JERRICK MEDIA HOLDINGS, INC., 10-Q filed on 8/14/2017
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2017
Aug. 14, 2017
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
Jerrick Media Holdings, Inc. 
 
Entity Central Index Key
0001357671 
 
Trading Symbol
JMDA 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Document Type
10-Q 
 
Document Period End Date
Jun. 30, 2017 
 
Document Fiscal Period Focus
Q2 
 
Document Fiscal Year Focus
2017 
 
Entity Filer Category
Smaller Reporting Company 
 
Entity Common Stock, Shares Outstanding
 
38,842,729 
Condensed Consolidated Balance Sheet (Unaudited) (USD $)
Jun. 30, 2017
Dec. 31, 2016
Current Assets
 
 
Cash
$ 5,277 
$ 174,494 
Prepaid expenses
   
10,000 
Total Current Assets
5,277 
184,494 
Property and equipment, net
53,125 
71,829 
Security deposit
38,445 
38,445 
Minority investment in business
83,333 
83,333 
Total Assets
180,180 
378,101 
Current Liabilities
 
 
Accounts payable and accrued liabilities
1,099,471 
1,387,068 
Accrued dividends
360,555 
259,170 
Demand loan
10,366 
10,366 
Convertible Notes - related party, net of debt discount
48,904 
   
Convertible Notes, net of debt discount and Issuance costs
453,028 
268,823 
Current portion of capital lease payable
4,732 
3,524 
Note payable - related party, net of debt discount
1,522,467 
1,365,325 
Note payable, net of debt discount and Issuance costs
738,405 
15,579 
Derivative liability
945,403 
   
Line of credit - related party
130,000 
   
Line of credit
204,943 
235,141 
Total Current Liabilities
5,518,274 
3,544,996 
Non-current Liabilities:
 
 
Capital lease payables
   
1,208 
Total Non-current Liabilities
   
1,208 
Total Liabilities
5,518,274 
3,546,204 
Commitments and contingencies
   
   
Stockholders' Deficit
 
 
Common stock par value $0.001: 300,000,000 shares authorized; 38,401,322 and 33,894,582 issued and outstanding as of June 30, 2017 and December 31, 2016 respectively
38,402 
33,895 
Additional paid in capital
10,855,781 
10,075,941 
Accumulated deficit
(16,232,318)
(13,277,981)
Total Stockholders' Equity
(5,338,094)
(3,168,103)
Total Liabilities and Stockholders' Deficit
180,180 
378,101 
Series A Preferred stock
 
 
Stockholders' Deficit
 
 
Preferred stock value
32 
33 
Series B Preferred stock
 
 
Stockholders' Deficit
 
 
Preferred stock value
Series D Preferred stock
 
 
Stockholders' Deficit
 
 
Preferred stock value
$ 1 
$ 1 
Condensed Consolidated Balance Sheet (Unaudited) (Parenthetical) (USD $)
Jun. 30, 2017
Dec. 31, 2016
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
300,000,000 
300,000,000 
Common stock, shares issued
38,401,322 
33,894,582 
Common stock, shares outstanding
38,401,322 
33,894,582 
Series A Preferred stock
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares issued
32,166 
33,314 
Preferred stock, shares outstanding
32,166 
33,314 
Series B Preferred stock
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares issued
8,063 
7,000 
Preferred stock, shares outstanding
8,063 
7,000 
Series D Preferred stock
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares issued
914 
Preferred stock, shares outstanding
914 
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Income Statement [Abstract]
 
 
 
 
Net revenue
$ 52,259 
$ 63,932 
$ 94,101 
$ 184,640 
Cost of revenue
   
8,923 
   
43,321 
Gross margin
52,259 
55,009 
94,101 
141,319 
Operating expenses
 
 
 
 
Compensation
709,296 
327,548 
1,091,407 
713,439 
Consulting fees
37,565 
405,889 
341,570 
515,007 
General and administrative
253,017 
338,020 
636,754 
547,857 
Total operating expenses
999,878 
1,071,457 
2,069,731 
1,776,303 
Loss from operations
(947,619)
(1,016,448)
(1,975,630)
(1,634,984)
Other income (expenses)
 
 
 
 
Interest expense
(87,318)
(4,364,460)
(144,705)
(4,397,614)
Accretion of debt discount and issuance cost
(620,586)
(15,974)
(951,484)
(15,974)
Derivative expense
   
   
(254,470)
   
Change In derivative liability
360,244 
   
584,011 
   
Settlement of vendor liabilities
   
   
(110,674)
   
Other income (expenses), net
(347,660)
(4,380,434)
(877,322)
(4,413,588)
Loss before income tax provision
(1,295,279)
(5,396,882)
(2,852,952)
(6,048,572)
Income tax provision
   
   
   
   
Net loss
$ (1,295,279)
$ (5,396,882)
$ (2,852,952)
$ (6,048,572)
Per-share data
 
 
 
 
Basic and diluted loss per share
$ (0.03)
$ (0.17)
$ (0.08)
$ (0.20)
Weighted average number of common shares outstanding
38,014,509 
31,682,537 
37,247,125 
29,879,099 
Consolidated Statements of Cash Flows (Unaudited) (USD $)
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
Net loss
$ (2,852,952)
$ (6,048,572)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation
18,704 
20,784 
Accretion of debt issuance costs
120,332 
   
Accretion of debt discount
831,151 
40,399 
Share-based compensation
627,619 
66,174 
Loss on settlement of vendor liabilities
110,674 
   
Change in fair value of derivative liability
(584,010)
   
Derivative expense
254,470 
   
Changes in operating assets and liabilities:
 
 
Prepaid expenses
10,000 
(10,000)
Security deposit
   
(32,775)
Accounts payable and accrued expenses
77,642 
276,268 
Accrued liquidating damages
   
4,346,490 
Net Cash Used In Operating Activities
(1,386,370)
(1,341,232)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
Cash paid for property and equipment
   
(43,956)
Net Cash Used In Investing Activities
   
(43,956)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
Repayment of loans
   
(107,415)
Net proceeds from issuance of notes
991,585 
106,000 
Net proceeds from issuance of preferred stock
   
94,248 
Proceeds from issuance of convertible note
121,500 
   
Proceeds from issuance of convertible notes - related party
50,000 
   
Proceeds from issuance of note payable - related party
185,000 
1,000,000 
Repayment of note payable - related party
(120,000)
   
Proceeds from issuance of line of credit - related party
130,000 
   
Repayment of line of credit
(41,706)
   
Cash paid for debt issuance costs
(99,226)
   
Net Cash Provided By Financing Activities
1,217,153 
1,092,833 
Net Change in Cash
(169,217)
(292,355)
Cash - Beginning of Period
174,494 
438,629 
Cash - End of Period
5,277 
146,274 
Cash Paid During the Year for:
 
 
Income taxes
   
   
Interest
3,534 
   
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
Settlement of vendor liabilities
353,732 
   
Conversion of interest
   
108,843 
Debt discount on convertible note
90,470 
24,425 
Debt discount on related party note payable
13,627 
166,591 
Debt discount on note payable
5,683 
   
Accrued dividends
101,385 
   
Warrants at issuance of debt
$ 1,184,473 
    
Organization and Operations
Organization and Operations

Note 1 - Organization and Operations

 

Jerrick Ventures, Inc. (“Ventures”) was incorporated on November 24, 2014 under the laws of the State of Nevada. Ventures develops digital transmedia content, including videos, imagery, articles, e-books, as well as traditional film and television, for each brand in its portfolio.

 

Jerrick Ventures, LLC (“Jerrick LLC”) was incorporated in Delaware in 2013. On December 1, 2014, Jerrick LLC entered into a share exchange agreement whereby the members of Jerrick LLC exchanged all of their membership interests in Jerrick LLC for Common Stock in Ventures (the “Jerrick Share Exchange”). As result of the Jerrick Share Exchange, Jerrick LLC became the operating subsidiary of Ventures.

 

Jerrick is a technology company focused on the development of digital communities, marketing branded digital content, and e-commerce opportunities. Jerrick’s content distribution platform, Vocal, delivers a robust long-form, digital publishing platform organized into highly engaged niche-communities capable of hosting all forms of rich media content. Through Jerrick’s proprietary algorithm dynamics, Vocal enhances the visibility of content and maximizes viewership, providing advertisers access to target markets that most closely match their interests.

Significant and Critical Accounting Policies and Practices
Significant and Critical Accounting Policies and Practices

Note 2 - Significant and Critical Accounting Policies and Practices

 

The Company’s significant accounting policies are disclosed in Note 2 - Summary of Significant Accounting Policies in the 2016 Annual Report. Since the date of the 2016 Annual Report, there have been no material changes to the Company’s significant accounting policies. The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements. These estimates and assumptions include valuing equity securities and derivative financial instruments issued in financing transactions, deferred taxes and related valuation allowances, and the fair values of long lived assets. Actual results could differ from the estimates.

 

Basis of Presentation

 

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).

 

The unaudited condensed consolidated financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. This report should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2017. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained in the Company’s Form 10-K for the year ended December 31, 2016 has been omitted. The results of operations for the interim periods presented are not necessarily indicative of results for the entire year ending December 31, 2017 or any other period.

 

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

  

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

   

(i) Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
   
(ii) Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
   
(iii)   Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.  
   
(iv) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

 

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

 

Actual results could differ from those estimates.

  

Principles of consolidation

 

The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

 

As of June 30, 2017, the Company’s consolidated subsidiaries and/or entities are as follows:

 

Name of combined affiliate   State or other jurisdiction of
incorporation or organization
  Company interest  
           
Jerrick Ventures LLC   The State of Delaware     100 %

 

All inter-company balances and transactions have been eliminated.

 

On May 12, 2017, the Company assigned the right, title and interest to all of the membership interests of the above listed subsidiaries, with the exception of Jerrick Ventures, LLCcertain inactive subsidiaries, to the Company’s Chief Executive Officer, Jeremy Frommer, in consideration for Mr. Frommer’s assumption of all liabilities of such subsidiaries, if any, with such assignment and assumption effected entirely in the interest of corporate efficiency. The Board reviewed the transaction and believes it to be fair in all respects, deeming it to advance the Company’s business interests by allowing the Company to divest non-producing and non-operating subsidiaries at no cost to the Company. All of the Company’s operations have been, and will continue to be, run through its operating subsidiary, Jerrick Ventures LLC.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1  

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

     
Level 2  

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

     
Level 3  

Pricing inputs that are generally observable inputs and not corroborated by market data.

