
Purchase of equipment | 860 | ||||
Website development costs | 5,529 | ||||
Repayments of related party | 1,076,191 | ||||
Deferred compensation | 135,000 | ||||
Secretary [Member] | Employment Agreements [Member] | |||||
Deferred compensation | $ 60,000 |
CONVERTIBLE NOTES PAYABLE (Deta
CONVERTIBLE NOTES PAYABLE (Details) | 9 Months Ended |
Sep. 30, 2018USD ($)$ / sharesshares | |
Amount of notes | $ 1,731,504 |
Debt Discount | $ (19,726) |
Number of Warrants | shares | 19,928,802 |
January and February 2018 Notes | |
Amount of notes | $ 294,000 |
Debt Discount | $ (19,726) |
Conversion Price | $ / shares | $ 0.08 |
Number of Warrants | shares | 1,960,000 |
Exercise Price | $ / shares | $ 0.15 |
Warrants Exercisable thru | Feb. 16, 2023 |
January and February 2018 Notes | Minimum [Member] | |
Maturity Date | Oct. 3, 2018 |
January and February 2018 Notes | Maximum [Member] | |
Maturity Date | Nov. 16, 2018 |
November 2017 Note | |
Amount of notes | $ 287,502 |
Debt Discount | |
Maturity Date | Dec. 31, 2018 |
Conversion Price | $ / shares | $ 0.08 |
Number of Warrants | shares | 3,593,776 |
Exercise Price | $ / shares | $ 0.15 |
Warrants Exercisable thru | Nov. 10, 2022 |
November 2016 Note | |
Amount of notes | $ 287,502 |
Debt Discount | |
Maturity Date | Dec. 31, 2018 |
Conversion Price | $ / shares | $ 0.08 |
Number of Warrants | shares | 3,593,776 |
Exercise Price | $ / shares | $ 0.15 |
Warrants Exercisable thru | Nov. 10, 2022 |
December 2015 Note | |
Amount of notes | $ 862,500 |
Debt Discount | |
Maturity Date | Dec. 31, 2018 |
Conversion Price | $ / shares | $ 0.08 |
Number of Warrants | shares | 10,781,250 |
Exercise Price | $ / shares | $ 0.15 |
Warrants Exercisable thru | Nov. 10, 2022 |
CONVERTIBLE NOTES PAYABLE (De_2
CONVERTIBLE NOTES PAYABLE (Details 1) - Warrant [Member] - $ / shares | Jan. 03, 2018 | Feb. 16, 2018 |
Common stock price | $ 0.17 | $ 0.13 |
Term | 5 years | 5 years |
Strike price | $ 0.15 | $ 0.15 |
Dividend yield | 0.00% | 0.00% |
Risk free rate | 2.25% | 2.63% |
Volatility | 62.50% | 62.50% |
CONVERTIBLE NOTE PAYABLE (Detai
CONVERTIBLE NOTE PAYABLE (Details 2) - USD ($) | Jan. 03, 2018 | Feb. 16, 2018 |
Fair Value [Member] | ||
Warrant | $ 95,324 | $ 65,292 |
Common stock | 70,833 | 54,167 |
Redeemable shares | 255,000 | 195,000 |
Remaining note value | 110,300 | 110,300 |
Total | 531,457 | 424,759 |
Relative Fair Value [Member] | ||
Warrant | 19,784 | 16,955 |
Common stock | 14,701 | 14,066 |
Redeemable shares | 52,923 | 50,637 |
Remaining note value | 22,892 | 28,642 |
Total | $ 110,300 | $ 110,300 |
CONVERTIBLE NOTE PAYABLE (Det_2
CONVERTIBLE NOTE PAYABLE (Details 3) - November 2017Optional Redemption Valuation [Member] | 9 Months Ended |
Sep. 30, 2018$ / shares | |
Expected dividend yield | 0.00% |
Expected stock-price volatility | 47.50% |
Risk-free interest rate | 2.11% |
Expected term of options (years) | 6 months |
Stock price | $ 0.019 |
Conversion price | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_3
CONVERTIBLE NOTES PAYABLE (Details 4) - Warrant One [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk free rate | 2.11% | 1.53% |
Term | 6 months | 6 months |
Stock price | $ 0.019 | $ 0.12 |
Conversion price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_4
CONVERTIBLE NOTES PAYABLE (Details 5) - Optional Redemption Valuation [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Expected dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk-free interest rate | 2.11% | 1.53% |
Expected term of options (years) | 6 months | 6 months |
Stock price | $ 0.019 | $ 0.12 |
Conversion price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_5
CONVERTIBLE NOTES PAYABLE (Details 6) - November 2016 Purchaser Warrants [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Expected dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk-free interest rate | 2.11% | 1.53% |
Expected term of options (years) | 6 months | 6 months |
Stock price (in dollars per share) | $ 0.019 | $ 0.12 |
Exercise price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_6
CONVERTIBLE NOTES PAYABLE (Details 7) - December 2015 Optional Redemption [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Expected dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk-free interest rate | 2.11% | 1.53% |
Expected term of options (years) | 6 months | 6 months |
Stock price | $ 0.019 | $ 0.12 |
Conversion price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_7
CONVERTIBLE NOTES PAYABLE (Details 8) - December 2015 Purchaser Conversion Shares [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Expected dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk-free interest rate | 2.11% | 1.53% |
Expected term of options (years) | 6 months | 6 months |
Stock price | $ 0.019 | $ 0.12 |
Conversion price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_8
CONVERTIBLE NOTES PAYABLE (Details 9) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Derivative liabilities [Roll Forward] | |
Balance at beginning | $ 470,839 |
Change due to extinguishment of debt | 59,999 |
Valuation of November 2017 Optional Redemption shares | 6,375 |
