Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | Apr. 19, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Reign Sapphire Corp | |
Entity Central Index Key | 0001642159 | |
Document Type | 10-Q | |
Trading Symbol | RSAP | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 81,272,408 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 1,331 | $ 7,497 |
Inventories | 715,351 | 723,595 |
Current assets of discontinued operations and assets held for sale | 2,096 | |
Total current assets | 716,682 | 733,188 |
Property and Equipment, net | 12,288 | 15,530 |
Intangible assets, net | 97,034 | 113,331 |
Total assets | 826,004 | 862,049 |
Current liabilities: | ||
Accounts payable | 23,250 | 22,710 |
Due to related party | 1,267,099 | 1,246,805 |
Accrued compensation - related party | 1,304,750 | 1,239,750 |
Short term notes payable, less unamortized debt issuance costs of $18,500 and $27,750 at March 31, 2019 and December 31, 2018, respectively | 79,687 | 103,770 |
Convertible notes payable, less unamortized debt discount of $0 and $0 at March 31, 2019 and December 31, 2018, respectively | 1,731,504 | 1,731,504 |
Other current liabilities | 80,996 | 69,774 |
Current liabilities of discontinued operations and assets held for sale | 162,978 | |
Total current liabilities | 4,487,286 | 4,577,291 |
Total liabilities | 4,487,286 | 4,577,291 |
Shareholders' deficit | ||
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 1 and 1 share issued and outstanding at March 31, 2019 and December 31, 2018, respectively | ||
Common stock, $0.0001 par value, 150,000,000 shares authorized; 81,272,408 and 81,272,408 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively | 8,128 | 8,128 |
Additional paid-in-capital | 9,277,899 | 9,277,899 |
Accumulated deficit | (12,947,309) | (13,001,269) |
Total shareholders' deficit | (3,661,282) | (3,715,242) |
Total liabilities and shareholders' deficit | $ 826,004 | $ 862,049 |
CONSOLIDATED BALANCE SHEETS (_2
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Unamortized debt issuance costs | $ 18,500 | $ 27,750 |
Debt discount on convertible notes, current | $ 0 | $ 0 |
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 | 81,272,408 | 81,272,408 |
Common stock, outstanding | 81,272,408 | 81,272,408 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
Net revenues | $ 41,554 | $ 23,149 |
Cost of Sales | 9,250 | 9,681 |
Gross Profit | 32,304 | 13,468 |
Operating expenses: | ||
Advertising and marketing expenses | 8,531 | 38,624 |
Stock based compensation - related party | 21,531 | |
General and administrative | 192,628 | 241,549 |
Total operating expenses | 201,159 | 301,704 |
Loss from operations | (168,855) | (288,236) |
Other (income) expense: | ||
Change in fair value of derivative liabilities | (306,018) | |
Extinguishment of debt | 548,425 | |
Interest expense | 15,500 | 81,600 |
Total other expense, net | 15,500 | 324,007 |
Loss before income taxes and discontinued operations | (184,355) | (612,243) |
Income taxes | ||
Loss from continuing operations | (184,355) | (612,243) |
Discontinued operations | (127,149) | |
Gain of disposal of discontinued operations | 238,315 | |
Net profit (loss) | $ 53,960 | $ (739,392) |
Net profit (loss) per share from continuing operations, basic and diluted | $ 0 | $ (0.01) |
Net loss per share from discontinued operations, basic and diluted | 0 | 0 |
Net profit (loss) per share total, basic and diluted (in dollars per share) | $ 0 | $ (0.01) |
Weighted average number of shares outstanding Basic and diluted | 81,272,408 | 57,711,496 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY DEFICIT (Unaudited) - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Balance at beginning at Dec. 31, 2017 | $ 5,328 | $ 8,281,793 | $ (10,380,995) | $ (2,093,874) | |
Balance at beginning (in shares) at Dec. 31, 2017 | 1 | 53,276,676 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Redeemable shares issued in conjunction with note payable | $ 300 | 103,260 | 103,560 | ||
Redeemable shares issued in conjunction with note payable (in shares) | 3,000,000 | ||||
issuance of common stock and warrants with short-term convertible notes | $ 83 | 65,423 | 65,506 | ||
issuance of common stock and warrants with short-term convertible notes (in shares) | 833,332 | ||||
Shares issued in conjunction with modification of note payable | $ 240 | 263,282 | 263,522 | ||
Shares issued in conjunction with modification of note payable (in shares) | 2,395,650 | ||||
Net loss | (739,392) | (739,392) | |||
Balance at end at Mar. 31, 2018 | $ 5,951 | 8,713,758 | (11,120,387) | (2,400,678) | |
Balance at end (in shares) at Mar. 31, 2018 | 1 | 59,505,658 | |||
Balance at beginning at Dec. 31, 2018 | $ 8,128 | 9,277,899 | (13,001,269) | (3,715,242) | |
Balance at beginning (in shares) at Dec. 31, 2018 | 1 | 81,272,408 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | 53,960 | 53,960 | |||
Balance at end at Mar. 31, 2019 | $ 8,128 | $ 9,277,899 | $ (12,947,309) | $ (3,661,282) | |
Balance at end (in shares) at Mar. 31, 2019 | 2 | 81,272,408 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities: | ||
Net profit (loss) | $ 53,960 | $ (739,392) |
Adjustments to reconcile net profit (loss) to net cash used in operating activities: | ||
Depreciation expense | 3,242 | 3,156 |
Amortization expense | 16,297 | 58,443 |
Gain on disposal of discontinued operations | (260,883) | |
Accretion of debt discount | 9,250 | 78,596 |
Change in derivative liabilities | (306,018) | |
Loss on extinguishment of debt | 548,425 | |
Amortization of stock issued for future services | 3,750 | |
Estimated fair market value of stock issued for services | 21,531 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (13,398) | |
Inventory | 8,244 | 4,744 |
Prepaid expenses | 1,002 | |
Accounts payable | 540 | 7,881 |
Due to related party | 20,294 | 41,322 |
Accrued compensation - related party | 65,000 | 20,000 |
Deferred revenue | (46,155) | |
Estimated fair value of contingent payments, net | (918) | |
Other current liabilities | 11,223 | (4,810) |
Net cash used in operating activities | (72,833) | (321,841) |
Cash flows from investing activities: | ||
Proceeds from sale of business | 100,000 | |
Net cash provided by investing activities | 100,000 | |
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 | 134,020 | |
Repayments of short term notes | (33,333) | (30,470) |
Net cash (used in) provided by financing activities | (33,333) | 353,550 |
Net increase (decrease) in cash | (6,166) | 31,709 |
Cash at beginning of period | 7,497 | 9,592 |
Cash at end of period | 1,331 | 41,301 |
Cash paid during the period for: | ||
Interest | ||
Income taxes | ||
Non-cash investing and financing activities: | ||
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 | |
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 |
ORGANIZATION AND PRINCIPAL ACTI
ORGANIZATION AND PRINCIPAL ACTIVITIES | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND PRINCIPAL ACTIVITIES | NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES Corporate History and Background Reign Sapphires – Continuing Operations: 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. 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. The Company has begun its planned principal operations, and accordingly, the Company has prepared its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Coordinates Collection – Discontinued Operations: 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. On January 1, 2019, Reign Brands, Inc., a subsidiary of Reign Sapphire Corporation, entered into an Asset Purchase Agreement (the “Agreement”) with Co-Op Jewelers LLC (“Co-Op”), whereby Reign Brands, Inc. sold operating assets of Reign Brands, Inc., consisting of substantially all of the assets related to Coordinates Collection (“CCI”). On January 1, 2019 (the “Closing Date”), the parties executed the Asset Purchase Agreement and the final exhibits. Upon the closing of the Agreement, Reign Brands, Inc. sold substantially all of the operating assets of the CCI business, consisting of fixed assets and intellectual property in exchange for an aggregate of $100,000 in cash. The Agreement contained customary closing conditions. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2019 | |