  

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued liabilities and accrued liquidating damages approximate their fair value because of the short maturity of those instruments.

 

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

   

Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis

 

The Company’s non-financial assets include inventory. The Company identifies potentially excess and slow-moving inventory by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories. The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle counts.  

 

Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

 

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.

 

Inventories

 

Inventory Valuation

 

The Company values inventory, entirely consisting of finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method.

 

Inventory Obsolescence and Markdowns

 

The Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.

 

The Company recorded a markdown of $0 and $0 as of June 30, 2017 and 2016, respectively, due to slow moving inventory.

 

There was no lower of cost or market adjustments for the reporting period ended June 30, 2017 or 2016. 

  

Property and Equipment

 

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

 

    Estimated Useful
Life (Years)
 
       
Computer equipment and software     3  
         
Furniture and fixture     5  

 

Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.

 

Investments - Cost Method, Equity Method and Joint Venture

 

In accordance with sub-topic 323-10 of the FASB ASC (“Sub-topic 323-10”), the Company accounts for investments in common stock of an investee for which the Company has significant influence in the operating or financial policies even though the Company holds 50% or less of the common stock or in-substance common stock.

 

On January 2, 2013, the Company purchased a minority interest in a business for proceeds of $83,333. The interest is accounted for under the cost method. The Company tests the carrying value annually for impairment.

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 FASB Accounting Standards, the related parties include (a) affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15 FASB Accounting Standards, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company and members of their immediate families; (e) management of the Company and members of their immediate families; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

Pursuant to ASC Paragraphs 850-10-50-1 and 50-5 financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. 

  

Derivative Liability

 

The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity.

  

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. 

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

 

The Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.  

 

The Company utilizes an option pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The Company records the change in the fair value of the derivative as other income or expense in the condensed consolidated statements of operations.

 

Revenue Recognition

 

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

Stock-Based Compensation

 

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

 

Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a five year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date.

  

The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is benchmarked against similar companies in a similar industry over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. The expected forfeiture rate is estimated based on management’s best estimate.

 

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period.

 

The Company accounts for share–based payments granted to non–employees in accordance with ASC 505-40, “Equity Based Payments to Non–Employees”. The Company determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete. The fair value of the equity instruments is re-measured each reporting period over the requisite service period.

  

Income Taxes

 

Income taxes are provided in accordance with ASC No. 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the period of deferred tax assets and liabilities.

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. 

 

Loss Per Share

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the three months ended June 30, 2017 and 2016 presented in these condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

  

The Company had the following common stock equivalents at June 30, 2017 and 2016:

 

    June 30,
2017
    June 30,
2016
 
Options    

17,549,990

      550,000  
Warrants     22,073,481       13,541,667  
Convertible notes     2,000,000       -  
Totals    

41,623,471

      14,091,667  

 

Subsequent Events

 

The Company has evaluated events that occurred subsequent to June 30, 2017 and through the date the financial statements were issued.

 

Reclassifications

 

Certain prior year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year presentation. These reclassifications did not affect the prior period total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities.

 

Recently Issued Accounting Pronouncements

 

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 provides guidance on management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016 and for annual and interim periods thereafter. The Company has adopted the methodologies prescribed by ASU 2014-15, the adoption of ASU 2014-15 did not have a material effect on its financial position or results of operations. 

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements.

Going Concern
Going Concern

Note 3 – Going Concern

 

The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit at June 30, 2017, a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is attempting to further implement its business plan and generate sufficient revenues; however, its cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private offering of its debt or equity securities, there can be no assurance to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and its ability to raise additional funds by way of a public or private offering.

 

The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Property and Equipment
Property and Equipment

Note 4 – Property and Equipment

 

Property and equipment stated at cost, less accumulated depreciation and amortization, consisted of the following:

 

  

June 30,

2017

  December 31,
2016
 
Computer Equipment $219,653  $219,653 
Furniture and Fixtures  61,803   61,803 
   281,456   281,456 
Less: Accumulated Depreciation  (228,331)  (209,627)
  $53,125  $71,829 

 

Depreciation expense was $9,404 and $10,812 for the three months ended June 30, 2017 and 2016, respectively. Depreciation expense was $18,704 and $20,784 for the six months ended June 30, 2017 and 2016, respectively.

Line of Credit
Line of Credit

Note 5 – Line of Credit

 

Line of credit as of June 30, 2017 and December 31, 2016 is as follows:

 

    Outstanding Balances as of  
    June 30,
2017
    December 31, 2016  
March 19, 2009     193,496       203,988  
October 4, 2016     11,447       31,153  
    $ 204,943     $ 235,141  

 

On March 19, 2009 Astoria Surgical Supplies North LLC signed a revolving note (the “Note”) at PNC Bank (the “Bank”). The outstanding balance of this Note is limited to $200,000 and expired March 19, 2010. The outstanding balance accrues interest at a variable rate. The interest rate is subject to change based on changes in an independent index which is the highest Prime Rate as published in the “Money Rates” section of the Wall Street Journal. Interest is payable monthly and the rate as of December 31, 2016 and 2015 was 3.75% and 4.50%, respectively. The Company had been in payment default since March 19, 2010; however, on May 3, 2017, the Company agreed to pay back the line of credit by October 2, 2017.

 

The balance outstanding on the revolving note at June 30, 2017 and December 31, 2016 was $193,496 and $203,988, respectively.

 

On October 4, 2016, the Company signed a revenue based factoring agreement (the “Note) with Imperial Advance, LLC. The company received proceeds of $40,000 and agrees to pay $52,400 of future receivables. The debenture is secured by an officer of the Company.

 

The balance outstanding on the revenue based factoring agreement at June 30, 2017 and December 31, 2016 was $11,447 and $31,153, respectively.

Note Payable
Note Payable

Note 6 –Note Payable

 

Notes payable as of June 30, 2017 and December 31, 2016 is as follows:

 

    Outstanding Principal as of               Warrants  
    June 30, 2017     December 31, 2016     Interest Rate     Maturity Date   Quantity     Exercise Price  
October 25, 2016     25,000       25,000       9 %   July 1, 2017     50,000       0.30  
February 22, 2017     975,510       -       12 %   September 1, 2017     6,161,615       0.20  
June 2, 2017     50,000       -       15 %   July 1, 2017     25,000       0.20  
June 8, 2017     25,000       -       15 %   July 8, 2017     12,500       0.20  
      1,075,510       25,000                              
Less: Debt Discount     (284,249 )     (9,421 )                            
Less: Debt Issuance Costs     (52,856 )     -                              
    $ 738,405     $ 15,579                              

 

On October 25, 2016, the Company entered into a loan agreement (the “October 2016 Loan Agreement”) with an individual (the “October 2016 Lender”), pursuant to which on October 25, 2016 (the “Closing Date”), the Lender issued the Company a promissory note of $25,000 (the “October 2016 Note”). Pursuant to the October 2016 Loan Agreement, the October 2016 Note bears interest at a rate of 9% per annum. As additional consideration for entering in the October 2016 Loan Agreement, the Company issued the October 2016 Lender a five-year warrant to purchase 50,000 shares of the Company’s common stock at a price of $0.30 per share . The maturity date of the October 2016 Note was July 1, 2017 (the “October 2016 Note Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the October 2016 Note were due. As of the date of this filing the October 2016 Loan was repaid.

 

 On June 2, 2017, the Company entered into a loan agreement (the “First June 2017 Loan Agreement”) with an individual (the “First June 2017 Lender”), the First June 2017 Lender issued the Company a promissory note of $50,000 (the “First June 2017 Note”). The First June 2017 Note is secured by an officer of the Company. Pursuant to the First June 2017 Loan Agreement, the First June 2017 Note bears interest at a rate of 15% per annum. As additional consideration for entering in the First June 2017 Loan Agreement, the Company issued the First June 2017 Lender a five-year warrant to purchase 25,000 shares of the Company’s common stock with an exercise price of $0.20 per share The maturity date of the First June 2017 Note was July 1, 2017 (the “First June 2017 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the First June 2017 Note were due. As of the date of this filing the First June 2017 Note was repaid.

 

 On June 8, 2017, the Company entered into a loan agreement (the “Second June 2017 Loan Agreement”) with an individual (the “Second June 2017 Lender”), the Second June 2017 Lender issued the Company a promissory note of $25,000 (the “Second June 2017 Note”). The Second June 2017 Note is secured by an officer of the Company. Pursuant to the Second June 2017 Loan Agreement, the Second June 2017 Note bears interest at a rate of 15% per annum. As additional consideration for entering in the Second June 2017 Loan Agreement, the Company issued Second June 2017 Lender a five-year warrant to purchase 12,500 shares of the Company’s common stock at a purchase price of $0.20 per share. The maturity date of the Second June 2017 Note was July 8, 2017 (the “Second June 2017 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts were due. As of the date of this filing the Second June 2017 Note was repaid.

 

Private Placement Offering:

 

On February 22, 2017, the Company conducted the initial closing (the “Initial Closing”) of a private placement offering (the “February 2017 Offering”) of the Company’s securities by entering into a subscription agreement (the “Subscription Agreement”) for gross proceeds of $140,605.

 

On March 17, 2017, the Company conducted the final closing of the February 2017 Offering by entering into Subscription Agreements with eight accredited investors for additional gross proceeds of $775,980. In the aggregate, the Company entered into Subscription Agreements offering up to $1,000,000 of face value in secured promissory notes (the “February 2017 Offering Notes”) with an original issue discount of six percent (6%) and warrants to purchase the Company’s common stock (the “February 2017 Offering Warrants”). Pursuant to the Subscription Agreements, the Company issued $975,511 aggregate principal amount of the February 2017 Offering Notes due on September 1, 2017 and warrants to purchase shares of the Company’s common stock for aggregate gross proceeds of $916,585.

 

The February 2017 Offering Notes are convertible into shares of the Company’s common stock at the time of Company’s next round of financing (the “Subsequent Offering”) at a price equal to eighty-five percent (85%) of the price per share offered in the Subsequent Offering (the “Conversion Price”). The February 2017 Offering Warrants have a five-year term. Investors received the February 2017 Offering Warrants in the following amounts: (i) Investors purchasing $150,000 or more of the Offering received a Warrant equal to one hundred thirty percent (130%) of the dollar amount invested in the Offering; (ii) investors purchasing at least $100,000 but less than $150,000 of the February 2017 Offering received a February 2017 Offering Warrant equal to one hundred percent (100%) of the dollar amount invested in the Offering; and (iii) investors purchasing less than $100,000 of the Offering received to a February 2017 Offering Warrant equal to seventy percent (70%) of the dollar amount invested in the Offering. The Warrants entitle the holder to purchase shares of the Company’s common stock at $0.20 per share (the “Exercise Price”).