Decrease in fair value | (505,338) |
Balance at end | $ 31,875 |
CONVERTIBLE NOTES PAYABLE (De_9
CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) | Jan. 03, 2018 | Nov. 10, 2017 | Feb. 16, 2018 | Jan. 31, 2018 | Jan. 25, 2018 | Nov. 30, 2017 | Nov. 30, 2016 | Feb. 28, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Nov. 16, 2017 | May 30, 2017 |
Interest expense | $ 111,201 | $ 19,971 | $ 304,280 | $ 337,610 | |||||||||||||
Derivative liabilities | 31,875 | 31,875 | $ 470,839 | ||||||||||||||
Restricted Stock [Member] | |||||||||||||||||
Value of shares issued | $ 126,680 | ||||||||||||||||
Number of shares issued | 4,750,000 | ||||||||||||||||
Securities Purchase Agreement [Member] | |||||||||||||||||
Issuance date | Nov. 10, 2017 | Nov. 10, 2016 | |||||||||||||||
Description of terms of conversion feature | <font style="font: 10pt Times New Roman, Times, Serif">ii) a November 2017 Note with a principal amount of $1.00 for each $0.86956 for each $1.00 paid by each purchaser for such purchaser’s November 2017 Note; and (iii) November 2017 Warrants to purchase up to a number of shares of Common Stock equal to 100% of such purchaser’s November 2017 Note principal amount divided by $0.08 (“Purchaser Conversion Price”), the conversion price in effect on the Initial Closing Date, with a per share exercise price equal to $0.15, as amended on November 16, 2017, subject to adjustment.</font></p>" id="sjs-C9"><p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">ii) a November 2017 Note with a principal amount of $1.00 for each $0.86956 for each $1.00 paid by each purchaser for such purchaser’s November 2017 Note; and (iii) November 2017 Warrants to purchase up to a number of shares of Common Stock equal to 100% of such purchaser’s November 2017 Note principal amount divided by $0.08 (“Purchaser Conversion Price”), the conversion price in effect on the Initial Closing Date, with a per share exercise price equal to $0.15, as amended on November 16, 2017, subject to adjustment.</font></p> | <font style="font-size: 10pt">(ii) a November 2016 Note with a principal amount of $1.00 for each $0.86956 for each $1.00 paid by each purchaser for such purchaser’s November 2016 Note; and (iii) November 2016 Warrants to purchase up to a number of shares of Common Stock equal to 100% of such purchaser’s November 2016 Note principal amount divided by $0.12 (“Purchaser Conversion Price”), the conversion price in effect on the Initial Closing Date, as amended on May 30, 2017 to $0.08, with a per share exercise price equal to $0.30, subject to adjustment.</font></p>" id="sjs-O9"><p style="margin: 0; text-align: justify"><font style="font-size: 10pt">(ii) a November 2016 Note with a principal amount of $1.00 for each $0.86956 for each $1.00 paid by each purchaser for such purchaser’s November 2016 Note; and (iii) November 2016 Warrants to purchase up to a number of shares of Common Stock equal to 100% of such purchaser’s November 2016 Note principal amount divided by $0.12 (“Purchaser Conversion Price”), the conversion price in effect on the Initial Closing Date, as amended on May 30, 2017 to $0.08, with a per share exercise price equal to $0.30, subject to adjustment.</font></p> | |||||||||||||||
Issuance of convertible debt | $ 250,002 | $ 244,945 | |||||||||||||||
Unamortized debt discount | $ 37,500 | $ 42,557 | $ 138,000 | ||||||||||||||
Maturity date | Dec. 31, 2018 | Dec. 31, 2018 | |||||||||||||||
Interest rate | 15.00% | 15.00% | 15.00% | ||||||||||||||
Conversion rate | $ 0.08 | $ 0.12 | $ 0.08 | ||||||||||||||
Percentage of beneficially own in excess of common shares outstanding | 9.99% | 9.99% | 9.99% | ||||||||||||||
Percentage of right to participate subsequent financing | 100.00% | 100.00% | 100.00% | ||||||||||||||
Description of redemption of debt intrument | The notes provide that commencing six (6) months after the November 2017 Original Issue Date, the Company will have the option of prepaying the outstanding principal amount of the November 2017 Notes (an “November 2017 Optional Redemption”), in whole or in part, by paying to the holders a sum of money in cash equal to one hundred percent (100%) of the principal amount to be redeemed, together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable to the holder arising under the November 2017 Note through the November 2017 Redemption Payment Date and 2.8986 shares of the Company’s Common Stock for each $1.00 of November 2017 Note principal amount being redeemed. A Notice of Redemption, if given, may be given on the first Trading Day following twenty (20) consecutive Trading Days during which all of the “Equity Conditions”, as defined, have been in effect. No derivative liability has been recorded as of December 31, 2017, as redemption was contingent.