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 March 31, 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, 2018 and 2017 audited financial statements filed on Form 10-K on April 2, 2019. 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, 2018 as filed on April 2, 2019, 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 $12,947,000 and $13,001,000 at March 31, 2019 and December 31, 2018, respectively, had a working capital deficit of approximately $3,771,000 and $3,844,000 at March 31, 2019 and December 31, 2018, respectively, had net income of approximately $54,000 and a net loss of approximately $739,000 for the three months ended March 31, 2019 and 2018, respectively, and net cash used in operating activities of approximately $73,000 and $322,000 for the three months ended March 31, 2019 and 2018, 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 | 3 Months Ended |
Mar. 31, 2019 | |
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 consolidated financial statements. The 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 consolidated financial statements. Consolidation The 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 consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the 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 consolidated 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. Cash The Company’s cash is held in bank accounts in the United States and is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Company has not experienced any cash losses. 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 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 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. Advertising and Marketing Costs Advertising and marketing costs are recorded as general and administrative expenses when they are incurred. Advertising and marketing expenses were recorded of approximately $9,000 ($9,000 from continuing operations and $0 from discontinued operations) and $175,000 ($39,000 from continuing operations and $136,000 from discontinued operations) for the three months ended March 31, 2019 and 2018, respectively. Comprehensive Income Comprehensive income is reported in accordance with 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, 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 months ended March 31, 2019 and 2018. 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 totaling $0 and $21,977 as of March 31, 2019 and December 31, 2018, respectively, is included in current liabilities of discontinued operations and assets held for sale in the accompanying consolidated Balance Sheets. Inventories Reign Sapphire Inventories are stated at the lower of cost or market (net realizable value) 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 March 31, 2019 and December 31, 2018, the Company carried primarily loose sapphire jewels, jewelry for sale on our website, and jewelry 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 as of March 31, 2019. 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. The estimated fair value per management’s internal assessment is greater than the cost, therefore, there is no indicator of impairment as of March 31, 2019. Le Bloc Le Bloc products are outsourced to a third party for manufacture, made to order, and when completed are shipped to the customer. The inventory for Le Bloc is considered immaterial as of March 31, 2019 and December 31, 2018. 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. Intangible Assets 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 was an impairment charge of $0 for the three months ended March 31, 2019 and 2018 and $481,947 of impairment charge was recorded in the fourth quarter of year December 31, 2018. 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 was an impairment charge of $0 for the three months ended March 31, 2019 and 2018 and $460,789 of impairment charge was recorded in the fourth quarter of year December 31, 2018. 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. Fair Value of Financial Instruments The provisions of accounting guidance, FASB Topic ASC 825 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 March 31, 2019 and December 31, 2018, the fair value of cash, accounts receivable, accounts payable, 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. There were 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 warrant and the embedded derivative liabilities are recognized at fair value on a recurring basis at March 31, 2019 and are Level 3 measurements (see Note 8). There have been no transfers between levels. The carrying values of the Company’s financial instruments, including cash, other current assets, accounts payable, accruals, and other current liabilities approximate their fair values due to the short period of time to maturity or repayment. Convertible Notes Payable 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 months ended March 31, 2019 and 2018, 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. Australian Sapphire Corporation (“ASC”), a shareholder of the Company which is wholly-owned by Joseph Segelman, t e Comp a n y’s Chief Executive Officer (" CEO”), is inactive and we have no transactions with ASC. Segment Reporting Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. The Company identifies operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility. Accordingly, the Company has one reportable segment. Reclassifications Certain amounts in previously issued financial statements have been reclassified to conform to the presentation following the January 2019 sale of CCI, which includes the reclassification of the combined financial position as assets and liabilities held for sale (see Note 15) for all periods presented. Discontinued Operations Pursuant to ASC 205-20 Discontinued Operations, in determining whether a group of assets that is disposed (or to be disposed) should be presented as a discontinued operation, we analyze whether the group of assets being disposed represents a component of the Company; that is, whether it had historic operations and cash flows that were clearly distinguished, both operationally and for financial reporting purposes. In addition, we consider whether the disposal represents a strategic shift that has or will have a major effect on our operations and financial results. The results of discontinued operations, as well as any gain or loss on the disposal, if applicable, are aggregated and separately presented in our consolidated statements of operations, net of income taxes. The historical financial position of discontinued operations are aggregated and separately presented in our accompanying consolidated balance sheets. Concentrations, Risks, and Uncertainties Business Risk Substantial business risks and uncertainties are inherent to an entity, including the potential risk of business failure. The Company is headquartered and operates in the United States. To date, the Company has generated limited revenues from operations. There can be no assurance that the Company will be able to successfully continue to produce 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. 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. 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 banks and accounts receivable. The credit risk on cash in banks is limited because the counterparties are recognized financial institutions. The Company had one customer that accounted for 96% of total revenues for the three months ended March 31, 2019. There was one customer that accounted for 10% of total revenue for the three months ended March 31, 2018. The Company had no customers that accounted for 10% or more of total accounts receivable at March 31, 2019 and December 31, 2018, respectively. 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. Major Suppliers The Company does not manufacture its own products and currently depends primarily upon third parties to manufacture its products. In the event that the manufacturing provided by our current supplier were discontinued, it is believed that alternate suppliers could be identified which would be able to provide it with sufficient levels of products at terms similar to those of our current supplier. 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)” – |
INVENTORIES