 

The Conversion Price and the Exercise Price are subject to adjustments for issuances of (i) the Company’s common stock, (ii) any equity linked instruments or (iii) securities convertible into the Company’s common stock, at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustments shall result in the Conversion Price or Exercise Price being reduced to such lower purchase price, as described in the February 2017 Offering Notes and the February 2017 Offering Warrants.

Convertible Note Payable
Convertible Note Payable

Note 7 – Convertible Note Payable

 

Convertible notes payable as of June 30, 2017 and December 31, 2016 is as follows:

 

    Outstanding Principal as of                   Warrants  
    June 30, 2017     December 31, 2016     Interest Rate     Conversion Price   Maturity Date   Quantity     Exercise
Price
 
November - December, 2016     400,000       400,000       10 %   0.30   November 1, 2017     400,000       0.30  
December 27, 2016     100,000       100,000       10 %   0.30   December 27, 2017     100,000       0.30  
June, 2017     121,500       -       12 %   Not Applicable   September 1, 2017     114,700       0.20  
      621,500       500,000                                  
Less: Debt Discount     (124,403 )     (184,398 )                                
Less: Debt Issuance Costs     (44,069 )     (46,779 )                                
    $ 453,028     $ 268,823                                  

 

During the months of November and December 2016, the Company issued convertible notes to third party lenders totaling $400,000. The notes accrue interest at 10% per annum and mature with interest and principal both due on November 1, 2017 through December 29, 2017 . The notes and accrued interest are convertible at a conversion price as defined therein. In addition, in connection with the notes the Company issued five-year warrants to purchase an aggregate of 400,000 shares of Company common stock at a purchase price of $0.30 per share.

 

On December 27, 2016, the Company issued a convertible note to a third party lender totaling $100,000 (the “December 2016 Note”). The December 2016 Note accrues interest at 10% per annum and matures with interest and principal both due on December 27, 2017. In addition, the Company issued a warrant to purchase 100,000 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $0.40 per share for a period of five years from the issue date. The December 2016 Note and accrued interest are convertible at a conversion price of $0.30 per share, subject to adjustment.

 

During the month of June, 2017 the Company issued convertible notes to third party lenders totaling $121,500. The notes accrue interest at 12% per annum and mature with interest and principal both due on September 1, 2017. The notes and accrued interest may be converted into a subsequent offering at a 15% discount to the offering price are convertible at a conversion price as defined therein. In addition, the Company issued warrants to purchase 102,550 shares of Company common stock. The warrants entitle the holders to purchase the Company’s common stock at a purchase price of $0.20 per share for a period of five years from the issue date.

 

As of June 30, 2017, the total outstanding balance of such convertible notes payable was $453,028, net of debt discount and debt issuance costs of $124,403 and $44,069, respectively.

Related Party Loan
Related Party Loan

Note 8 – Related Party Loan

 

Convertible notes

 

Convertible notes payable – related party as of June 30, 2017 and December 31, 2016 is as follows:

 

    Outstanding Principal as of               Warrants  
    June 30, 2017     December 31, 2016     Interest Rate     Maturity Date   Quantity     Exercise
Price
 
April 25, 2017     25,000                 -       12 %   September 1, 2017     17,500       0.20  
April 25, 2017     25,000       -       12 %   September 1, 2017     17,500       0.20  
      50,000       -                              
Less: Debt Discount     (1,096 )     -                              
    $ 48,904     $ -                              

 

On April 25, 2017, the Company issued convertible notes to Arthur Rosen, a lender, totaling $25,000 (the “April Rosen Note”). The April Rosen Notes accrue interest at 12% per annum and mature with interest and principal both due on September 1, 2017. In addition, in connection with the April Rosen Notes, the Company issued a five-year warrant to purchase 17,500 shares of Company common stock at a purchase price of $0.20 per share. The April Rosen Notes and accrued interest may be converted into a subsequent offering at a 15% discount to the offering price as defined.

 

On April 25, 2017, the Company issued a convertible note to Chris Gordon, a lender totaling $25,000 (the “April Gordon Notes”). The April Gordon Notes accrue interest at 12% per annum and matures with interest and principal both due on September 1, 2017. In addition, the Company issued a five-year warrant to purchase 17,500 shares of Company common stock at a purchase price of $0.20 per share. The April Gordon Notes and accrued interest may be converted into a subsequent offering at a 15% discount to the offering price.

 

As of June 30, 2017, the total outstanding balance of the April Rosen Notes and April Gordon Notes - related party was $ 48,904, net of debt discount of $1,096.

 

Notes payable

  

Notes payable – related party as of June 30, 2017 and December 31, 2016 is as follows:

 

    Outstanding Principal as of               Warrants  
    June 30, 2017     December 31, 2016     Interest Rate     Maturity Date   Quantity     Exercise Price  
May 26, 2016     1,000,000       1,000,000       13 %   November 26, 2017     1,000,000       0.40  
September 12, 2016     40,000       100,000       12 %   November 22, 2017     17,500       0.20  
September 20, 2016     -       10,000       10 %   March 20, 2017     235,000       0.40  
October 13, 2016     50,000       50,000       12 %   November 22, 2017     50,000       0.40  
October 24, 2016     15,000       15,000       9 %   January 1, 2018     30,000       0.30  
October 31, 2016     -       10,000       10 %   November 10, 2016     10,000       0.30  
November 22, 2016     225,000       225,000       10 %   November 22, 2017     750,000       0.30  
December 21, 2016     50,000       50,000       10 %   November 22, 2017     166,666       0.30  
January 25, 2017     50,000       -       10 %   January 1, 2018     50,000       0.30  
March 2, 2017     10,000       -       10 %   January 21, 2018     10,000       0.30  
April 12, 2017     10,000       -       10 %   January 21, 2018     17,500       0.20  
April 12, 2017     10,000       -       10 %   September 1, 2017     17,500       0.20  
May 4, 2017     15,000       -       12 %   September 1, 2017     10,500       0.30  
May 11, 2017     20,000       -       10 %   September 30, 2017     20,000       0.20  
June 26, 2017     30,000       -       10 %   January 21, 2018     22,500       0.20  
      1,525,000       1,460,000                              
Less: Debt Discount     (2,533 )     (94,675 )                            
    $ 1,522,467     $ 1,365,325                              

 

On May 26, 2016, the Company entered into a loan agreement (the “May 2016 Rosen Loan Agreement”) with Arthur Rosen, an individual (“Rosen”), pursuant to which on May 26, 2016 (the “Closing Date”), Rosen provided the Company a secured term loan of $1,000,000 (the “May 2016 Rosen Loan”). In connection with the May 2016 Rosen Loan Agreement, on May 26, 2016, the Company and Rosen entered into a security agreement (the “Rosen Security Agreement”), pursuant to which the Company granted to Rosen a senior security interest in substantially all of the Company’s assets as security for repayment of the May 2016 Rosen Loan. Pursuant to the May 2016 Rosen Loan Agreement, the May 2016 Rosen Loan bears interest at a rate of 12.5% per annum, compounded annually and payable on the maturity date of May 26, 2017 (the “May 2016 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the May 2016 Rosen Loan are due. The Company entered into an amendment to the May 2016 Rosen Loan extending the May 2016 Rosen Maturity Date to November 26, 2017. As additional consideration for entering in the May 2016 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 1,000,000 shares of the Company’s common stock at a purchase price of $0.40 per share (the “May 2016 Rosen Warrant”). The May 2016 Rosen Warrant contains anti-dilution provisions as further described therein.

 

On September 12, 2016, the Company entered into a loan agreement (the “September 2016 Rosen Loan Agreement”) with Rosen, pursuant to which on September 12, 2016 (the “Closing Date”), the Company issued Rosen a promissory note of $100,000 (the “September 2016 Rosen Note”). Pursuant to the September 2016 Rosen Loan Agreement, the September 2016 Rosen Note bears interest at a rate of 12% per annum. As additional consideration for entering in the September 2016 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 150,000 shares of the Company’s common stock at a purchase price of $0.40 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the September 2016 Rosen Note are due on the maturity date. The original maturity date of the September 2016 Rosen Note was October 12, 2016. The Company entered into an amendment to the September 2016 Rosen Note , extending maturity date to November 22, 2017.

  

On October 13, 2016, the Company entered into a loan agreement (the “October 2016 Gordon Loan Agreement”) with Chris Gordon, an individual (the “Gordon”), pursuant to which on October 13, 2016 (the “Closing Date”), the Company issued a promissory note of $50,000 to Gordon (the “October 2016 Gordon Note”). Pursuant to the October 2016 Gordon Loan Agreement, the October 2016 Gordon Note bears interest at a rate of 12% per annum. As additional consideration for entering in the October 2016 Gordon Loan Agreement, the Company issued Gordon a five-year warrant to purchase 50,000 shares of the Company’s common stock at a purchase price of $0.40 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the October 2016 Gordon Note are due on the November 12, 2016 (the “October 2016 Gordon Note Maturity Date”). The Company entered into an amendment to the October 2016 Gordon Note, extending the October 2016 Gordon Note Maturity Date to November 22, 2017.

 

On October 24, 2016, the Company entered into a loan agreement (the “October 2016 Schiller Loan Agreement”) with Leonard Schiller, a Board Member (the “Schiller”), pursuant to which on October 24, 2016 (the “Closing Date”), the Company issued Schiller a promissory note of $15,000 (the “October 2016 Schiller Note”). Pursuant to the October 2016 Schiller Loan Agreement, the October 2016 Schiller Note bears interest at a rate of 9% per annum. As additional consideration for entering in the October 2016 Schiller Loan Agreement, the Company issued Schiller a 5-year warrant to purchase 30,000 shares of the Company’s common stock at a purchase price of $0.30 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the October 2016 Schiller Note were due July 1, 2017 (the “October 2016 Schiller Note Maturity Date”). The Company entered into an amendment to the October 2016 Schiller Note, extending the October 2016 Schiller Note Maturity Date to January 1, 2018..