</p>" id="sjs-C17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The notes provide that commencing six (6) months after the November 2017 Original Issue Date, the Company will have the option of prepaying the outstanding principal amount of the November 2017 Notes (an “November 2017 Optional Redemption”), in whole or in part, by paying to the holders a sum of money in cash equal to one hundred percent (100%) of the principal amount to be redeemed, together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable to the holder arising under the November 2017 Note through the November 2017 Redemption Payment Date and 2.8986 shares of the Company’s Common Stock for each $1.00 of November 2017 Note principal amount being redeemed. A Notice of Redemption, if given, may be given on the first Trading Day following twenty (20) consecutive Trading Days during which all of the “Equity Conditions”, as defined, have been in effect. No derivative liability has been recorded as of December 31, 2017, as redemption was contingent.</p> | <font style="font: 10pt Times New Roman, Times, Serif">The notes provide that commencing six (6) months after the November 2016 Original Issue Date, the Company will have the option of prepaying the outstanding principal amount of the November 2016 Notes (an “November 2016 Optional Redemption”), in whole or in part, by paying to the holders a sum of money in cash equal to one hundred percent (100%) of the principal amount to be redeemed, together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable to the holder arising under the November 2016 Note through the November 2016 Redemption Payment Date and 2.8986 shares of the Company’s Common Stock for each $1.00 of November 2016 Note principal amount being redeemed. A Notice of Redemption, if given, may be given on the first Trading Day following twenty (20) consecutive Trading Days during which all of the “Equity Conditions”, as defined, have been in effect</font></p>" id="sjs-O17"><p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">The notes provide that commencing six (6) months after the November 2016 Original Issue Date, the Company will have the option of prepaying the outstanding principal amount of the November 2016 Notes (an “November 2016 Optional Redemption”), in whole or in part, by paying to the holders a sum of money in cash equal to one hundred percent (100%) of the principal amount to be redeemed, together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable to the holder arising under the November 2016 Note through the November 2016 Redemption Payment Date and 2.8986 shares of the Company’s Common Stock for each $1.00 of November 2016 Note principal amount being redeemed. A Notice of Redemption, if given, may be given on the first Trading Day following twenty (20) consecutive Trading Days during which all of the “Equity Conditions”, as defined, have been in effect</font></p> | |||||||||||||||
Securities Purchase Agreement [Member] | Crossover Capital Fund II, LLC | |||||||||||||||||
Value of shares issued | $ 294,000 | ||||||||||||||||
Securities Purchase Agreement [Member] | Crossover Capital Fund II, LLC | Warrants | |||||||||||||||||
Value of shares issued | $ 250,000 | ||||||||||||||||
Number of shares issued | 1,960,000 | ||||||||||||||||
Original issue discount | $ 44,000 | ||||||||||||||||
Securities Purchase Agreement [Member] | Crossover Capital Fund II, LLC | Restricted Stock [Member] | |||||||||||||||||
Value of shares issued | $ 263,522 | ||||||||||||||||
Number of shares issued | 2,395,650 | ||||||||||||||||
Securities Purchase Agreement [Member] | Alpha Capital Anstalt and Brio Capital Master Fund Ltd. [Member] | |||||||||||||||||
Conversion rate | $ 0.3 | ||||||||||||||||
Percentage of right to participate subsequent financing | 100.00% | ||||||||||||||||
Trading days | 5 years | ||||||||||||||||
Issuance date | 6 months | ||||||||||||||||
Warrant [Member] | |||||||||||||||||
Share price (in dollars per share) | $ 0.25 | ||||||||||||||||
Warrant [Member] | Securities Purchase Agreement [Member] | Alpha Capital Anstalt and Brio Capital Master Fund Ltd. [Member] | |||||||||||||||||
Common stock convertible shares | 3,593,776 | 3,593,775 | 10,781,250 | ||||||||||||||
Issuance date | Dec. 23, 2015 | ||||||||||||||||
Description of terms of conversion feature | <font style="font: 10pt Times New Roman, Times, Serif">ii) a December 2015 Note with a principal amount of $1.00 for each $0.86956 for each $1.00 paid by each purchaser for such purchaser’s December 2015 Note; and (iii) December 2015 Warrants to purchase up to a number of shares of Common Stock equal to 100% of such purchaser’s December 2015 Note principal amount divided by $0.12 (“December 2015 Purchaser Conversion Price”), the conversion price in effect on the Initial Closing Date, as amended on May 30, 2017 to $0.08, with a per share exercise price equal to $0.15, as amended on November 16, 2017, subject to adjustment.</font></p>" id="sjs-P37"><p style="margin: 0; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">ii) a December 2015 Note with a principal amount of $1.00 for each $0.86956 for each $1.00 paid by each purchaser for such purchaser’s December 2015 Note; and (iii) December 2015 Warrants to purchase up to a number of shares of Common Stock equal to 100% of such purchaser’s December 2015 Note principal amount divided by $0.12 (“December 2015 Purchaser Conversion Price”), the conversion price in effect on the Initial Closing Date, as amended on May 30, 2017 to $0.08, with a per share exercise price equal to $0.15, as amended on November 16, 2017, subject to adjustment.</font></p> | ||||||||||||||||