INVENTORIES | 3 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE 4 – INVENTORIES Inventories consisted of the following as of: March 31, 2019 December 31, 2018 Loose stones $ 518,229 $ 526,473 Finished goods 134,145 134,145 Samples 62,977 62,977 $ 715,351 $ 723,595 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 5 – PROPERTY AND Equipment Property and equipment consisted of the following as of: Estimated Life March 31, 2019 December 31, 2018 Office equipment 5 years $ 5,481 $ 5,481 Computer equipment 3 years 40,171 40,171 Accumulated depreciation (33,364 ) (30,122 ) $ 12,288 $ 15,530 |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 6 – INTANGIBLE ASSETS Intangible assets consisted of the following as of: Estimated Life March 31, 2019 December 31, 2018 Trademarks 3.3 – 4.5 years $ 260,000 $ 260,000 Accumulated amortization (162,966 ) (146,669 ) $ 97,034 $ 113,331 Future amortization expense related to intangible assets are approximately as follows: Total 2019 $ 46,610 2020 37,818 2021 12,606 $ 97,034 Amortization expense was $16,297 and $58,443 for the three months ended March 31, 2019 and 2018, and is classified in general and administrative expenses in the condensed consolidated Statements of Operations. |
DUE TO RELATED PARTY
DUE TO RELATED PARTY | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
DUE TO RELATED PARTY | NOTE 7 – DUE TO RELATED PARTY During the three months ended March 31, 2019, the Company received no advances from its CEO/director, incurred business expenses that were paid by the CEO/director of $486,384 (comprised of operating expenses) and had repayments of $466,090. The Company has a balance owed to the related party of $1,267,099 and $1,246,805 at March 31, 2019 and December 31, 2018, respectively. During the three months ended March 31, 2019, the Company incurred $45,000 of compensation related to the CEO/director’s employment agreement and $20,000 of deferred compensation related to the Secretary’s employment agreement. As of March 31, 2019 and December 31, 2018, accrued compensation-related party was $1,304,750 and $1,239,750, respectively. |
CONVERTIBLE NOTES PAYABLE
CONVERTIBLE NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE NOTE PAYABLE | NOTE 8 – CONVERTIBLE NOTES PAYABLE Convertible notes payable consists of the following: March 31, December 31, 2019 2018 January and February 2018 Notes, issued January 3, 2018 and February 16, 2018, respectively, with a maturity date of March 31, 2019, as amended, with an interest rate of 10%. $ 294,000 $ 294,000 November 2017 Notes, issued November 10, 2017, with a maturity date of March 31, 2019, as amended, bearing no interest, and secured by substantially all of the Company’s assets and guarantees of payment by the Company’s CEO, and Australian Sapphire Corporation (“ASC”), a shareholder of the Company which is wholly-owned by the Company’s CEO. 287,502 287,502 November 2016 Notes, issued November 10, 2016, with a maturity date of March 31, 2019, as amended, bearing no interest, and secured by substantially all of the Company’s assets and guarantees of payment by the Company’s CEO, and ASC. 287,502 287,502 December 2015 Notes, issued December 23, 2015, with a maturity date of March 31, 2019, as amended, bearing no interest, and secured by substantially all of the Company’s assets and guarantees of payment by the Company’s CEO, and ASC. 862,500 862,500 Total convertible notes payable 1,731,504 1,731,504 Debt discount — — Convertible notes payable, net of unamortized debt discount $ 1,731,504 $ 1,731,504 The following represents a summary of the convertible debt terms at March 31, 2019: 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 $ — 3/31/2019 $ 0.08 1,960,000 $ 0.15 2/16/2023 November 2017 Notes 287,502 — 3/31/2019 $ 0.08 3,593,776 $ 0.15 11/10/2022 November 2016 Notes 287,502 — 3/31/2019 $ 0.08 3,593,776 $ 0.15 11/10/2022 December 2015 Notes 862,500 — 3/31/2019 $ 0.08 10,781,250 $ 0.15 11/10/2022 Total $ 1,731,504 $ — 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 and provides 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 Additional discount (interest) $ — $ 13,808 $ — $ 8,058 The Company recorded debt discount accretion of $0 and $61,096 to interest expense in the condensed consolidated Statements of Operations during the three months ended March 31, 2019 and 2018, respectively, and has $0 of unamortized debt discount remaining as of March 31, 2019. 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 matured on March 31, 2019, as amended on January 2, 2019. The note is in default and the Company is currently in discussions to restructure the terms of the note and provides 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 March 31, 2019 and December 31, 2018, the Optional Redemption was recorded as a derivative liability on the consolidated Balance Sheets using the “Black Scholes Merton Method” 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 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 $0 at March 31, 2019 and December 31, 2018. During the three months ended March 31, 2019 and 2018, the Company recorded $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”, incorporating the following inputs: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 Conversion price $ 0.08 $ 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 March 31, 2019, 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 March 31, 2019, the embedded derivative was re-measured at fair value that was determined to be $0. During the three months ended March 31, 2019 and 2018, the Company recorded a loss of $0 and $52,000, 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 three months ended March 31, 2018. In addition, the value of the restricted common shares of $263,522 was recorded as an extinguishment of debt in the three months ended March 31, 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: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 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 three months ended March 31, 2018 with a debt discount of $0 as of March 31, 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 matured on March 31, 2019, as amended on January 2, 2019. The note is in default and the Company is currently in discussions to restructure the terms of the note and provides 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 March 31, 2019 and December 31, 2018, the Optional Redemption was recorded as a derivative liability on the condensed consolidated Balance Sheets using “Black Scholes Merton 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 $0 at March 31, 2019 and December 31, 2018. During the three months ended March 31, 2019 and 2018, the Company recorded $0 and $11,505, 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: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 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 December 31, 2017, 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 March 31, 2019, the embedded derivative was re-measured at fair value that was determined to be $0. During the three months ended March 31, 2019 and 2018, the Company recorded a gain of $0 and $52,000, respectively, on embedded derivative re-valuation, respectively. 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 months ended March 31, 2018. In addition, the value of the restricted common shares of $263,522 was recorded as an extinguishment of debt in the three months ended March 31, 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: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 Conversion price $ 0.08 $ 0.08 Nove |
SHORT TERM NOTES PAYABLE
SHORT TERM NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2019 | |
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 has 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 $18,500 at March 31, 2019 was $79,687 with an availability of approximately $880,000 on the Note. In January 2019, the Company paid a principal payment of $33,333 against 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 year ended December 31, 2018, the Company had borrowings of $35,000 and repayments of $35,171 for a balance due of $0 at December 31, 2018. Repayments are based on 30% of amounts processed through PayPal until the balance is paid. |
STOCK TRANSACTIONS
STOCK TRANSACTIONS | 3 Months Ended |
Mar. 31, 2019 | |
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 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). |