 

On October 31, 2016, the Company entered into a loan agreement (the “October 2016 Rosen Loan Agreement”) with Rosen, pursuant to which on October 31, 2016 (the “Closing Date”), Company issued Rosen a promissory note of $10,000 (the “October 2016 Rosen Note”). Pursuant to the October 2016 Rosen Loan Agreement, the October 2016 Rosen Note bears interest at a rate of 10% per annum. As additional consideration for entering in the October 2016 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 10,000 shares of the Company’s common stock at a purchase price of $0.30 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the October 2016 Rosen Note were due on November 10, 2016 (the “October 2016 Rosen Note Maturity Date”). The Company entered into an amendment to the October 2016 Rosen Note and the October 2016 Rosen Note Maturity Date was extended to January 1, 2018.

 

On December 21, 2016, the Company entered into a loan agreement (the “December 2016 Gordon Loan Agreement”) with Gordon, pursuant to which on December 21, 2016 (the “Closing Date”), the Company issued Gordon a promissory note of $275,000 (the “December 2016 Gordon Note”). Pursuant to the December 2016 Gordon Loan Agreement, the December 2016 Gordon Note bears interest at a rate of 10% per annum. As additional consideration for entering in the December 2016 Gordon Loan Agreement, the Company issued Gordon a five-year warrant to purchase 166,666 shares of the Company’s common stock at a purchase price of $0.40 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the Loan were due on January 20, 2017 (the “December 2016 Gordon Note Maturity Date”). The Company entered into an amendment to the December 2016 Gordon Note, extending the December 2016 Gordon Note Maturity Date to November 22, 2017.

 

On January 25, 2017, the Company entered into a loan agreement (the “January 2017 Rosen Loan Agreement”) with Rosen pursuant to which on January 25, 2017 (the “Closing Date”), the Company issued Rosen a promissory note of $50,000 (the “January 2017 Rosen Note”). The January 2017 Rosen Note is secured by an officer of the Company. Pursuant to the January 2017 Rosen Loan Agreement, the January 2017 Rosen Note bears interest at a rate of 10% per annum. As additional consideration for entering in the January 2017 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 50,000 shares of the Company’s common stock at a purchase price of $0.30 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the January 2017 Rosen Note were due July 1, 2017 (the January 2017 Rosen Note Maturity Date. The Company entered into an amendment to the January 2017 Rosen Note, extending the January 2017 Rosen Note Maturity Date to January 1, 2018.

 

On January 26, 2017, the Company entered into a loan agreement (the “January 2017 Gordon Loan Agreement”) with Gordon pursuant to which on January 26, 2017 (the “Closing Date”), the Company issued Gordon a promissory note of $50,000 (the “January 2017 Gordon Note”). The January 2017 Gordon Note is secured by an officer of the Company. Pursuant to the January 2017 Gordon Loan Agreement, the January 2017 Gordon Note bears interest at a rate of 10% per annum. As additional consideration for entering in the January 2017 Gordon Loan Agreement, the Company issued Gordon a five-year warrant to purchase 50,000 shares of the Company’s common stock at a purchase price of $0.30 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the January 2017 Gordon Note are due November 22, 2017.

  

On February 7, 2017, the Company entered into a loan agreement (the “February 2017 Schiller Loan Agreement”) with Schiller, a member of the Board, pursuant to which on October 24, 2016 (the “Closing Date”), the the Company issued Schiller a promissory note of $10,000 (the “February 2017 Schiller Note”). The February 2017 Schiller Note is secured by an officer of the Company. Pursuant to the February 2017 Schiller Loan Agreement, the February 2017 Schiller Note bears interest at a rate of 10% per annum. As additional consideration for entering in the February 2017 Schiller Note Loan Agreement, the Company issued Schiller a five-year warrant to purchase 10,000 shares of the Company’s common stock at a purchase price of $0.30 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the February 2017 Schiller Note were due on May 7, 2017 (the “February 2017 Schiller Note”). The Company entered into an amendment to the February 2017 Schiller Note, extending the February 2017 Schiller Note Maturity Date to January 21, 2018.

 

On April 12, 2017, the Company entered into a loan agreement (the “April 2017 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note of $10,000 (the “April 2017 Schiller Note”). The April 2017 Schiller Note is secured by an officer of the Company. Pursuant to the April 2017 Schiller Loan Agreement, the April 2017 Schiller Note bears interest at a rate of 10% per annum. As additional consideration for entering in the April 2017 Schiller Loan Agreement, the Company issued Schiller a five-year warrant to purchase 10,000 shares of the Company’s common stock at a purchase price of $0.30 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the April 2017 Schiller Note are due on September 1, 2017.

 

On April 12, 2017, the Company entered into a loan agreement (the “April 2017 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note of $10,000 (the “April 2017 Rosen Note”). The April 2017 Rosen Note is secured by an officer of the Company. Pursuant to the April 2017 Rosen Loan Agreement, the April 2017 Rosen Note bears interest at a rate of 10% per annum. As additional consideration for entering in the April 2017 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 10,000 shares of the Company’s common stock at a purchase price of $0.30 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the April 2017 Rosen Note were due on June 30, 2017 (“April 2017 Rosen Note Maturity Date”). The Company entered into an amendment to the April 2017 Rosen Note, extending the maturity date to January 21, 2018.

 

On May 4, 2017, the Company entered into a loan agreement (the “May 2017 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note of $15,000 (the “May 2017 Rosen Note”). The May 2017 Rosen Note is secured by an officer of the Company. Pursuant to the May 2017 Rosen Note Loan Agreement, the May 2017 Rosen Note bears interest at a rate of 12% per annum. As additional consideration for entering in the May 2017 Rosen Note Loan Agreement, the Company issued Rosen a five-year warrant to purchase 10,500 shares of the Company’s common stock at a purchase price of $0.30 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the May 2017 Rosen Note are due on September 1, 2017.

 

On May 11, 2017, the Company entered into a loan agreement (the “May 2017 Schiller Loan Agreement”) with a Schiller, a member of the Board, whereby the Company issued Schiller a promissory note of $20,000 (the “May 2017 Schiller Note ”). Pursuant to the May 2017 Schiller Loan Agreement, the May 2017 Schiller Note bears interest at a rate of 10% per annum. As additional consideration for entering in the May 2017 Schiller Note Loan Agreement, the Company issued Schiller a five-year warrant to purchase 20,000 shares of the Company’s common stock at a purchase price of $0.20 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the May 2017 Schiller Note are due on September 30, 2017.

 

On June 26, 2017, the Company entered into a loan agreement (the “June 2017 Schiller Loan Agreement”) Schiller, a member of the Board, whereby the Company issued Schiller a promissory note of $30,000 (the “June 2017 Schiller Note”). Pursuant to the June 2017 Schiller Loan Agreement, the June 2017 Schiller Note bears interest at a rate of 10% per annum. As additional consideration for entering in the June 2017 Schiller Loan Agreement, the Company issued Schiller a five-year warrant to purchase 22,500 shares of the Company’s common stock at a purchase price of $0.20 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the June 2017 Schiller Note were due on July 3, 2017 (“June 2017 Schiller Note Maturity Date”). The Company entered into an amendment to the June 2017 Schiller Note extending the Maturity Date to January 21, 2018.

 

As of June 30, 2017, the total outstanding balance of related party notes payable was $1,522,467, net of debt discount of $2,533. As of December 31, 2016, the total outstanding balance of related party notes payable was $1,350,325, net of debt discount of $94,675.

  

Line of credit

 

On May 9, 2017, the Company entered into a Revolving Line of Credit (the “LOC”) with Grawlin, LLC, an LLC controlled by Arthur Rosen, a related party. The LOC is was established for a period of twelve months in which the Company can borrow principal up to $130,000. The LOC bears interest at a rate of 18%.

 

On May 09, 2017, in connection with the LOC the Company issued a promissory note in the principal aggregate amount of $56,000 in favor Grawlin, LLC. 

 

On May 16, 2017, in connection with the LOC the Company issued a promissory note in the principal aggregate amount of $30,000 in favor Grawlin, LLC. 

 

On May 22, 2017, in connection with the LOC the Company issued a promissory note in the principal aggregate amount of $6,000 in favor Grawlin, LLC. 

 

On May 25, 2017, in connection with the LOC the Company issued a promissory note in the principal aggregate amount of $35,000 in favor Grawlin, LLC. 

 

On June 16, 2017, in connection with the LOC the Company issued a promissory note in the principal aggregate amount of $3,000 in favor Grawlin, LLC. 

 

As of June 30, 2017, the total outstanding balance of line of credit - related party was $130,000.

Capital Leases Payable
Capital Leases Payable

Note 9 – Capital Leases Payable

 

Capital lease obligation consisted of the following:

 

    June 30,
2017
  December 31,
2016
 
         
(i) Capital lease obligation to a financing company for a term of five (5) years, collateralized by equipment, with interest at 10.0% per annum, with principal and interest due and payable in monthly installments of $383.10 $4,732  $4,732 
           
  Less current maturities  (4,732   (3,524)
           
  Capital lease obligation, net of current maturities  -   1,208 
           
  TOTAL CAPITAL LEASE OBLIGATION $4,732  $4,732 

 

The capital leases mature as follows:

 

2017: $3,524  $3,524 
2018:  1,208  $1,208
Derivative Liabilities
Derivative Liabilities

Note 10 – Derivative Liabilities

 

The Company has identified derivative instruments arising from embedded conversion features in the Company’s convertible notes payable and warrants at June 30, 2017. The Company had no financial assets measured at fair value on a recurring basis as of June 30, 2017.

 

The following summarizes the Black-Scholes assumptions used to estimate the fair value of the derivative liability and warrant liability at the date of issuance and for the convertible notes converted during the three months ended June 30, 2017.

 

  Low  High 
Annual dividend rate  0%  0%
Expected life  0.34   0.83 
Risk-free interest rate  1.14%  1.93%
Expected volatility  88.89%  92.96%

 

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.

 

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

 

Volatility: The Company calculates the expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period consistent with the warrants’ expected term. 

 

Remaining term: The Company’s remaining term is based on the remaining contractual maturity of the warrants.

 

The following are the changes in the derivative liabilities during the three months ended June 30, 2017.