Issuance of convertible debt | $ 724,500 | ||||||||||||||||
Maturity date | Dec. 31, 2018 | ||||||||||||||||
Description of redemption of debt intrument | The notes provide that commencing six (6) months after the December 2015 Original Issue Date, the Company will have the option of prepaying the outstanding principal amount of the December 2015 Notes (an “December 2015 Optional Redemption”), in whole or in part, by paying to the holders a sum of money in cash equal to one hundred percent (100%) of the principal amount to be redeemed, together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable to the holder arising under the December 2015 Note through the December 2015 Redemption Payment Date and 2.8986 shares of the Company’s Common Stock for each $1.00 of December 2015 Note principal amount being redeemed. A Notice of Redemption, if given, may be given on the first Trading Day following twenty (20) consecutive Trading Days during which all of the “Equity Conditions”, as defined, have been in effect.</p>" id="sjs-P40"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The notes provide that commencing six (6) months after the December 2015 Original Issue Date, the Company will have the option of prepaying the outstanding principal amount of the December 2015 Notes (an “December 2015 Optional Redemption”), in whole or in part, by paying to the holders a sum of money in cash equal to one hundred percent (100%) of the principal amount to be redeemed, together with accrued but unpaid interest thereon, if any, and any and all other sums due, accrued or payable to the holder arising under the December 2015 Note through the December 2015 Redemption Payment Date and 2.8986 shares of the Company’s Common Stock for each $1.00 of December 2015 Note principal amount being redeemed. A Notice of Redemption, if given, may be given on the first Trading Day following twenty (20) consecutive Trading Days during which all of the “Equity Conditions”, as defined, have been in effect.</p> | ||||||||||||||||
November 2017 Purchaser Conversion Shares [Member] | |||||||||||||||||
Conversion rate | $ 0.08 | ||||||||||||||||
Embedded derivative liability | $ 165,000 | ||||||||||||||||
Number of common shares issued | 3,593,776 | ||||||||||||||||
Value of shares issued | $ 833,354 | ||||||||||||||||
Number of shares issued | 163,171 | ||||||||||||||||
Derivative liabilities | 0 | 0 | $ 0 | ||||||||||||||
Gain on Re-valuation of derivative liability | 0 | 0 | $ 75,000 | 0 | |||||||||||||
November 2017 Purchaser Warrants [Member] | |||||||||||||||||
Trading days | 5 years | ||||||||||||||||
Issuance date | 6 months | ||||||||||||||||
Fair value of the warrants | $ 290,612 | ||||||||||||||||
Change in warrant liability | $ 0 | ||||||||||||||||
December 2015 Purchaser Conversion Shares [Member] | |||||||||||||||||
Common stock convertible shares | 10,781,250 | ||||||||||||||||
Conversion rate | $ 0.08 | ||||||||||||||||
Embedded derivative liability | 88,983 | 88,983 | |||||||||||||||
Derivative liabilities | 0 | 0 | |||||||||||||||
Gain on Re-valuation of derivative liability | 0 | (320,000) | 224,998 | (134,430) | |||||||||||||
Derivative fair value | 88,983 | $ 88,983 | |||||||||||||||
CommonStock | Securities Purchase Agreement [Member] | |||||||||||||||||
Common stock convertible shares | 2,500,000 | ||||||||||||||||
Common stock convertible amount | $ 625,000 | ||||||||||||||||
CommonStock | Securities Purchase Agreement [Member] | Crossover Capital Fund II, LLC | |||||||||||||||||
Number of shares issued | 833,332 | ||||||||||||||||
CommonStock | Securities Purchase Agreement [Member] | Alpha Capital Anstalt and Brio Capital Master Fund Ltd. [Member] | |||||||||||||||||
Common stock convertible shares | 833,354 | 833,354 | 2,500,000 | ||||||||||||||
November 2016 Purchaser Common Stock [Member] | |||||||||||||||||
Embedded derivative liability | $ 240,615 | ||||||||||||||||
Value of shares issued | $ 833,354 | $ 244,945 | |||||||||||||||
Number of shares issued | 100,002 | ||||||||||||||||
November 2016 Purchaser Warrants [Member] | |||||||||||||||||
Conversion rate | $ 0.12 | ||||||||||||||||
Embedded derivative liability | $ 108,597 | ||||||||||||||||
Trading days | 5 years | ||||||||||||||||
Issuance date | 6 months | ||||||||||||||||
Gain on Re-valuation of derivative liability | $ 0 | ||||||||||||||||
Change in warrant liability | 0 | ||||||||||||||||
December 2015 Purchaser Warrants [Member] | |||||||||||||||||
Conversion rate | $ 0.08 | ||||||||||||||||
Trading days | 5 years | ||||||||||||||||
Issuance date | 6 months | ||||||||||||||||
Share price (in dollars per share) | $ 0.15 | ||||||||||||||||
Derivative fair value | $ 439,107 | ||||||||||||||||
Change in warrant liability | $ 0 | ||||||||||||||||
November 2016 Purchaser Conversion Shares [Member] | |||||||||||||||||