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK BASED COMPENSATION | NOTE 11 – STOCK BASED COMPENSATION 2015 Equity Incentive Plan As of March 31, 2019, 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. In April 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. As of March 31, 2018, the Company issued a total of 100,000 restricted common shares to members of its advisory committee (“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 $0 and $3,750 under general and administrative expenses in the accompanying condensed consolidated Statements of Operations for the three months ended March 31, 2019 and 2018, respectively, with $0 remaining to be amortized. As of March 31, 2019, the Advisors had vested in 100,000 shares with 0 shares to vest over the remaining vesting period. As of March 31, 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 for the three months ended March 31, 2019 and 2018, 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 March 31, 2019 Weighted Average Aggregate Options Exercise Price Intrinsic Value * Outstanding at December 1, 2018 10,000,000 $ 0.005 $ 1,200,000 Granted — — — Exercised — — — Expired/Forfeited — — — Outstanding at December 31, 2018 10,000,000 $ 0.005 $ 120,000 Granted — — — Exercised — — — Expired/Forfeited — — — Outstanding at March 31, 2019 10,000,000 $ 0.005 $ 210,000 Exercisable at March 31, 2019 10,000,000 $ — $ — Expected to be vested 10,000,000 $ 0.005 $ — * Based on the Company’s stock price on March 31, 2018 and December 31, 2017, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2019 | |
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, 11 and 14, 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. Sublease The Company’s customer service and distribution facility is subleased at $7,834 per month through CCI for a period of eighteen months. On March 1, 2017, the Company gave ninety day written notice to terminate the sublease with no costs to terminate the lease. Beginning June 1, 2017, the Company leases its customer service and distribution facility on a month-to-month basis for $4,000 per month from a third party. 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 expired 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 $45,000 for the three months ended March 31, 2019 and 2018, respectively. Deferred compensation totaling $877,750 as of March 31, 2019, is included in Accrued Compensation in the accompanying condensed consolidated Balance Sheet. Deferred compensation includes $663,750 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 $4,707 and $3,608 for the three months ended March 31, 2019 and 2018, 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 expired 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 $20,000 for the three months ended March 31, 2019 and 2018, respectively. Deferred compensation totaling $427,000 as of March 31, 2019, is included in Accrued Compensation in the accompanying condensed consolidated Balance Sheets. Deferred compensation includes $313,333 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 $1,202 and $1,802 for the three months ended March 31, 2019 and 2018, respectively. Employee benefits include use of a car and car insurance. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2019 | |
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 Three Months Ended March 31, 2019 2018 Loss from continuing operations $ (184,355 ) $ (612,243 ) Discontinued operations — (127,149 ) Gain of disposal of discontinued operations 238,315 — Net profit (loss) attributable to the common stockholders $ 53,960 $ (739,392 ) Basic weighted average outstanding shares of common stock 81,272,408 57,711,496 Dilutive effect of options and warrants — — Diluted weighted average common stock and common stock equivalents 81,272,408 57,711,496 Profit (loss) per share: Net profit (loss) per share from continuing operations, basic and diluted $ (0.00 ) $ (0.01 ) Net loss per share from discontinued operations, basic and diluted — (0.00 ) Net Profit (loss) per share total, basic and diluted $ (0.00 ) $ (0.01 ) |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 14 – COMMITMENTS AND CONTINGENCIES 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 $11,333 and $18,906 for the three months ended March 31, 2019 and 2018, 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 The Company’s Convertible Notes Payable are collateralized by substantially all of the Company’s assets and are personally guaranteed by the Company’s CEO and Australian Sapphire Corporation, a shareholder of the Company which is wholly-owned by the Company’s CEO. |
DISCONTINUED OPERATIONS AND ASS
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | NOTE 15 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE On January 1, 2019, Reign Brands, Inc., a subsidiary of Reign Sapphire Corporation, entered into an Asset Purchase Agreement (the “Agreement”) with Co-Op Jewelers LLC (“Co-Op”), whereby Reign Brands, Inc. sold operating assets of Reign Brands, Inc., consisting of substantially all of the assets related to Coordinates Collection (“CC”). On January 1, 2019 (the “Closing Date”), the parties executed the Asset Purchase Agreement and the final exhibits. Upon the closing of the Agreement, Reign Brands, Inc. sold substantially all of the operating assets of the CCI business, consisting of fixed assets and intellectual property in exchange for an aggregate of $100,000 in cash. The Agreement contained customary closing conditions. As a result of the sale, the Company had reclassified CCI as assets and liabilities held for sale as of December 31, 2018. Discontinued operations during the three months ended March 31, 2018 consist of the operations from CCI. The following tables lists the assets of discontinued operations and held for sale and liabilities of discontinued operations and held for sale as of December 31, 2018 and the discontinued operations for CCI for the three months ended March 31, 2018: December 31, 2018 ASSETS Current Assets: Accounts Receivable $ 2,096 Total Current Assets of Discontinued Operations 2,096 Property, Plant and Equipment, net — TOTAL ASSETS OF DISCONTINUED OPERATIONS AND HELD FOR SALE $ 2,096 LIABILITIES LIABILITIES Current Liabilities: Accounts Payable $ — Estimated fair value of contingent payments, net 137,007 Deferred revenue 21,977 Other current liabilities 3,994 Total Current Liabilities of Discontinued Operations 162,978 TOTAL LIABILITIES OF DISCONTINUED OPERATIONS AND HELD FOR SALE $ 162,978 For the Three Months Ended March 31, 2018 Net revenues $ 250,101 Cost of sales 72,868 Gross profit 177,233 Operating expenses Advertising and marketing expenses 136,519 Stock based compensation - related party — General and administrative 167,863 Total operating expenses 304,382 Net loss of discontinued operations and held for sale $ (127,149 ) |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16 – SUBSEQUENT EVENTS The Company’s convertible notes matured on March 31, 2019. The convertible notes are in default and the Company is currently in discussions to restructure the terms of the convertible notes. There were no other events subsequent to March 31, 2019, and up to the date of this filing that would require disclosure. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Consolidation | Consolidation The 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 consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the 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 consolidated 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. |
Cash | Cash The Company’s cash is held in bank accounts in the United States and is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Company has not experienced any cash losses. |
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 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 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. |
Advertising and Marketing Costs | Advertising and Marketing Costs Advertising and marketing costs are recorded as general and administrative expenses when they are incurred. Advertising and marketing expenses were recorded of approximately $9,000 ($9,000 from continuing operations and $0 from discontinued operations) and $175,000 ($39,000 from continuing operations and $136,000 from discontinued operations) for the three months ended March 31, 2019 and 2018, respectively. |
Comprehensive Income | Comprehensive Income Comprehensive income is reported in accordance with 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, 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 months ended March 31, 2019 and 2018. |
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 totaling $0 and $21,977 as of March 31, 2019 and December 31, 2018, respectively, is included in current liabilities of discontinued operations and assets held for sale in the accompanying consolidated Balance Sheets. |