 

  Three Months Ended
June 30, 2017
 
  Level 1  Level 2  Level 3 
Derivative liabilities as January 1, 2017 $-  $-  $- 
Addition  -   -   1,529,414 
Conversion  -   -     
Loss on changes in fair value  -   -   (584,011))
Derivative liabilities as June 30, 2017 $-  $-  $945,403 
Stockholders' Deficit
Stockholders' Deficit

Note 11 - Stockholders’ Deficit

 

Shares Authorized

 

Upon incorporation, the total number of shares of all classes of stock which the Company is authorized to issue is Three Hundred Twenty Million (320,000,000) shares of which Three Hundred Million (300,000,000) shares shall be Common Stock, par value $0.001 per share and Twenty Million (20,000,000) shall be Preferred Stock, par value $0.001 per share. The designations, rights, and preferences of such preferred stock are to be determined by the Board of Directors.

 

Preferred Stock

 

Series A Cumulative Convertible Preferred Stock

 

On February 13, 2015, 100,000 shares of preferred stock were designated as Series A Cumulative Convertible Preferred Stock (“Series A”). Each share of Series A shall have a stated value equal to $100.00 (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series A Stated Value”).

 

During the year ended December 31, 2015, the Company sold 24,400 shares of Series A for proceeds of $2,450,000. In addition, $800,000 in convertible notes and $91,400 in accrued interest were converted into 8,914 shares of the Company’s Series A.

 

During the six months ended June 30, 2017, the Company converted 1,148 shares of Series A for 700,000 shares of common stock.

  

The holders of the Series A shall be entitled to receive preferential dividends at the rate of 6% per share per annum on the Series A Stated Value, but before any dividend or other distribution will be paid or declared and set apart for payment on any shares of any Junior Stock, as defined. Such dividends shall compound annually and be fully cumulative, and shall accumulate from the date of original issuance of the Series A and shall be payable quarterly, in arrears, commencing on the first day of the calendar quarter following the date on which the Series A is issued. Upon the occurrence of an Event of Default (as defined below) and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series A Stated Value. At the Company’s option, such dividend payments may be made in (i) cash (ii) additional shares of Series A valued at the Series A Stated Value thereof, in an amount equal to 150% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series A, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series A Preferred.

 

The dividends on the Series A shall be cumulative whether or not declared so that, if at any time full cumulative dividends at the rate aforesaid on all shares of the Series A then outstanding from the date from and after which dividends thereon are cumulative to the end of the annual dividend period next preceding such time shall not have been paid or declared and set apart for payment, or if the full dividend on all such outstanding Series A for the then current dividend period shall not have been paid or declared and set apart for payment, the amount of the deficiency shall be paid or declared and set apart for payment before any sum shall be set apart for or applied by the Corporation or a subsidiary of the Corporation to the purchase, redemption or other acquisition of the Series A or any shares of any other class of stock ranking on a parity with the Series A and before any dividend or other distribution shall be paid or declared and set apart for payment on any Junior Stock and before any sum shall be set aside for or applied to the purchase, redemption or other acquisition of any Junior Stock.

 

Holder of Series A shall have the right at any time after the issuance, to convert such shares, accrued but unpaid declared dividends on the Series A and any other sum owed by the Corporation arising from the Series A into fully paid and non-assessable shares of Common Stock (the “Conversion Shares”) of the Corporation determined in accordance with the applicable conversion price (the “Conversion Price”). 

 

The number of Conversion Shares issuable upon conversion shall equal (i) the sum of (A) the Series A Stated Value being converted and/or (B) at the Holder’s election, accrued and unpaid dividends or any other component of the Conversion Amount, divided by (ii) the Conversion Price. The Conversion Price of the Series A shall be $0.25, subject to adjustment.

 

The Corporation and the Holder may not convert that amount of the Conversion Amount on a Conversion Date in amounts that would result in the Holder having a beneficial ownership of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates on such Conversion Date, and (ii) the number of Conversion Shares issuable upon the conversion of the Conversion Amount with respect to which the determination of this proviso is being made on such Conversion Date, which would result in the aggregate beneficial ownership by the Holder and its Affiliates of more than 4.99% of the outstanding shares of Common Stock of the Corporation. For the purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to successive exercises which would result in the aggregate issuance of more than 4.99%. The Holder may allocate which of the equity of the Corporation deemed beneficially owned by the Holder shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%. The Holder may waive the conversion limitation described in this Section in whole or in part, upon and effective after sixty-one (61) days’ prior written notice to the Corporation.

  

The holders of our Series A do vote together with the holders of our Common Stock on an as converted basis on each matter submitted to a vote of holders of Common Stock. The number of votes that may be cast by a holder of Series A shall be equal to the number of shares of Common Stock issuable upon conversion of such Holder’s Series A on the record date for determining those stockholders entitled to vote on the matter. In addition, the affirmative vote of the holders of a majority of our outstanding Series A is required to for the following actions:

 

(a) amending the Corporation’s certificate of incorporation or by-laws if such amendment would adversely affect the Series A

 

(b) purchasing any of the Corporation’s securities other than required redemptions of Series A and repurchase under restricted stock and option agreements authorizing the Corporation’s employees;

 

(c) effecting a Liquidation Event;

 

(d) declaring or paying any dividends other than in respect of the Series A; and

 

(e) issuing any additional securities having rights senior to or on parity with the Series A.

 

During the three months ended June 30, 2017, the Company accrued $0 for liquidating damages on the Series A and $0 on the warrants associated with the Series A. 

 

Series B Cumulative Convertible Preferred Stock

 

On December 21, 2015, 20,000 shares of preferred stock were designated as Series B Cumulative Convertible Preferred Stock (“Series B”). Each share of Series B shall have a stated value equal to $100.00 (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series B Stated Value”).

 

During the year ended December 31, 2015, the Company sold 7,000 shares of Series B for proceeds of $700,000.

 

The holders of outstanding shares of Series B shall be entitled to receive preferential dividends at the rate of 6% per share per annum on the Series B Stated Value, but before any dividend or other distribution will be paid or declared and set apart for payment on any shares of any Junior Stock as defined. Such dividends shall compound annually and be fully cumulative, and shall accumulate from the date of original issuance of the Series B, and shall be payable quarterly, in arrears, commencing on the first day of the calendar quarter following the date on which the Series B is issued. Upon the occurrence of an Event of Default as defined below and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series B Stated Value. At the Corporation’s option, such dividend payments may be made in (i) cash (ii) additional shares of Series B valued at the Series B Stated Value thereof, in an amount equal to 100% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series B, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series B Preferred.

 

The dividends on the Series B shall be cumulative whether or not declared so that, if at any time full cumulative dividends at the rate aforesaid on all shares of the Series B then outstanding from the date from and after which dividends thereon are cumulative to the end of the annual dividend period next preceding such time shall not have been paid or declared and set apart for payment, or if the full dividend on all such outstanding Series B for the then current dividend period shall not have been paid or declared and set apart for payment, the amount of the deficiency shall be paid or declared and set apart for payment before any sum shall be set apart for or applied by the Corporation or a subsidiary of the Corporation to the purchase, redemption or other acquisition of the Series B or any shares of any other class of stock ranking on a parity with the Series B and before any dividend or other distribution shall be paid or declared and set apart for payment on any Junior Stock and before any sum shall be set aside for or applied to the purchase, redemption or other acquisition of any Junior Stock.

 

Holders of shares of Series B shall have the right at any time commencing after the issuance to convert such shares, accrued but unpaid declared dividends on the Series B into fully paid and non-assessable shares of Common Stock (the “Conversion Shares”) of the Corporation determined in accordance with the applicable conversion price (the “Conversion Price”). All declared or accrued but unpaid dividends may be converted at the election of the Holder together with or independent of the conversion of the Series B Stated Value of the Series B.

  

The number of Conversion Shares issuable upon conversion of the Conversion Amount shall equal (i) the sum of (A) the Series B Stated Value being converted and/or (B) at the Holder’s election, accrued and unpaid dividends or any other component of the Conversion Amount, divided by (ii) the Conversion Price. The Conversion Price of the Series B shall be $0.30, subject to adjustment.

 

The Corporation and the Holder may not convert that amount of the Conversion Amount on a Conversion Date in amounts that would result in the Holder having a beneficial ownership of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates on such Conversion Date, and (ii) the number of Conversion Shares issuable upon the conversion of the Conversion Amount with respect to which the determination of this proviso is being made on such Conversion Date, which would result in the aggregate beneficial ownership by the Holder and its Affiliates of more than 4.99% of the outstanding shares of Common Stock of the Corporation. For the purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to successive exercises which would result in the aggregate issuance of more than 4.99%. The Holder may allocate which of the equity of the Corporation deemed beneficially owned by the Holder shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%. The Holder may waive the conversion limitation described in this Section in whole or in part, upon and effective after sixty one (61) days’ prior written notice to the Corporation.

 

The holders of our Series B do vote together with the holders of our Common Stock on an as converted basis on each matter submitted to a vote of holders of Common Stock. The number of votes that may be cast by a holder of Series B shall be equal to the number of shares of Common Stock issuable upon conversion of such Holder’s Series B on the record date for determining those stockholders entitled to vote on the matter. In addition, the affirmative vote of the holders of a majority of our outstanding Series B is required to for the following actions:

 

(a) amending the Corporation’s certificate of incorporation or by-laws if such amendment would adversely affect the Series B

 

(b) purchasing any of the Corporation’s securities other than required redemptions of Series B and repurchase under restricted stock and option agreements authorizing the Corporation’s employees;

 

(c) effecting a Liquidation Event;

 

(d) declaring or paying any dividends other than in respect of the Company’s Series A or Series B; and

 

(e) issuing any additional securities having rights senior to the Series B. 

 

During the six months ended June 30, 2017, the Company accrued $0 for liquidating damages on the Series B and $0 on the warrants associated with the Series B.

 

During the six months ended June 30, 2017, the Company issued 0 shares of Series B upon conversion of interest totaling $0.

 

Series D Convertible Preferred Stock

 

On January 29, 2016, 2,100,000 shares of preferred stock were designated as Series D Convertible Preferred Stock (“Series D”). Each share of Series A shall have a stated value equal to $100.00 (as adjusted for any stock dividends, combinations or splits with respect to such shares) (the “Series D Stated Value”).

 

Holders of shares of Series D shall have the right at any time commencing after the issuance to convert such shares into fully paid and non-assessable shares of Common Stock (the “Conversion Shares”) of the Corporation determined in accordance with the applicable conversion price (the “Conversion Price”).