Conversion rate | $ 0.08 | ||||||||||||||||
Embedded derivative liability | $ 32,016 | ||||||||||||||||
Number of common shares issued | 3,593,775 | ||||||||||||||||
Derivative liabilities | 0 | $ 0 | 0 | ||||||||||||||
Gain on Re-valuation of derivative liability | $ 0 | (93,875) | $ 75,000 | (39,163) | |||||||||||||
Redeemable Shares | Securities Purchase Agreement [Member] | Crossover Capital Fund II, LLC | |||||||||||||||||
Number of shares issued | 3,000,000 | ||||||||||||||||
January and February 2018 Purchaser Conversion Shares [Member] | |||||||||||||||||
Common stock convertible shares | 3,675,000 | ||||||||||||||||
Total interest | $ 29,400 | ||||||||||||||||
Interest rate | 10.00% | 10.00% | |||||||||||||||
Conversion rate | $ 0.08 | $ 0.08 | |||||||||||||||
January 2018 Purchaser Warrants [Member] | |||||||||||||||||
Fair value of the warrants | $ 95,324 | $ 65,292 | |||||||||||||||
November 2017 Notes [Member] | |||||||||||||||||
Extinguishments of Debt | $ 12,000 | $ 12,000 | |||||||||||||||
November 2017 Notes [Member] | Restricted Stock [Member] | |||||||||||||||||
Value of shares issued | $ 263,522 | ||||||||||||||||
Number of shares issued | 2,395,650 | ||||||||||||||||
Extinguishments of Debt | 263,522 | ||||||||||||||||
November 2017 Notes [Member] | Warrant [Member] | |||||||||||||||||
Unamortized debt discount | $ 287,502 | ||||||||||||||||
Accretion of debt discount | 0 | ||||||||||||||||
Number of common shares issued | 163,171 | ||||||||||||||||
Warrants granted | $ 290,612 | ||||||||||||||||
Extinguishments of Debt | 224,904 | ||||||||||||||||
Debt origination expenses | 369,000 | ||||||||||||||||
December 2015 Purchaser Conversion [Member] | |||||||||||||||||
Description of terms of conversion feature | December 2015 Purchaser Conversion Price of $0.08, as amended on May 30, 2017, subject to potential future adjustments described below. If the total outstanding balance of the Note were convertible as of December 31, 2017, the December 2015 Note would have been convertible into 10,781,250 shares of our common stock.</p>" id="sjs-P115"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">December 2015 Purchaser Conversion Price of $0.08, as amended on May 30, 2017, subject to potential future adjustments described below. If the total outstanding balance of the Note were convertible as of December 31, 2017, the December 2015 Note would have been convertible into 10,781,250 shares of our common stock.</p> | ||||||||||||||||
Secured Convertible Notes [Member] | Securities Purchase Agreement [Member] | Alpha Capital Anstalt and Brio Capital Master Fund Ltd. [Member] | |||||||||||||||||
Principle amount | $ 287,502 | 287,502 | $ 862,500 | ||||||||||||||
November 2016 Notes [Member] | |||||||||||||||||
Unamortized debt discount | 0 | 0 | |||||||||||||||
Interest expense | 0 | 78,312 | |||||||||||||||
Extinguishments of Debt | 691,371 | ||||||||||||||||
Gain (Loss) on Optional Redemption valuation | 0 | 0 | |||||||||||||||
November 2016 Notes [Member] | Warrant [Member] | |||||||||||||||||
Unamortized debt discount | $ 283,172 | ||||||||||||||||
Number of common shares issued | 100,002 | ||||||||||||||||
Warrants granted | $ 108,567 | ||||||||||||||||
December 2015 Notes [Member] | |||||||||||||||||
Extinguishments of Debt | 35,999 | $ 691,371 | |||||||||||||||
December 2015 Notes [Member] | Restricted Stock [Member] | |||||||||||||||||
Value of shares issued | $ 263,522 | ||||||||||||||||
Number of shares issued | 2,395,650 | ||||||||||||||||
Extinguishments of Debt | 263,522 | ||||||||||||||||
December 2015 Notes [Member] | Warrant [Member] | |||||||||||||||||
Unamortized debt discount | $ 862,500 | ||||||||||||||||
Interest expense | 0 | 96,008 | |||||||||||||||
Accretion of debt discount | 0 | 237,660 | |||||||||||||||
Number of common shares issued | 625,000 | ||||||||||||||||
Warrants granted | $ 439,107 | ||||||||||||||||
Debt origination expenses | $ 429,000 | ||||||||||||||||
December 2015 Optional Redemption [Member] | |||||||||||||||||
Share price (in dollars per share) | $ 0.12 | ||||||||||||||||
Derivative liabilities | $ 19,125 | ||||||||||||||||
Contingent fair value | $ 199,150 | ||||||||||||||||
Gain (Loss) on Optional Redemption valuation | 0 | (89,996) | $ 97,755 | (62,652) | |||||||||||||
Convertible Promissory Note [Member] | Second Consent Waiver and Modification Agreement [Member] | |||||||||||||||||
Conversion rate | $ 0.08 | ||||||||||||||||
Convertible Promissory Note [Member] | Warrant [Member] | Second Consent Waiver and Modification Agreement [Member] | |||||||||||||||||
Share price (in dollars per share) | 0.15 | ||||||||||||||||
Convertible Promissory Note [Member] | CommonStock | Second Consent Waiver and Modification Agreement [Member] | |||||||||||||||||
Share price (in dollars per share) | $ 0.08 | ||||||||||||||||
January and February 2018 Notes [Member] | |||||||||||||||||
Description of terms of conversion feature | The exercise price for the Warrants is $0.15, subject to adjustment, are exercisable for five years after the date of the Warrants and are exercisable in whole or in part, as either a cash exercise or as a "cashless" exercise. | ||||||||||||||||