Inventories | Inventories Reign Sapphire Inventories are stated at the lower of cost or market (net realizable value) 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 March 31, 2019 and December 31, 2018, the Company carried primarily loose sapphire jewels, jewelry for sale on our website, and jewelry 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 as of March 31, 2019. 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. The estimated fair value per management’s internal assessment is greater than the cost, therefore, there is no indicator of impairment as of March 31, 2019. Le Bloc Le Bloc products are outsourced to a third party for manufacture, made to order, and when completed are shipped to the customer. The inventory for Le Bloc is considered immaterial as of March 31, 2019 and December 31, 2018. |
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. |
Intangible Assets | Intangible Assets 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 was an impairment charge of $0 for the three months ended March 31, 2019 and 2018 and $481,947 of impairment charge was recorded in the fourth quarter of year December 31, 2018. 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 was an impairment charge of $0 for the three months ended March 31, 2019 and 2018 and $460,789 of impairment charge was recorded in the fourth quarter of year December 31, 2018. 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. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The provisions of accounting guidance, FASB Topic ASC 825 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 March 31, 2019 and December 31, 2018, the fair value of cash, accounts receivable, accounts payable, 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. There were 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 warrant and the embedded derivative liabilities are recognized at fair value on a recurring basis at March 31, 2019 and are Level 3 measurements (see Note 8). There have been no transfers between levels. The carrying values of the Company’s financial instruments, including cash, other current assets, accounts payable, accruals, and other current liabilities approximate their fair values due to the short period of time to maturity or repayment. |
Convertible Notes Payable | Convertible Notes Payable 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 months ended March 31, 2019 and 2018, 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. Australian Sapphire Corporation (“ASC”), a shareholder of the Company which is wholly-owned by Joseph Segelman, t e Comp a n y’s Chief Executive Officer (“ CEO”), is inactive and we have no transactions with ASC. |
Segment Reporting | Segment Reporting Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. The Company identifies operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility. Accordingly, the Company has one reportable segment. |
Reclassifications | Reclassifications Certain amounts in previously issued financial statements have been reclassified to conform to the presentation following the January 2019 sale of CCI, which includes the reclassification of the combined financial position as assets and liabilities held for sale (see Note 15) for all periods presented. |
Discontinued Operations | Discontinued Operations Pursuant to ASC 205-20 Discontinued Operations, in determining whether a group of assets that is disposed (or to be disposed) should be presented as a discontinued operation, we analyze whether the group of assets being disposed represents a component of the Company; that is, whether it had historic operations and cash flows that were clearly distinguished, both operationally and for financial reporting purposes. In addition, we consider whether the disposal represents a strategic shift that has or will have a major effect on our operations and financial results. The results of discontinued operations, as well as any gain or loss on the disposal, if applicable, are aggregated and separately presented in our consolidated statements of operations, net of income taxes. The historical financial position of discontinued operations are aggregated and separately presented in our accompanying consolidated balance sheets. |
Concentrations, Risks, and Uncertainties | Concentrations, Risks, and Uncertainties Business Risk Substantial business risks and uncertainties are inherent to an entity, including the potential risk of business failure. The Company is headquartered and operates in the United States. To date, the Company has generated limited revenues from operations. There can be no assurance that the Company will be able to successfully continue to produce 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. 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. 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 banks and accounts receivable. The credit risk on cash in banks is limited because the counterparties are recognized financial institutions. The Company had one customer that accounted for 96% of total revenues for the three months ended March 31, 2019. There was one customer that accounted for 10% of total revenue for the three months ended March 31, 2018. The Company had no customers that accounted for 10% or more of total accounts receivable at March 31, 2019 and December 31, 2018, respectively. 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. Major Suppliers The Company does not manufacture its own products and currently depends primarily upon third parties to manufacture its products. In the event that the manufacturing provided by our current supplier were discontinued, it is believed that alternate suppliers could be identified which would be able to provide it with sufficient levels of products at terms similar to those of our current supplier. |
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)” – |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consisted of the following as of: March 31, 2019 December 31, 2018 Loose stones $ 518,229 $ 526,473 Finished goods 134,145 134,145 Samples 62,977 62,977 $ 715,351 $ 723,595 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consisted of the following as of: Estimated Life March 31, 2019 December 31, 2018 Office equipment 5 years $ 5,481 $ 5,481 Computer equipment 3 years 40,171 40,171 Accumulated depreciation (33,364 ) (30,122 ) $ 12,288 $ 15,530 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | Intangible assets consisted of the following as of: Estimated Life March 31, 2019 December 31, 2018 Trademarks 3.3 – 4.5 years $ 260,000 $ 260,000 Accumulated amortization (162,966 ) (146,669 ) $ 97,034 $ 113,331 |
Future amortization expense related to intangible assets | Future amortization expense related to intangible assets are approximately as follows: Total 2019 $ 46,610 2020 37,818 2021 12,606 $ 97,034 |
CONVERTIBLE NOTES PAYABLE (Tabl
CONVERTIBLE NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Convertible notes payable | Convertible notes payable consists of the following: March 31, December 31, 2019 2018 January and February 2018 Notes, issued January 3, 2018 and February 16, 2018, respectively, with a maturity date of March 31, 2019, as amended, with an interest rate of 10%. $ 294,000 $ 294,000 November 2017 Notes, issued November 10, 2017, with a maturity date of March 31, 2019, as amended, bearing no interest, and secured by substantially all of the Company’s assets and guarantees of payment by the Company’s CEO, and Australian Sapphire Corporation (“ASC”), a shareholder of the Company which is wholly-owned by the Company’s CEO. 287,502 287,502 November 2016 Notes, issued November 10, 2016, with a maturity date of March 31, 2019, as amended, bearing no interest, and secured by substantially all of the Company’s assets and guarantees of payment by the Company’s CEO, and ASC. 287,502 287,502 December 2015 Notes, issued December 23, 2015, with a maturity date of March 31, 2019, as amended, bearing no interest, and secured by substantially all of the Company’s assets and guarantees of payment by the Company’s CEO, and ASC. 862,500 862,500 Total convertible notes payable 1,731,504 1,731,504 Debt discount — — Convertible notes payable, net of unamortized debt discount $ 1,731,504 $ 1,731,504 |
Summary of convertible debt | The following represents a summary of the convertible debt terms at March 31, 2019: 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 $ — 3/31/2019 $ 0.08 1,960,000 $ 0.15 2/16/2023 November 2017 Notes 287,502 — 3/31/2019 $ 0.08 3,593,776 $ 0.15 11/10/2022 November 2016 Notes 287,502 — 3/31/2019 $ 0.08 3,593,776 $ 0.15 11/10/2022 December 2015 Notes 862,500 — 3/31/2019 $ 0.08 10,781,250 $ 0.15 11/10/2022 Total $ 1,731,504 $ — 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 Additional discount (interest) $ — $ 13,808 $ — $ 8,058 |