 

The number of Conversion Shares issuable upon conversion of the Conversion Amount shall equal (i) the sum of (A) the Series D Stated Value being converted and/or (B) at the Holder’s election, accrued and unpaid dividends or any other component of the Conversion Amount, divided by (ii) the Conversion Price. The Conversion Price of the Series B shall be $0.25, subject to adjustment.

  

The Corporation and the Holder may not convert that amount of the Conversion Amount on a Conversion Date in amounts that would result in the Holder having a beneficial ownership of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates on such Conversion Date, and (ii) the number of Conversion Shares issuable upon the conversion of the Conversion Amount with respect to which the determination of this proviso is being made on such Conversion Date, which would result in the aggregate beneficial ownership by the Holder and its Affiliates of more than 4.99% of the outstanding shares of Common Stock of the Corporation. For the purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the 1934 Act and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to successive exercises which would result in the aggregate issuance of more than 4.99%. The Holder may allocate which of the equity of the Corporation deemed beneficially owned by the Holder shall be included in the 4.99% amount described above and which shall be allocated to the excess above 4.99%. The Holder may waive the conversion limitation described in this Section in whole or in part, upon and effective after sixty one (61) days’ prior written notice to the Corporation.

 

The holders of Series D Preferred shall not be entitled to a vote on matters submitted to a vote of the stockholders of the Company. Also, as long as any shares of Series D Preferred are outstanding, the Company shall not, without the affirmative vote of all of the Holders of the then outstanding shares of the Series D Preferred,

 

(a) alter or change adversely the powers, preferences or rights given to the Series D Preferred or alter or amend this Certificate of Designation,

 

(b) amend its articles of incorporation or other charter documents in any manner that adversely affects any rights of the Holders,

 

(c) increase the number of authorized shares of Series D Preferred, or

 

(d) enter into any agreement with respect to any of the foregoing.

 

On August 31, 2016, a holder of Series D converted 1,099 shares of Series A into 1,098,933 shares of the Company’s common stock.

  

Common Stock

 

On January 30,2017, the Company issued 2,946,740 shares of its restricted common stock to settle outstanding vendor liabilities of $353,732. In connection with this transaction the company also recorded a loss on settlement of vendor liabilities of $110,674. 

 

On February 1, 2017, the Company issued 800,000 shares of its restricted common stock to its Placement Agent. Such shares were issued pursuant to a Placement Agent Agreement with the Company and services rendered in connection with a private placement of the Company’s securities.

    

Stock Options

 

The Company applied fair value accounting for all share based payments awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.

 

The assumptions used for options granted during the three months ended June 30, 2017 and December 31, 2016 are as follows:

 

    June 30,
2017
    December 31,
2016
 
Exercise price     0.20-0.75        0.25-0.40  
Expected dividends     0 %     0 %
Expected volatility     63.72% - 92.14 %     73.44%-90.05
Risk free interest rate     1.81% - 2.10 %     1%-1.39
Expected life of option     5 years       4.68-5 years  

 

The following is a summary of the Company’s stock option activity:

 

    Options    

Weighted

Average

Exercise

Price

   

Weighted

Average

Remaining Contractual Life (in years)

 
Balance – December 31, 2016     2,250,000     $ 0.34       4.38  
Granted     15,399,990     $ 0.43       4.89  
Exercised     -       -       -  
Cancelled/Modified     (100,000 )   $ 0.40       -  
Balance – June 30, 2017 – outstanding     17,549,990     $ 0.42       4.77  
Balance – June 30, 2017 – exercisable     8,883,322     $ 0.27       4.65  
                         
Outstanding options held by related party – June 30, 2017     17,549,990     $ 0.42       4.77  
Exercisable options held by related party – June 30, 2017     8,883,322     $ 0.27       4.65  

 

At June 30, 2017, the aggregate intrinsic value of options outstanding and exercisable was $0 and $0, respectively.

 

Stock-based compensation for stock options has been recorded in the condensed consolidated statements of operations and totaled $463,619 and $0, for the three months ended June 30, 2016 and 2015, respectively.

 

The following is a summary of the Company’s stock options granted during the six months ended June 30, 2017:

 

Options     Value     Purpose for Grant
  15,399,990     $ 457,179     Service Rendered

   

Warrants

 

The Company applied fair value accounting for all share based payments awards. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model.

 

The assumptions used for warrants granted during the three months ended June 30, 2017 are as follows:

 

    June 30,
2017
  December 31, 2016  
Exercise price   $ 0.20-0.30   $ 0.40  
Expected dividends     0 %   0 %
Expected volatility     62.63%-92.96 %   73.44-91.54 %
Risk free interest rate     1.77%-2.03 %   1.13%-1.39 %
Expected life of warrant     5 years     5 years  

  

Warrant Activities

 

The following is a summary of the Company’s warrant activity:

 

    Warrants     Weighted Average
Exercise
Price
 
             
Outstanding – December 31, 2016     15,541,666     $ 0.36  
Granted     6,531,815     $ 0.20  
Exercised     -     $ -  
Forfeited/Cancelled     -     $ -  
Outstanding – June 30, 2017     22,073,481     $ 0.31  
Exercisable – June 30, 2017     22,073,481     $ 0.31  

  

Warrants Outstanding   Warrants Exercisable
Exercise price   Number Outstanding     Weighted Average Remaining Contractual Life
(in years)
    Weighted
Average
Exercise Price
    Number
Exercisable
  Weighted
Average Exercise Price
 
$     0.20 – 0.40       22,073,481       3.70       0.31     22,073,481     0.31  

 

During the six months ended June 30, 2017, a total of 6,199,115.00 warrants were issued with promissory notes (See Note 6 above). The warrants have a grant date fair value of $844,686 using a Black-Scholes option-pricing model and the above assumptions.

 

During the six months ended June 30, 2017, a total of 114,700.00 warrants were issued with convertible notes (See Note 7 above). The warrants have a grant date fair value of $14,214.28 using a Black-Scholes option-pricing model and the above assumptions.

 

During the six months ended June 30, 2017, a total of 183,000 warrants were issued with notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $15,650 using a Black-Scholes option-pricing model and the above assumptions.

 

 During the six months ended June 30, 2017, a total of 35,000 warrants were issued with convertible notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $2,245 using a Black-Scholes option-pricing model and the above assumptions.

Subsequent Events
Subsequent Events

Note 12 - Subsequent Events

 

On July 6, 2017, the Company entered into a loan agreement (the “July 2017 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note of $25,000 (the “May 2017 Rosen Note”). The July 2017 Rosen Note is secured by an officer of the Company. Pursuant to the July 2017 Rosen Note Loan Agreement, the July 2017 Rosen Note bears interest at a rate of 10% per annum. As additional consideration for entering in the July 2017 Rosen Note Loan Agreement, the Company issued Rosen a five-year warrant to purchase 18,750 shares of the Company’s common stock at a purchase price of $0.20 per share. All outstanding principal, accrued and unpaid interest and other amounts due under the July 2017 Rosen Note are due on July 21, 2017. The Company entered into an amendment to the July 2017 Rosen Note, extending the maturity date to January 21, 2018.

 

On July 11, 20176, the Company issued a convertible note to a third party lender totaling $222,000 (the “First July 2017 Note”). The First July 2017 Note accrues interest at 8.5% per annum and matures with interest and principal both due on April 11, 2018. In addition, the Company issued a warrant to purchase 350,000 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $0.20 per share for a period of five years from the issue date. The First July 2017 Note and accrued interest are convertible after January 11, 2018 at a conversion price of $0.20 per share, subject to adjustment. In connection with the First July 2017 Note the lender purchased 110,000 shares of the Company’s restricted common stock for proceeds of $22,000.

 

On July 18, 2017, the Company issued a convertible note to a third party lender totaling $222,000 (the “Second July 2017 Note”). The Second July 2017 Note accrues interest at 8.5% per annum and matures with interest and principal both due on April 18, 2018. In addition, the Company issued a warrant to purchase 350,000 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $0.20 per share for a period of five years from the issue date. The Second July 2017 Note and accrued interest are convertible after January 11, 2018 at a conversion price of $0.20 per share, subject to adjustment. In connection with the Second July 2017 Note the lender purchased 110,000 shares of the Company’s restricted common stock for proceeds of $22,000.

 

On July 21, 2017, the Company entered into a loan agreement (the “Third July 2017 Loan Agreement”) with an individual (the “Third July 2017 Lender”), the Third July 2017 Lender issued the Company a promissory note of $100,000 (the “Third July 2017 Note”). Pursuant to the Third July 2017 Loan Agreement, the Third July 2017 Note bears interest at a rate of 10% per annum. As additional consideration for entering in the Third July 2017 Loan Agreement, the Company issued the Third July 2017 Lender a five-year warrant to purchase 100,000 shares of the Company’s common stock with an exercise price of $0.20 per share. The maturity date of the Third July 2017 Note is May 21, 2017 (the “Third June 2017 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the Third June 2017 Note are due.

 

On July 24, 2017, the Company issued a convertible note to a third party lender totaling $50,000 (the “Fourth July 2017 Note”). The Fourth July 2017 Note accrues interest at 8.5% per annum and matures with interest and principal both due on April 24, 2018. In addition, the Company issued a warrant to purchase 78,750 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $0.20 per share for a period of five years from the issue date. The Fourth July 2017 Note and accrued interest are convertible after January 24, 2018 at a conversion price of $0.20 per share, subject to adjustment. In connection with the Fourth July 2017 Note the lender purchased 25,000 shares of the Company’s restricted common stock for proceeds of $5,000.

 

Subsequent to June 30, 2017, a Series A preferred note holder elected to convert $27,500 of principal and $4,711 of dividends into 196,407 shares of the company’s common stock.

Significant and Critical Accounting Policies and Practices (Policies)

Basis of Presentation

 

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).

 

The unaudited condensed consolidated financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. This report should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2017. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained in the Company’s Form 10-K for the year ended December 31, 2016 has been omitted. The results of operations for the interim periods presented are not necessarily indicative of results for the entire year ending December 31, 2017 or any other period.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

   

(i) Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
   
(ii) Fair value of long-lived assets: Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
   
(iii)   Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.  
   
(iv) Estimates and assumptions used in valuation of equity instruments: Management estimates expected term of share options and similar instruments, expected volatility of the Company’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s) to value share options and similar instruments.

 

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

 

Actual results could differ from those estimates.