Unamortized debt discount | $ 19,726 | $ 19,726 | |||||||||||||||
Interest rate | 18.00% | 18.00% | |||||||||||||||
Common stock convertible amount | $ 28,767 | ||||||||||||||||
Interest expense | 29,400 | ||||||||||||||||
Accretion of debt discount | $ 80,822 | 0 | 222,740 | 0 | |||||||||||||
Warrants granted | 36,739 | ||||||||||||||||
Original issue discount | 44,000 | ||||||||||||||||
Debt discount | 242,466 | ||||||||||||||||
January and February 2018 Notes [Member] | CommonStock | |||||||||||||||||
Value of shares issued | $ 125,000 | ||||||||||||||||
Number of shares issued | 833,332 | ||||||||||||||||
Fair value of redeemable common shares | $ 28,767 | ||||||||||||||||
January and February 2018 Notes [Member] | Redeemable Shares | |||||||||||||||||
Value of shares issued | $ 450,000 | ||||||||||||||||
Number of shares issued | 3,000,000 | ||||||||||||||||
Fair value of redeemable common shares | $ 103,560 | ||||||||||||||||
January 2018 Notes [Member] | Warrant [Member] | |||||||||||||||||
Maturity date | Oct. 3, 2018 | ||||||||||||||||
February 2018 Notes [Member] | Warrant [Member] | |||||||||||||||||
Maturity date | Nov. 16, 2018 | ||||||||||||||||
November 2016 Notes [Member] | |||||||||||||||||
Extinguishments of Debt | $ 12,000 | ||||||||||||||||
November 2016 Notes [Member] | Restricted Stock [Member] | |||||||||||||||||
Value of shares issued | $ 263,522 | ||||||||||||||||
Number of shares issued | 2,395,650 | ||||||||||||||||
Extinguishments of Debt | 263,522 | ||||||||||||||||
November 2017Optional Redemption Valuation [Member] | |||||||||||||||||
Derivative liabilities | 6,375 | 6,375 | |||||||||||||||
Contingent fair value | 6,375 | 6,375 | |||||||||||||||
Gain (Loss) on Optional Redemption valuation | 0 | 0 | 0 | 0 | |||||||||||||
November 2016 Optional Redemption [Member] | |||||||||||||||||
Derivative liabilities | 6,375 | 6,375 | |||||||||||||||
Contingent fair value | 35,015 | 35,015 | |||||||||||||||
Gain (Loss) on Optional Redemption valuation | $ 0 | $ (27,139) | $ 32,585 | $ (12,235) |
SHORT TERM NOTES PAYABLE (Detai
SHORT TERM NOTES PAYABLE (Details Narrative) - USD ($) | Sep. 30, 2018 | Sep. 30, 2017 | Mar. 31, 2017 | Sep. 30, 2018 | Jan. 31, 2018 | Jun. 30, 2017 |
Debt issuance costs on note payable, non current | $ 54,500 | $ 54,500 | ||||
Note payable, net debt issuance costs | 83,740 | 83,740 | ||||
Availability of debt | 880,000 | 880,000 | ||||
Upfront fee | 400 | |||||
Short term loan | 35,000 | 35,000 | ||||
Repayment of loan | 30,952 | |||||
Balance due | 4,218 | $ 4,218 | ||||
Restricted Stock [Member] | ||||||
Number of shares issued | 4,750,000 | |||||
Aggregate value of shares issued | $ 126,680 | |||||
Secured Promissory Note [Member] | Alpha Capital Anstalt [Member] | ||||||
Periodic payment | $ 350 | |||||
Description of collateral | </p> <p style="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0">" id="sjs-C14">The Note is secured with the assets of the Company pursuant to a security agreement dated December 23, 2015. In addition, the Company’s CEO has personally guaranteed the Note.</p> <p style="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"></p> <p style="font: 12pt Times New Roman, Times, Serif; margin: 0pt 0"> | |||||
Secured Promissory Note [Member] | Alpha Capital Anstalt [Member] | Restricted Stock [Member] | ||||||
Number of shares issued | 1,500,000 | |||||
Aggregate value of shares issued | $ 105,000 | |||||
Payments of debt issuance costs | 2,500 | |||||
Debt issuance costs on note payable, non current | 107,500 | |||||
Secured Promissory Note [Member] | Alpha Capital Anstalt [Member] | Brio Capital Master Fund Ltd. [Member] | ||||||
Advance | $ 60,010 | $ 60,010 | $ 60,010 | $ 125,005 | ||
Debt discount | $ 55,500 | |||||
Principle amount | $ 1,125,000 | |||||
Number of shares issued | 600,000 | |||||
Secured Promissory Note [Member] | Alpha Capital Anstalt [Member] | Brio Capital Master Fund Ltd. [Member] | Restricted Stock [Member] | ||||||
Number of shares issued | 600,000 | |||||
Aggregate value of shares issued | $ 55,500 | |||||
Secured Promissory Note [Member] | Alpha Capital Anstalt [Member] | Brio Capital Master Fund Ltd. [Member] | Minimum [Member] | ||||||
Advance | $ 250,000 |
STOCK TRANSACTIONS (Details Nar
STOCK TRANSACTIONS (Details Narrative) - USD ($) | Sep. 30, 2018 | Sep. 01, 2018 | Jul. 08, 2018 | Sep. 30, 2017 | Jul. 14, 2017 | Jan. 31, 2018 | Jan. 26, 2018 | Mar. 31, 2017 | Mar. 17, 2017 | Feb. 28, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | May 19, 2017 |
Preferred stock cancellation term | 10 years | |||||||||||||
Common stock payable | $ 79,625 | |||||||||||||
Preferred stock value | ||||||||||||||
Mr. Joseph Segelman [Member] | ||||||||||||||
Preferred stock value | $ 270,000 | |||||||||||||
Restricted Stock [Member] | ||||||||||||||
Number of shares issued | 4,750,000 | |||||||||||||
Value of shares issued | $ 126,680 | |||||||||||||
Stock issued for payment of accounts payable, Shares | 5,000,000 | |||||||||||||
Stock issued for payment of accounts payable, Value | $ 88,165 | |||||||||||||