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”, incorporating the following inputs: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 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: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 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: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 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: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 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: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 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: March 31, 2019 December 31, 2018 Expected dividend yield 0.00 % 0.00 % Expected stock-price volatility 47.5 % 47.5 % Risk-free interest rate 2.40 % 2.45 % Expected term of options (years) 0.8 0.3 Stock price $ 0.02 $ 0.01 Conversion price $ 0.08 $ 0.08 |
STOCK BASED COMPENSATION (Table
STOCK BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
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 March 31, 2019 Weighted Average Aggregate Options Exercise Price Intrinsic Value * Outstanding at December 1, 2018 10,000,000 $ 0.005 $ 1,200,000 Granted — — — Exercised — — — Expired/Forfeited — — — Outstanding at December 31, 2018 10,000,000 $ 0.005 $ 120,000 Granted — — — Exercised — — — Expired/Forfeited — — — Outstanding at March 31, 2019 10,000,000 $ 0.005 $ 210,000 Exercisable at March 31, 2019 10,000,000 $ — $ — Expected to be vested 10,000,000 $ 0.005 $ — * Based on the Company’s stock price on March 31, 2018 and December 31, 2017, respectively. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
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 Three Months Ended March 31, 2019 2018 Loss from continuing operations $ (184,355 ) $ (612,243 ) Discontinued operations — (127,149 ) Gain of disposal of discontinued operations 238,315 — Net profit (loss) attributable to the common stockholders $ 53,960 $ (739,392 ) Basic weighted average outstanding shares of common stock 81,272,408 57,711,496 Dilutive effect of options and warrants — — Diluted weighted average common stock and common stock equivalents 81,272,408 57,711,496 Profit (loss) per share: Net profit (loss) per share from continuing operations, basic and diluted $ (0.00 ) $ (0.01 ) Net loss per share from discontinued operations, basic and diluted — (0.00 ) Net Profit (loss) per share total, basic and diluted $ (0.00 ) $ (0.01 ) |
DISCONTINUED OPERATIONS AND A_2
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Notes to Financial Statements | |
Schedule of Assets of discontinued operations and held for sale and liabilities of discontinued operations and held for sale | The following tables lists the assets of discontinued operations and held for sale and liabilities of discontinued operations and held for sale as of December 31, 2018 and the discontinued operations for CCI for the three months ended March 31, 2018: December 31, 2018 ASSETS Current Assets: Accounts Receivable $ 2,096 Total Current Assets of Discontinued Operations 2,096 Property, Plant and Equipment, net — TOTAL ASSETS OF DISCONTINUED OPERATIONS AND HELD FOR SALE $ 2,096 LIABILITIES LIABILITIES Current Liabilities: Accounts Payable $ — Estimated fair value of contingent payments, net 137,007 Deferred revenue 21,977 Other current liabilities 3,994 Total Current Liabilities of Discontinued Operations 162,978 TOTAL LIABILITIES OF DISCONTINUED OPERATIONS AND HELD FOR SALE $ 162,978 For the Three Months Ended March 31, 2018 Net revenues $ 250,101 Cost of sales 72,868 Gross profit 177,233 Operating expenses Advertising and marketing expenses 136,519 Stock based compensation - related party — General and administrative 167,863 Total operating expenses 304,382 Net loss of discontinued operations and held for sale $ (127,149 ) |
ORGANIZATION AND PRINCIPAL AC_2
ORGANIZATION AND PRINCIPAL ACTIVITIES (Details Narrative) - USD ($) | Jan. 02, 2019 | Mar. 17, 2017 | Mar. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2014 |
Common stock, issued | 81,272,408 | 81,272,408 | 27,845,000 | ||
Common stock, outstanding | 81,272,408 | 81,272,408 | 16,000,250 | ||
Preferred stock, authorized | 10,000,000 | 10,000,000 | |||
Preferred stock, issued | 1 | 1 | |||
Description of shares amendment | 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. | ||||
Asset Purchase Agreement [Member] | |||||
Sale of operating assets | $ 100,000 |
BASIS OF PRESENTATION (Details
BASIS OF PRESENTATION (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | |||
Accumulated deficit | $ (12,947,309) | $ (13,001,269) | |
Working capital deficit | (3,771,000) | $ (3,844,000) | |
Net income loss | 53,960 | (739,392) | |
Net cash used in operating activities | (72,833) | $ (321,841) | |
Restricted cash | $ 25,000 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2018 | |
FDIC amount | $ 250,000 | $ 250,000 | ||
Deferred revenue | $ 0 | 21,977 | $ 21,977 | |
Revenues | 41,554 | $ 23,149 | ||
Impairments | 0 | 481,947 | 0 | |
Impairment charge | 0 | $ 460,789 | 0 | |
Advertising and marketing expenses | $ 8,531 | 38,624 | ||
Estimated useful life | P5Y | |||
Retail sales [Member] | ||||
Revenues | $ 0 | 217,636 | ||
Wholesale Sales [Member] | ||||
Revenues | $ 41,554 | $ 55,614 | ||
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) | 10.00% | 10.00% | ||
Sales Revenue, Net [Member] | One Customer [Member] | ||||
Concentration risk (in percent) | 96.00% | 10.00% | ||
Continuing Operations [Member] | ||||
Advertising and marketing expenses | $ 9,000 | $ 39,000 | ||
Continuing Operations [Member] | Retail sales [Member] | ||||
Revenues | 0 | 0 | ||
Continuing Operations [Member] | Wholesale Sales [Member] | ||||
Revenues | 41,554 | 32,465 | ||
Discontinued Operations [Member] | ||||
Advertising and marketing expenses | 0 | 136,000 | ||
Discontinued Operations [Member] | Retail sales [Member] | ||||
Revenues | 217,636 | 217,636 | ||
Discontinued Operations [Member] | Wholesale Sales [Member] | ||||
Revenues | $ 0 | $ 23,149 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Loose stones | $ 518,229 | $ 526,473 |
Finished goods | 134,145 | 134,145 |
Samples | 62,977 | 62,977 |
Inventory, net | $ 715,351 | $ 723,595 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Accumulated depreciation | $ (33,364) | $ (30,122) |
Total | 12,288 | 15,530 |
Office Equipment [Member] | ||
Total | $ 5,481 | 5,481 |
Estimated useful life | 5 years | |
Computer Equipment [Member] | ||
Total | $ 40,171 | $ 40,171 |
Estimated useful life | 3 years |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Depreciation expense | $ 3,242 | $ 3,156 |
General and Administrative Expense [Member] | ||
Depreciation expense | $ 3,242 | $ 3,156 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Accumulated amortization | $ (162,966) | $ (146,669) |
Intangible assets net | $ 97,034 | 113,331 |
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 |
INTANGIBLE ASSETS (Details 1)
INTANGIBLE ASSETS (Details 1) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2019 | $ 46,610 | |
2020 | 37,818 | |
2021 | 12,606 | |
Intangible assets net | $ 97,034 | $ 113,331 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
General and Administrative Expense [Member] | ||
Amortization expense | $ 16,297 | $ 58,443 |
DUE TO RELATED PARTY (Details N
DUE TO RELATED PARTY (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | |
Due to related party | $ 1,267,099 | $ 1,246,805 |
Accrued compensation - related party | 1,304,750 | $ 1,239,750 |
Mr. Joseph Segelman [Member] | ||
Advances received | 0 | |
Repayment of advance from related party | 466,090 | |
Business expenses | 486,384 | |
Deferred compensation | 45,000 | |
Mr. Chaya Segelman [Member] | ||
Deferred compensation | $ 20,000 |
CONVERTIBLE NOTES PAYABLE (Deta
CONVERTIBLE NOTES PAYABLE (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | |
Convertible notes payable | $ 1,731,504 | $ 1,731,504 | |
Debt Discount | |||
Convertible notes payable, net of unamortized debt discount | 1,731,504 | 1,731,504 | |
January and February 2018 Notes | |||
Convertible notes payable | 294,000 | 294,000 | |
Debt Discount | |||
November 2017 Note | |||
Convertible notes payable | 287,502 | 287,502 | |
Debt Discount | |||
November 2016 Note | |||
Convertible notes payable | 287,502 | 287,502 | $ 287,502 |
Debt Discount | |||