Principles of consolidation

 

The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

 

As of June 30, 2017, the Company’s consolidated subsidiaries and/or entities are as follows:

 

Name of combined affiliate   State or other jurisdiction of
incorporation or organization
  Company interest  
           
Jerrick Ventures LLC   The State of Delaware     100 %

 

All inter-company balances and transactions have been eliminated.

 

On May 12, 2017, the Company assigned the right, title and interest to all of the membership interests of the above listed subsidiaries, with the exception of Jerrick Ventures, LLCcertain inactive subsidiaries, to the Company’s Chief Executive Officer, Jeremy Frommer, in consideration for Mr. Frommer’s assumption of all liabilities of such subsidiaries, if any, with such assignment and assumption effected entirely in the interest of corporate efficiency. The Board reviewed the transaction and believes it to be fair in all respects, deeming it to advance the Company’s business interests by allowing the Company to divest non-producing and non-operating subsidiaries at no cost to the Company. All of the Company’s operations have been, and will continue to be, run through its operating subsidiary, Jerrick Ventures LLC.

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1  

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

     
Level 2  

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

     
Level 3  

Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued liabilities and accrued liquidating damages approximate their fair value because of the short maturity of those instruments.

 

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis

 

The Company’s non-financial assets include inventory. The Company identifies potentially excess and slow-moving inventory by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories. The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle counts.

Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

 

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.

Inventories

 

Inventory Valuation

 

The Company values inventory, entirely consisting of finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method.

 

Inventory Obsolescence and Markdowns

 

The Company evaluates its current level of inventory considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations.

 

The Company recorded a markdown of $0 and $0 as of June 30, 2017 and 2016, respectively, due to slow moving inventory.

 

There was no lower of cost or market adjustments for the reporting period ended June 30, 2017 or 2016.

Property and Equipment

 

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

 

  Estimated Useful
Life (Years)
 
    
Computer equipment and software  3 
     
Furniture and fixture  5 

 

Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations.

Investments - Cost Method, Equity Method and Joint Venture

 

In accordance with sub-topic 323-10 of the FASB ASC (“Sub-topic 323-10”), the Company accounts for investments in common stock of an investee for which the Company has significant influence in the operating or financial policies even though the Company holds 50% or less of the common stock or in-substance common stock.

 

On January 2, 2013, the Company purchased a minority interest in a business for proceeds of $83,333. The interest is accounted for under the cost method. The Company tests the carrying value annually for impairment.

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 FASB Accounting Standards, the related parties include (a) affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15 FASB Accounting Standards, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company and members of their immediate families; (e) management of the Company and members of their immediate families; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

Pursuant to ASC Paragraphs 850-10-50-1 and 50-5 financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

Derivative Liability

 

The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity.

  

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. 

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

 

The Company adopted Section 815-40-15 of the FASB Accounting Standards Codification (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.  

 

The Company utilizes an option pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The Company records the change in the fair value of the derivative as other income or expense in the condensed consolidated statements of operations.

Revenue Recognition

 

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

Stock-Based Compensation

 

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

 

Restricted stock awards are granted at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite service periods, typically over a five year period (vesting on a straight–line basis). The fair value of a stock award is equal to the fair market value of a share of Company stock on the grant date.

 

The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model. The Black–Scholes option valuation model requires the development of assumptions that are inputs into the model. These assumptions are the value of the underlying share, the expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture rate. Expected volatility is benchmarked against similar companies in a similar industry over the expected option life and other appropriate factors. Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends on its Common stock and does not intend to pay dividends on its Common stock in the foreseeable future. The expected forfeiture rate is estimated based on management’s best estimate.

 

Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only for those shares expected to vest. If the Company’s actual forfeiture rate is materially different from its estimate, the equity–based compensation could be significantly different from what the Company has recorded in the current period.

 

The Company accounts for share–based payments granted to non–employees in accordance with ASC 505-40, “Equity Based Payments to Non–Employees”. The Company determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete. The fair value of the equity instruments is re-measured each reporting period over the requisite service period.

Income Taxes

 

Income taxes are provided in accordance with ASC No. 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the period of deferred tax assets and liabilities.

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Loss Per Share

 

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the three months ended June 30, 2017 and 2016 presented in these condensed consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

 

The Company had the following common stock equivalents at June 30, 2017 and 2016:

 

  June 30,
2017
  June 30,
2016
 
Options  

17,549,990

   550,000 
Warrants  22,073,481   13,541,667 
Convertible notes  2,000,000   - 
Totals  

41,623,471

   14,091,667

Subsequent Events

 

The Company has evaluated events that occurred subsequent to June 30, 2017 and through the date the financial statements were issued.

Reclassifications

 

Certain prior year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current year presentation. These reclassifications did not affect the prior period total assets, total liabilities, stockholders’ deficit, net loss or net cash used in operating activities.

Recently Issued Accounting Pronouncements

 

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 provides guidance on management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016 and for annual and interim periods thereafter. The Company has adopted the methodologies prescribed by ASU 2014-15, the adoption of ASU 2014-15 did not have a material effect on its financial position or results of operations. 

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements.

Significant and Critical Accounting Policies and Practices (Tables)
Name of combined affiliate State or other jurisdiction of
incorporation or organization
 Company interest 
      
Jerrick Ventures LLC The State of Delaware  100%
  Estimated Useful
Life (Years)
 
    
Computer equipment and software  3 
     
Furniture and fixture  5 
  June 30,
2017
  June 30,
2016
 
Options  

17,549,990

   550,000 
Warrants  22,073,481   13,541,667 
Convertible notes  2,000,000   - 
Totals  

41,623,471

   14,091,667 
Property and Equipment (Tables)
Summary of property and equipment
  

June 30,

2017

  December 31,
2016
 
Computer Equipment $219,653  $219,653 
Furniture and Fixtures  61,803   61,803 
   281,456   281,456 
Less: Accumulated Depreciation  (228,331)  (209,627)
  $53,125  $71,829 
Line of Credit (Tables)
Schedule of line of credit
  Outstanding Balances as of 
  June 30,
2017
  December 31, 2016 
March 19, 2009  193,496   203,988 
October 4, 2016  11,447   31,153 
  $204,943  $235,141 
Note Payable (Tables)
Schedule of notes payable
  Outstanding Principal as of       Warrants 
  June 30, 2017  December 31, 2016  Interest Rate  Maturity Date Quantity  Exercise Price 
October 25, 2016  25,000   25,000   9% July 1, 2017  50,000   0.30 
February 22, 2017  975,510   -   12% September 1, 2017  6,161,615   0.20 
June 2, 2017  50,000   -   15% July 1, 2017  25,000   0.20 
June 8, 2017  25,000   -   15% July 8, 2017  12,500   0.20 
   1,075,510   25,000               
Less: Debt Discount  (284,249)  (9,421)              
Less: Debt Issuance Costs  (52,856)  -               
  $738,405  $15,579              
Convertible Note Payable (Tables)
Schedule of convertible notes payable
  Outstanding Principal as of         Warrants 
  June 30, 2017  December 31, 2016  Interest Rate  Conversion Price Maturity Date Quantity  Exercise
Price
 
November - December, 2016  400,000   400,000   10% 0.30 November 1, 2017  400,000   0.30 
December 27, 2016  100,000   100,000   10% 0.30 December 27, 2017  100,000   0.30 
June, 2017  121,500   -   12% Not Applicable September 1, 2017  114,700   0.20 
   621,500   500,000                 
Less: Debt Discount  (124,403)  (184,398)                
Less: Debt Issuance Costs  (44,069)  (46,779)                
  $453,028  $268,823                 
Related Party Loan (Tables)
  Outstanding Principal as of       Warrants 
  June 30, 2017  December 31, 2016  Interest Rate  Maturity Date Quantity  Exercise
Price
 
April 25, 2017  25,000   -   12% September 1, 2017  17,500   0.20 
April 25, 2017  25,000   -   12% September 1, 2017  17,500   0.20 
   50,000   -               
Less: Debt Discount  (1,096)  -               
  $48,904  $-               

  Outstanding Principal as of       Warrants 
  June 30, 2017  December 31, 2016  Interest Rate  Maturity Date Quantity  Exercise Price 
May 26, 2016  1,000,000   1,000,000   13% November 26, 2017  1,000,000   0.40 
September 12, 2016  40,000   100,000   12% November 22, 2017  17,500   0.20 
September 20, 2016  -   10,000   10% March 20, 2017  235,000   0.40 
October 13, 2016  50,000   50,000   12% November 22, 2017  50,000   0.40 
October 24, 2016  15,000   15,000   9% January 1, 2018  30,000   0.30 
October 31, 2016  -   10,000   10% November 10, 2016  10,000   0.30 
November 22, 2016  225,000   225,000   10% November 22, 2017  750,000   0.30 
December 21, 2016  50,000   50,000   10% November 22, 2017  166,666   0.30 
January 25, 2017  50,000   -   10% January 1, 2018  50,000   0.30 
March 2, 2017  10,000   -   10% January 21, 2018  10,000   0.30 
April 12, 2017  10,000   -   10% January 21, 2018  17,500   0.20 
April 12, 2017  10,000   -   10% September 1, 2017  17,500   0.20 
May 4, 2017  15,000   -   12% September 1, 2017  10,500   0.30 
May 11, 2017  20,000   -   10% September 30, 2017  20,000   0.20 
June 26, 2017  30,000   -   10% January 21, 2018  22,500   0.20 
   1,525,000   1,460,000               
Less: Debt Discount  (2,533)  (94,675)              
  $1,522,467  $1,350,325      
Capital Leases Payable (Tables)
    June 30,
2017
  December 31,
2016
 
         
(i) Capital lease obligation to a financing company for a term of five (5) years, collateralized by equipment, with interest at 10.0% per annum, with principal and interest due and payable in monthly installments of $383.10 $4,732  $4,732 
           
  Less current maturities  (4,732   (3,524)
           
  Capital lease obligation, net of current maturities  -   1,208 
           
  TOTAL CAPITAL LEASE OBLIGATION $4,732  $4,732
2017: $3,524  $3,524 
2018:  1,208  $1,208
Derivative Liabilities (Tables)
  Low  High 
Annual dividend rate  0%  0%
Expected life  0.34   0.83 
Risk-free interest rate  1.14%  1.93%
Expected volatility  88.89%  92.96%
  Three Months Ended
June 30, 2017
 