Restricted Stock [Member] | Outside Consultant [Member] | ||||||||||||||
Number of shares issued | 162,500 | 100,000 | 487,500 | 568,750 | ||||||||||
Value of shares issued | $ 101,156 | $ 2,390 | $ 34,125 | |||||||||||
Common stock payable | $ 101,156 | |||||||||||||
Contract terminated date | Jan. 26, 2018 | |||||||||||||
Restricted Stock [Member] | Secured Promissory Note [Member] | Alpha Capital Anstalt [Member] | ||||||||||||||
Number of shares issued | 1,500,000 | |||||||||||||
Value of shares issued | $ 105,000 | |||||||||||||
Crossover Capital Fund II, LLC | Securities Purchase Agreement [Member] | ||||||||||||||
Value of shares issued | $ 294,000 | |||||||||||||
Crossover Capital Fund II, LLC | CommonStock | Securities Purchase Agreement [Member] | ||||||||||||||
Number of shares issued | 833,332 | |||||||||||||
Crossover Capital Fund II, LLC | Redeemable Shares | Securities Purchase Agreement [Member] | ||||||||||||||
Number of shares issued | 3,000,000 | |||||||||||||
Crossover Capital Fund II, LLC | Warrants | Securities Purchase Agreement [Member] | ||||||||||||||
Number of shares issued | 1,960,000 | |||||||||||||
Value of shares issued | $ 250,000 | |||||||||||||
Crossover Capital Fund II, LLC | Restricted Stock [Member] | Securities Purchase Agreement [Member] | ||||||||||||||
Number of shares issued | 2,395,650 | |||||||||||||
Value of shares issued | $ 263,522 | |||||||||||||
Brio Capital Master Fund Ltd. [Member] | Secured Promissory Note [Member] | Alpha Capital Anstalt [Member] | ||||||||||||||
Principle amount | $ 1,125,000 | |||||||||||||
Number of shares issued | 600,000 | |||||||||||||
Brio Capital Master Fund Ltd. [Member] | Restricted Stock [Member] | Secured Promissory Note [Member] | Alpha Capital Anstalt [Member] | ||||||||||||||
Number of shares issued | 600,000 | |||||||||||||
Value of shares issued | $ 55,500 |
STOCK BASED COMPENSATION (Detai
STOCK BASED COMPENSATION (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |||
Outstanding - beginning of year | 10,000,000 | 10,000,000 | |
Granted | |||
Exercised | |||
Expired/Forfeited | |||
Outstanding - ending of period | 10,000,000 | 10,000,000 | |
Exercisable - ending of period | 10,000,000 | ||
Expected to be vested | 10,000,000 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |||
Outstanding - beginning of year | $ 0.005 | $ 0.005 | |
Granted | |||
Exercised | |||
Expired/Forfeited | |||
Outstanding - ending of period | 0.005 | $ 0.005 | |
Exercisable - ending of period | |||
Expected to be vested | $ 0.005 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Aggregate Intrinsic Value [Roll Forward] | |||
Outstanding - beginning of year | [1] | $ 1,200,000 | $ 1,100,000 |
Outstanding - ending of period | [1] | $ 120,000 | $ 1,200,000 |
[1] | Based on the Company's stock price on September 30, 2018, December 31, 2017, and December 1, 2017, respectively. |
STOCK BASED COMPENSATION (Det_2
STOCK BASED COMPENSATION (Details Narrative) - USD ($) | Sep. 30, 2018 | Jul. 08, 2018 | Jul. 14, 2017 | Jul. 31, 2018 | Jan. 26, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2014 |
Common stock, issued (in shares) | 70,622,408 | 70,622,408 | 70,622,408 | 53,276,676 | 27,845,000 | |||||||
Stock based compensation | $ 7,742 | $ 5,760 | ||||||||||
Stock based compensation - related party | $ 0 | $ 4,560 | $ 2,390 | $ 45,391 | ||||||||
Number of shares vested | 10,000,000 | |||||||||||
2015 Equity Incentive Plan [Member] | ||||||||||||
Common stock, issued (in shares) | 20,000,000 | 20,000,000 | 20,000,000 | |||||||||
Vesting period | 10 years | |||||||||||
2015 Equity Incentive Plan [Member] | Mr. Joseph Segelman [Member] | ||||||||||||
Number of shares issued | 10,000,000 | |||||||||||
Value of common stock | $ 2,500,000 | |||||||||||
Dividend rate | 0.00% | |||||||||||
Volatility rate | 35.60% | |||||||||||
Risk-free interest rate | 1.87% | |||||||||||
Stock price | $ 0.25 | |||||||||||
Exercise price | $ 0.005 | |||||||||||
Expected life | 6 years | |||||||||||
2015 Equity Incentive Plan [Member] | Mr. Joseph Segelman [Member] | First Year Vest [Member] | ||||||||||||
Vesting period | 12 months | |||||||||||
2015 Equity Incentive Plan [Member] | Mr. Joseph Segelman [Member] | Second Year Vest [Member] | ||||||||||||
Vesting period | 24 months | |||||||||||
2015 Equity Incentive Plan [Member] | Outside Consultant [Member] | ||||||||||||
Number of shares vested | 83,333 | |||||||||||
Number of remaining shares vested | 16,667 | |||||||||||
General and Administrative Expense [Member] | 2015 Equity Incentive Plan [Member] | Outside Consultant [Member] | ||||||||||||
Stock based compensation | $ 3,750 | $ 11,250 | ||||||||||
Unamortized expenses | $ 2,500 | $ 2,500 | $ 2,500 | |||||||||
Restricted Stock [Member] | ||||||||||||
Number of shares issued | 4,750,000 | |||||||||||
Value of common stock | $ 126,680 | |||||||||||
Restricted Stock [Member] | Outside Consultant [Member] | ||||||||||||
Number of shares issued | 162,500 | 100,000 | 487,500 | 568,750 | ||||||||
Value of common stock | $ 101,156 | $ 2,390 | $ 34,125 | |||||||||