December 2015 Note | |||
Convertible notes payable | 862,500 | $ 862,500 | |
Debt Discount |
CONVERTIBLE NOTES PAYABLE (De_2
CONVERTIBLE NOTES PAYABLE (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | |
Amount of notes | $ 1,731,504 | $ 1,731,504 | |
Debt Discount | |||
Number of Warrants | 19,928,802 | ||
January and February 2018 Notes | |||
Amount of notes | $ 294,000 | 294,000 | |
Debt Discount | |||
Maturity Date | Mar. 31, 2019 | ||
Conversion Price | $ 0.08 | ||
Number of Warrants | 1,960,000 | ||
Exercise Price | $ 0.15 | ||
Warrants Exercisable thru | Feb. 16, 2023 | ||
November 2017 Note | |||
Amount of notes | $ 287,502 | 287,502 | |
Debt Discount | |||
Maturity Date | Mar. 31, 2019 | ||
Conversion Price | $ 0.08 | ||
Number of Warrants | 3,593,776 | ||
Exercise Price | $ 0.15 | ||
Warrants Exercisable thru | Nov. 10, 2022 | ||
November 2016 Note | |||
Amount of notes | $ 287,502 | 287,502 | $ 287,502 |
Debt Discount | |||
Maturity Date | Mar. 31, 2019 | ||
Conversion Price | $ 0.08 | ||
Number of Warrants | 3,593,776 | ||
Exercise Price | $ 0.15 | ||
Warrants Exercisable thru | Nov. 10, 2022 | ||
December 2015 Note | |||
Amount of notes | $ 862,500 | $ 862,500 | |
Debt Discount | |||
Maturity Date | Mar. 31, 2019 | ||
Conversion Price | $ 0.08 | ||
Number of Warrants | 10,781,250 | ||
Exercise Price | $ 0.15 | ||
Warrants Exercisable thru | Nov. 10, 2022 |
CONVERTIBLE NOTES PAYABLE (De_3
CONVERTIBLE NOTES PAYABLE (Details 2) - 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 NOTES PAYABLE (De_4
CONVERTIBLE NOTES PAYABLE (Details 3) - 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 |
Additional discount (interest) | ||
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 |
Additional discount (interest) | $ 13,808 | $ 8,058 |
CONVERTIBLE NOTES PAYABLE (De_5
CONVERTIBLE NOTES PAYABLE (Details 4) - November 2017Optional Redemption Valuation [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Expected dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk-free interest rate | 2.40% | 2.45% |
Expected term of options (years) | 9 months 18 days | 3 months 19 days |
Stock price | $ 0.02 | $ 0.01 |
Conversion price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_6
CONVERTIBLE NOTES PAYABLE (Details 5) - Warrant One [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk free rate | 2.40% | 2.45% |
Term | 9 months 18 days | 3 months 19 days |
Stock price | $ 0.02 | $ 0.01 |
Conversion price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_7
CONVERTIBLE NOTES PAYABLE (Details 6) - Optional Redemption Valuation [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Expected dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk-free interest rate | 2.40% | 2.45% |
Expected term of options (years) | 9 months 18 days | 3 months 19 days |
Stock price | $ 0.02 | $ 0.01 |
Conversion price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_8
CONVERTIBLE NOTES PAYABLE (Details 7) - November 2016 Purchaser Warrants [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Expected dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk-free interest rate | 2.40% | 2.45% |
Expected term of options (years) | 9 months 18 days | 3 months 19 days |
Stock price (in dollars per share) | $ 0.02 | $ 0.01 |
Exercise price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (De_9
CONVERTIBLE NOTES PAYABLE (Details 8) - December 2015 Optional Redemption [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Expected dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk-free interest rate | 2.40% | 2.45% |
Expected term of options (years) | 9 months 18 days | 3 months 19 days |
Stock price | $ 0.02 | $ 0.01 |
Conversion price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (D_10
CONVERTIBLE NOTES PAYABLE (Details 9) - December 2015 Purchaser Conversion Shares [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Expected dividend yield | 0.00% | 0.00% |
Expected stock-price volatility | 47.50% | 47.50% |
Risk-free interest rate | 2.40% | 2.45% |
Expected term of options (years) | 9 months 18 days | 3 months 19 days |
Stock price | $ 0.02 | $ 0.01 |
Conversion price | $ 0.08 | $ 0.08 |
CONVERTIBLE NOTES PAYABLE (D_11
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 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2018 | Nov. 16, 2017 | May 30, 2017 |
Unamortized debt discount | $ 18,500 | |||||||||||||||
Interest expense | 15,500 | $ 81,600 | ||||||||||||||
Securities Purchase Agreement [Member] | ||||||||||||||||
Issuance date | Nov. 10, 2017 | Nov. 10, 2016 | ||||||||||||||
Description of terms of conversion feature | 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. | (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. | ||||||||||||||
Issuance of convertible debt | $ 250,002 | $ 244,945 | ||||||||||||||
Unamortized debt discount | $ 37,500 | $ 42,557 | $ 138,000 | |||||||||||||
Maturity date | Mar. 31, 2019 | Mar. 31, 2019 | ||||||||||||||
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 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 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. | ||||||||||||||
Securities Purchase Agreement [Member] | Crossover Capital Fund II, LLC | ||||||||||||||||
Value of shares issued | $ 294,000 | |||||||||||||||
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 | |||||||||||||||
Restricted Stock [Member] | Securities Purchase Agreement [Member] | Crossover Capital Fund II, LLC | ||||||||||||||||
Value of shares issued | $ 263,522 | |||||||||||||||
Number of shares issued | 2,395,650 | |||||||||||||||
Warrants | Securities Purchase Agreement [Member] | Crossover Capital Fund II, LLC | ||||||||||||||||
Value of shares issued | $ 250,000 | |||||||||||||||
Number of shares issued | 1,960,000 | |||||||||||||||
Original issue discount | $ 44,000 | |||||||||||||||
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 | (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 December 2015 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. | |||||||||||||||
Issuance of convertible debt | $ 724,500 | |||||||||||||||
Maturity date | Mar. 31, 2019 | |||||||||||||||
Description of redemption of debt intrument | The December 2015 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. | |||||||||||||||
December 2015 Purchaser Conversion Shares [Member] | ||||||||||||||||
Common stock convertible shares | 10,781,250 | |||||||||||||||
Conversion rate | $ 0.08 | |||||||||||||||
Embedded derivative liability | 88,983 | |||||||||||||||
Derivative liabilities | 0 | |||||||||||||||
Gain on Re-valuation of derivative liability | 0 | 155,998 | ||||||||||||||
Derivative fair value | $ 88,983 | |||||||||||||||
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 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 | |||||||||||||||
November 2016 Purchaser Common Stock [Member] | ||||||||||||||||
Maturity date | Mar. 31, 2019 | |||||||||||||||
Embedded derivative liability | 240,615 | |||||||||||||||
Value of shares issued | $ 833,354 | $ 244,945 | ||||||||||||||
Number of shares issued | 100,002 | |||||||||||||||
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 | ||||||||||||||
Gain on Re-valuation of derivative liability | $ 0 | 52,000 | ||||||||||||||
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 | ||||||||||||||
Gain on Re-valuation of derivative liability | $ 0 | 52,000 | ||||||||||||||
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 | |||||||||||||||
Redeemable Shares | Securities Purchase Agreement [Member] | Crossover Capital Fund II, LLC | ||||||||||||||||
Number of shares issued | 3,000,000 | |||||||||||||||
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 | |||||||||||||
January and February 2018 Purchaser Conversion Shares [Member] | ||||||||||||||||
Common stock convertible shares | 3,675,000 | |||||||||||||||
Total interest | $ 29,400 | |||||||||||||||
Interest rate | 10.00% | |||||||||||||||
Conversion rate | $ 0.08 | |||||||||||||||
January 2018 Purchaser Warrants [Member] | ||||||||||||||||
Fair value of the warrants | $ 95,324 | $ 65,292 | ||||||||||||||
December 2015 Notes [Member] | ||||||||||||||||
Unamortized debt discount | $ 0 | 0 | ||||||||||||||
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 | |||||||||||||||
Accretion of debt discount | $ 0 | 0 | ||||||||||||||
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 | 34,515 | ||||||||||||||
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. | |||||||||||||||
November 2016 Notes [Member] | ||||||||||||||||
Unamortized debt discount | 0 | 0 | ||||||||||||||
Interest expense | 0 | 0 | ||||||||||||||
Extinguishments of Debt | 691,371 | |||||||||||||||
November 2016 Notes [Member] | Warrant [Member] | ||||||||||||||||
Unamortized debt discount | $ 283,172 | |||||||||||||||
Number of common shares issued | 100,002 | |||||||||||||||
Warrants granted | $ 108,567 | |||||||||||||||
November 2016 Optional Redemption [Member] | ||||||||||||||||
Derivative liabilities | 0 | 0 | ||||||||||||||
Contingent fair value | 35,015 | 35,015 | ||||||||||||||
Gain (Loss) on Optional Redemption valuation | 0 | 11,505 | ||||||||||||||
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 | 0 | 0 | ||||||||||||||
Contingent fair value | 0 | $ 0 | ||||||||||||||
Derivative fair value | 6,375 | |||||||||||||||
Gain (Loss) on Optional Redemption valuation | 0 | 0 | ||||||||||||||
November 2017 Notes [Member] | ||||||||||||||||
Extinguishments of Debt | 12,000 | |||||||||||||||
Debt discount | 0 | |||||||||||||||
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 | |||||||||||||||
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 | $ 0 | |||||||||||||||
Interest rate | 18.00% | |||||||||||||||
Common stock convertible amount | $ 28,767 | |||||||||||||||
Interest expense | 29,400 | |||||||||||||||
Accretion of debt discount | 0 | 61,096 | ||||||||||||||
Warrants granted | 36,739 | |||||||||||||||
Original issue discount | 44,000 | |||||||||||||||
Debt discount | $ 242,466 | |||||||||||||||
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 and February 2018 Notes [Member] | CommonStock | ||||||||||||||||
Value of shares issued | $ 250,000 | |||||||||||||||
Number of shares issued | 833,332 | |||||||||||||||
Fair value of redeemable common shares | $ 28,767 | |||||||||||||||
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 | |||||||||||||
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 2018 Notes [Member] | Warrant [Member] | ||||||||||||||||
Maturity date | Mar. 31, 2019 | |||||||||||||||
Removal of redeemable shares | 3,000,000 | |||||||||||||||
February 2018 Notes [Member] | Warrant [Member] | ||||||||||||||||
Maturity date | Mar. 31, 2019 |
SHORT TERM NOTES PAYABLE (Detai
SHORT TERM NOTES PAYABLE (Details Narrative) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Jan. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Jan. 31, 2018 |
Debt discount | $ 18,500 | ||||||
Note payable, net debt issuance costs | 79,687 | ||||||
Availability of debt | 880,000 | ||||||
Upfront fee | $ 400 | ||||||
Short term loan | $ 35,000 | ||||||
Repayment of loan | $ 33,333 | 35,171 | |||||
Balance due | $ 0 | ||||||
Secured Promissory Note [Member] | Alpha Capital Anstalt [Member] | |||||||
Periodic payment | $ 350 | ||||||
Description of collateral | 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. | ||||||
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 | $ 60,000 | 125,005 | $ 60,010 | ||||
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] | Minimum [Member] | |||||||
Advance | $ 250,000 |
STOCK TRANSACTIONS (Details Nar
STOCK TRANSACTIONS (Details Narrative) - USD ($) | 1 Months Ended | 2 Months Ended | ||||
Jan. 31, 2018 | Mar. 17, 2017 | Feb. 28, 2018 | Mar. 31, 2019 | Dec. 31, 2018 | May 19, 2017 | |
Preferred stock cancellation term | 10 years | |||||
Preferred stock value | ||||||
Mr. Joseph Segelman [Member] | ||||||
Preferred stock value | $ 270,000 | |||||
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 |
STOCK BASED COMPENSATION (Detai
STOCK BASED COMPENSATION (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2019 | Dec. 31, 2018 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||||
Outstanding - beginning of period | 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 period | $ 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 | $ 120,000 | [1] | $ 1,200,000 | |
Outstanding - ending of period | [1] | $ 210,000 | $ 120,000 | |
[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 ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Apr. 30, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2016 | Dec. 31, 2018 | Dec. 31, 2014 | |
Common stock, issued (in shares) | 81,272,408 | 81,272,408 | 27,845,000 | |||
Stock based compensation | $ 21,531 | |||||
Stock based compensation - related party | $ 0 | $ 0 | ||||
Number of shares vested | 10,000,000 | |||||
2015 Equity Incentive Plan [Member] | ||||||
Common stock, issued (in shares) | 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] | Advisors [Member] | ||||||
Number of shares vested | 100,000 | |||||
Number of remaining shares vested | 0 | |||||
General and Administrative Expense [Member] | 2015 Equity Incentive Plan [Member] | Advisors [Member] | ||||||
Stock based compensation | $ 0 | $ 3,750 | ||||
Unamortized expenses | $ 0 | |||||
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] | Advisors [Member] | ||||||
Number of shares issued | 100,000 | |||||
Value of common stock | $ 15,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Third Party [Member] | ||
Monthly sub leased | $ 4,000 | |
Mr. Joseph Segelman [Member] | ||
Deferred compensation | 45,000 | |
Employee benefits | $ 4,707 | $ 3,608 |
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. | |
Consulting fees | $ 120,000 | |
Compensation expense | 45,000 | 45,000 |
Deferred compensation | $ 214,000 | |
Mr. Joseph Segelman [Member] | Employment Agreements [Member] | ||
Description of amount equal to base salary | An amount equal to 200% of the base salary | |
Agreement expiration date | Dec. 31, 2018 | |
Deferred compensation | $ 877,750 | |
Deferred compensation | $ 663,750 | |
Secretary [Member] | Consulting Agreement [Member] | ||
Description of consulting agreement | 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. | |
Consulting fees | $ 60,000 | |
Compensation expense | 20,000 | 20,000 |
Deferred compensation | $ 113,667 | |
Secretary [Member] | Employment Agreements [Member] | ||
Description of amount equal to base salary | An amount equal to 50% of the base salary | |
Agreement expiration date | Dec. 31, 2018 | |
Deferred compensation | $ 427,000 | |
Deferred compensation | 313,333 | |
Mr. Chaya Segelman [Member] | ||
Deferred compensation | 20,000 | |
Employee benefits | $ 1,202 | $ 1,802 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Earnings Per Share [Abstract] | ||
Loss from continuing operations | $ (184,355) | $ (612,243) |
Discontinued operations | (127,149) | |
Gain of disposal of discontinued operations | 238,315 | |
Net profit (loss) attributable to the common stockholders | $ 53,960 | $ (739,392) |
Basic weighted average outstanding shares of common stock | 81,272,408 | 57,711,496 |
Dilutive effect of options and warrants | ||
Diluted weighted average common stock and common stock equivalents | 81,272,408 | 57,711,496 |
Profit (loss) per share: | ||
Net profit (loss) per share from continuing operations, basic and diluted (in dollars per share) | $ 0 | $ (0.01) |
Net loss per share from discontinued operations, basic and diluted (in dollars per share) | 0 | 0 |
Net Profit (loss) per share total, basic and diluted (in dollars per share) | $ 0 | $ (0.01) |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Monthly rent | $ 1,995 | |
Rent expense | 11,333 | $ 18,906 |
Third Party [Member] | ||
Monthly sub leased | $ 4,000 |
DISCONTINUED OPERATIONS AND A_3
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Current Assets: | |||
Accounts Receivable | $ 2,096 | ||
Total Current Assets of Discontinued Operations | 2,096 | ||
Property, Plant and Equipment, net | |||
TOTAL ASSETS OF DISCONTINUED OPERATIONS AND HELD FOR SALE | 2,096 | ||
Current Liabilities: | |||
Accounts Payable | |||
Estimated fair value of contingent payments, net | 137,007 | ||
Deferred revenue | 21,977 | ||
Other current liabilities | 3,994 | ||
Total Current Liabilities of Discontinued Operations | 162,978 | ||
TOTAL LIABILITIES OF DISCONTINUED OPERATIONS AND HELD FOR SALE | $ 162,978 | ||
Net revenues | $ 250,101 | ||
Cost of sales | 72,868 | ||
Gross profit | 177,233 | ||
Operating expenses | |||
Advertising and marketing expenses | 136,519 | ||
Stock based compensation - related party | |||
General and administrative | 167,863 | ||
Total operating expenses | 304,382 | ||
Net loss of discontinued operations and held for sale | $ (127,149) |
DISCONTINUED OPERATIONS AND A_4
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (Details Narrative) | Jan. 02, 2019USD ($) |
Asset Purchase Agreement [Member] | |
Sale of operating assets | $ 100,000 |