Restricted Stock [Member] | 2015 Equity Incentive Plan [Member] | Employees [Member] | ||||||||||||
Number of shares issued | 98,000 | |||||||||||
Value of common stock | $ 7,742 | |||||||||||
Restricted Stock [Member] | 2015 Equity Incentive Plan [Member] | Outside Consultant [Member] | ||||||||||||
Number of shares issued | 100,000 | 100,000 | ||||||||||
Value of common stock | $ 2,390 | $ 15,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Mr. Joseph Segelman [Member] | Consulting Agreement [Member] | ||||
Description of consulting agreement | The Company previously had a consulting agreement with its CEO under which he was compensated $120,000 per annum. Beginning June 20, 2013, this contract was to continue unless and until terminated at any time by either the Company or CEO giving two month notice in writing. Such consulting agreement was terminated by mutual agreement as of May 1, 2015 and superseded by the employment agreement effective May 1, 2015.</font></p>" id="sjs-D4"><p><font style="font: 10pt Times New Roman, Times, Serif">The Company previously had a consulting agreement with its CEO under which he was compensated $120,000 per annum. Beginning June 20, 2013, this contract was to continue unless and until terminated at any time by either the Company or CEO giving two month notice in writing. Such consulting agreement was terminated by mutual agreement as of May 1, 2015 and superseded by the employment agreement effective May 1, 2015.</font></p> | |||
Consulting fees | $ 120,000 | |||
Deferred compensation | $ 214,000 | 214,000 | ||
Mr. Joseph Segelman [Member] | Employment Agreements [Member] | ||||
Minimum annual base salary and compensation | $ 180,000 | |||
Description of amount equal to base salary | An amount equal to 200% of the base salary.</font></p>" id="sjs-D9"><p><font style="font: 10pt Times New Roman, Times, Serif">An amount equal to 200% of the base salary.</font></p> | |||
Agreement expiration date | Dec. 31, 2018 | |||
Compensation expense | 45,000 | $ 45,000 | $ 90,000 | $ 90,000 |
Deferred compensation included in Accrued Compensation | 787,750 | 787,750 | ||
Deferred compensation | 573,750 | 573,750 | ||
Employee benefits | 3,600 | 3,531 | 9,100 | 11,977 |
Secretary [Member] | Consulting Agreement [Member] | ||||
Deferred compensation | 113,667 | 113,667 | ||
Secretary [Member] | Employment Agreements [Member] | ||||
Consulting fees | 60,000 | |||
Minimum annual base salary and compensation | $ 80,000 | |||
Description of amount equal to base salary | <tr style="vertical-align: bottom"> <td style="font: 10pt Times New Roman, Times, Serif; width: 100%"><font style="font: 10pt Times New Roman, Times, Serif">An amount equal to 50% of the base salary</font>.</td></tr> </table>" id="sjs-D20"><table border="0" cellpadding="0" cellspacing="0" style="width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="font: 10pt Times New Roman, Times, Serif; width: 100%"><font style="font: 10pt Times New Roman, Times, Serif">An amount equal to 50% of the base salary</font>.</td></tr> </table> | |||
Agreement expiration date | Dec. 31, 2018 | |||
Compensation expense | 20,000 | 20,000 | $ 40,000 | 40,000 |
Deferred compensation included in Accrued Compensation | 387,000 | 387,000 | ||
Deferred compensation | 273,333 | 273,333 | ||
Employee benefits | $ 1,800 | $ 1,798 | $ 5,400 | $ 5,378 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Earnings Per Share [Abstract] | ||||
Net loss attributable to the common stockholders | $ (355,987) | $ (1,497,699) | $ (1,402,686) | $ (3,076,017) |
Basic weighted average outstanding shares of common stock | 65,460,451 | 48,034,278 | 61,710,263 | 45,372,823 |
Dilutive effect of options and warrants | ||||
Diluted weighted average common stock and common stock equivalents | 65,460,451 | 48,034,278 | 61,710,263 | 45,372,823 |
Loss per share: | ||||
Basic and diluted (in dollars per share) | $ (0.01) | $ (0.03) | $ (0.02) | $ (0.07) |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 01, 2016 | |
Total rent | $ 1,995 | |||||
Rent expense | $ 6,013 | $ 18,138 | 34,056 | $ 85,811 | ||
Estimated fair value of contingent payments, net | 279,026 | 279,026 | $ 287,957 | |||
Earn out payments | 100,930 | |||||
Reimbursement Expenses | 95,020 | |||||
Contingent cash payment | $ 500,000 | |||||
ASK Gold [Member] | ||||||
Earn out payments | $ 4,165 | 8,931 | ||||
CCI [Member] | ||||||
Earn out payments | 50,465 | |||||
Reimbursement Expenses | 44,555 | |||||
Third Party [Member] | ||||||
Monthly sub leased | $ 4,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended |
Oct. 31, 2018 | Sep. 30, 2018 | |
Restricted Stock [Member] | ||
Number of shares issued | 4,750,000 | |
Value of shares issued | $ 126,680 | |
Subsequent Event [Member] | Crossover Purchase Agreement [Member] | ||
Maturity date | Dec. 31, 2018 | |
Subsequent Event [Member] | Crossover Purchase Agreement [Member] | Redeemable Shares | ||
Number of rights removed | 1,500,000 | |
Subsequent Event [Member] | Restricted Stock [Member] | ||
Number of shares issued | 150,000 | |
Value of shares issued | $ 2,685 |