  Level 1  Level 2  Level 3 
Derivative liabilities as January 1, 2017 $-  $-  $- 
Addition  -   -   1,529,414 
Conversion  -   -     
Loss on changes in fair value  -   -   (584,011))
Derivative liabilities as June 30, 2017 $-  $-  $945,403 
Stockholders' Deficit (Tables)
  June 30,
2017
  December 31,
2016
 
Exercise price  0.20-0.75    0.25-0.40 
Expected dividends  0%  0%
Expected volatility  63.72% - 92.14%  73.44%-90.05
Risk free interest rate  1.81% - 2.10%  1%-1.39
Expected life of option  5 years   4.68-5 years
  Options  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining Contractual Life (in years)

 
Balance – December 31, 2016  2,250,000  $0.34   4.38 
Granted  15,399,990  $0.43   4.89 
Exercised  -   -   - 
Cancelled/Modified  (100,000) $0.40   - 
Balance – June 30, 2017 – outstanding  17,549,990  $0.42   4.77 
Balance –  June 30, 2017 – exercisable  8,883,322  $0.27   4.65 
             
Outstanding options held by related party – June 30, 2017  17,549,990  $0.42   4.77 
Exercisable options held by related party – June 30, 2017  8,883,322  $0.27   4.65 
Options  Value  Purpose for Grant
 15,399,990  $457,179  Service Rendered
  June 30,
2017
 December 31, 2016 
Exercise price $0.20-0.30 $0.40 
Expected dividends  0% 0%
Expected volatility  62.63%-92.96% 73.44-91.54%
Risk free interest rate  1.77%-2.03% 1.13%-1.39%
Expected life of warrant  5 years  5 years 
  Warrants  Weighted Average
Exercise
Price
 
       
Outstanding – December 31, 2016  15,541,666  $0.36 
Granted  6,531,815  $0.20 
Exercised  -  $- 
Forfeited/Cancelled  -  $- 
Outstanding – June 30, 2017  22,073,481  $0.31 
Exercisable – June 30, 2017  22,073,481  $0.31 
Warrants Outstanding Warrants Exercisable
Exercise price Number Outstanding  Weighted Average Remaining Contractual Life
(in years)
  Weighted
Average
Exercise Price
  Number
Exercisable
 Weighted
Average Exercise Price
 
$  0.20 – 0.40   22,073,481   3.70   0.31  22,073,481  0.31 
Significant and Critical Accounting Policies and Practices (Details) (Jerrick Ventures LLC [Member])
6 Months Ended
Jun. 30, 2017
Jerrick Ventures LLC [Member]
 
Name of combined affiliate
Jerrick Ventures LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
Significant and Critical Accounting Policies and Practices (Details 1)
6 Months Ended
Jun. 30, 2017
Computer equipment and software [Member]
 
Property and Equipment, Estimated Useful Life (Years)
3 years 
Furniture and fixture [Member]
 
Property and Equipment, Estimated Useful Life (Years)
5 years 
Significant and Critical Accounting Policies and Practices (Details 2)
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
41,623,471 
14,091,667 
Convertible notes [Member]
 
 
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
2,000,000 
   
Options [Member]
 
 
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
17,549,990 
550,000 
Warrant [Member]
 
 
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
22,073,481 
13,541,667 
Significant and Critical Accounting Policies and Practices (Details Textual) (USD $)
0 Months Ended 6 Months Ended
Jan. 2, 2013
Jun. 30, 2017
Jun. 30, 2016
Significant and Critical Accounting Policies and Practices (Textual)
 
 
 
Inventory markdown charges
 
$ 0 
$ 0 
Investments minority interest
$ 83,333 
 
 
Description of investments cost method equity method and joint venture
 
 
The Company holds 50% or less of the common stock or in-substance common stock.
Property and Equipment (Details) (USD $)
Jun. 30, 2017
Dec. 31, 2016
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 281,456 
$ 281,456 
Less: Accumulated Depreciation
(228,331)
(209,627)
Property and equipment, net
53,125 
71,829 
Computer Equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
219,653 
219,653 
Furniture and Fixtures [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 61,803 
$ 61,803 
Property and Equipment (Details Textual) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Property and Equipment (Textual)
 
 
 
 
Depreciation expense
$ 9,404 
$ 10,812 
$ 18,704 
$ 20,784 
Line of Credit (Details) (USD $)
Jun. 30, 2017
Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Line of credit outstanding balances
$ 204,943 
$ 235,141 
March 19, 2009 (Member)
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Line of credit outstanding balances
193,496 
203,988 
October 4, 2016 (Member)
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Line of credit outstanding balances
$ 11,447 
$ 31,153 
Line of Credit (Details Textual) (USD $)
0 Months Ended 1 Months Ended 6 Months Ended 12 Months Ended
Oct. 4, 2016
Mar. 19, 2009
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Line of Credit (Textual)
 
 
 
 
 
 
Line of credit maximum outstanding balance
 
$ 200,000 
 
 
 
 
Line of credit facility, expiration date
 
Mar. 19, 2010 
 
 
 
 
Line of credit monthly interest rate during period
 
 
 
 
3.75% 
4.50% 
Line of credit
 
 
204,943 
 
235,141 
 
Balance outstanding on the revolving
 
 
193,496 
 
203,988 
 
Line of credit balance outstanding on revenue factoring agreement
 
 
11,447 
 
31,153 
 
Company received proceeds from imperial advance, LLC
40,000 
 
130,000 
   
 
 
Agrees to pay for future receivable
$ 52,400 
 
$ 41,706 
    
 
 
Note Payable (Details) (USD $)
6 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Notes Payable
$ 1,075,510 
$ 25,000 
Less: Debt Discount
(284,249)
(9,421)
Less: Debt Issuance Costs
(52,856)
   
Note payable, Outstanding Principal, Balance
738,405 
15,579 
October 25, 2016 [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Note payable, Outstanding Principal, Balance
25,000 
25,000 
Interest Rate
9.00% 
 
Maturity Date
Jul. 01, 2017 
 
Warrants, Quantity
50,000 
 
Warrants, Exercise Price
$ 0.30 
 
February 22, 2017 [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Note payable, Outstanding Principal, Balance
975,510 
   
Interest Rate
12.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants, Quantity
6,161,615 
 
Warrants, Exercise Price
$ 0.20 
 
June 2, 2017 [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Note payable, Outstanding Principal, Balance
50,000 
   
Interest Rate
15.00% 
 
Maturity Date
Jul. 01, 2017 
 
Warrants, Quantity
25,000 
 
Warrants, Exercise Price
$ 0.20 
 
June 8, 2017 [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Note payable, Outstanding Principal, Balance
$ 25,000 
   
Interest Rate
15.00% 
 
Maturity Date
Jul. 08, 2017 
 
Warrants, Quantity
12,500 
 
Warrants, Exercise Price
$ 0.20 
 
Note Payable (Details Textual) (USD $)
1 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 1 Months Ended
Feb. 22, 2017
Private Placement Offering [Member]
Mar. 17, 2017
Private Placement Offering [Member]
Subscription Arrangements [Member]
Jun. 30, 2017
Private Placement Offering [Member]
Subscription Arrangements [Member]
Mar. 17, 2017
Private Placement Offering [Member]
Eight Investor [Member]
Jun. 2, 2017
Loan Agreement [Member]
Jun. 8, 2017
Loan Agreement [Member]
Oct. 25, 2016
Loan Agreement [Member]
Note Payable (Textual)
 
 
 
 
 
 
 
Promissory note
 
$ 1,000,000 
 
 
$ 50,000 
$ 25,000 
$ 25,000 
Maturity date
 
Sep. 01, 2017 
 
 
Jul. 01, 2017 
Jul. 08, 2017 
Jul. 01, 2017 
Interest rate
 
6.00% 
 
 
15.00% 
15.00% 
9.00% 
Warrants purchase of common stock
 
 
 
 
25,000 
12,500 
50,000 
Warrant exercisable price per share
 
 
$ 0.20 
 
$ 0.20 
$ 0.20 
$ 0.30 
Warrant term
 
 
 
 
5 years 
5 years 
5 years 
Gross proceeds of private placement offering
140,605 
 
 
775,980 
 
 
 
Aggregate principal amount
 
975,511,000 
 
 
 
 
 
Aggregate gross proceeds of common stock
 
$ 916,585 
 
 
 
 
 
Notes conversion description
 
 
The February 2017 Offering Notes are convertible into shares of the Company's common stock at the time of Company's next round of financing (the "Subsequent Offering") at a price equal to eighty-five percent (85%) of the price per share offered in the Subsequent Offering (the "Conversion Price"). The February 2017 Offering Warrants have a five-year term. Investors received the February 2017 Offering Warrants in the following amounts: (i) Investors purchasing $150,000 or more of the Offering received a Warrant equal to one hundred thirty percent (130%) of the dollar amount invested in the Offering; (ii) investors purchasing at least $100,000 but less than $150,000 of the February 2017 Offering received a February 2017 Offering Warrant equal to one hundred percent (100%) of the dollar amount invested in the Offering; and (iii) investors purchasing less than $100,000 of the Offering received to a February 2017 Offering Warrant equal to seventy percent (70%) of the dollar amount invested in the Offering. 
 
 
 
 
Convertible Note Payable (Details) (USD $)
6 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
$ 621,500 
$ 500,000 
Less: Debt Discount
(124,403)
(184,398)
Less: Debt Issuance Costs
(44,069)
(46,779)
Convertible notes payable, Outstanding Principal, Total
453,028 
268,823 
November - December, 2016 [Member]
 
 
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
400,000 
400,000 
Interest Rate
10.00% 
 
Conversion Price
$ 0.30 
 
Maturity Date
Nov. 01, 2017 
 
Warrants Quantity
400,000 
 
Warrants Exercise Price
$ 0.30 
 
December 27, 2016 [Member]
 
 
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
100,000 
100,000 
Interest Rate
10.00% 
 
Conversion Price
$ 0.30 
 
Maturity Date
Dec. 27, 2017 
 
Warrants Quantity
100,000 
 
Warrants Exercise Price
$ 0.30 
 
June, 2017 [Member]
 
 
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
$ 121,500 
   
Interest Rate
12.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants Quantity
114,700 
 
Warrants Exercise Price
$ 0.20 
 
Convertible Note Payable (Details Textual)) (USD $)
1 Months Ended 6 Months Ended 12 Months Ended
Dec. 27, 2016
Nov. 30, 2016
Jun. 30, 2017
Dec. 31, 2016
Convertible Note Payable (Textual)
 
 
 
 
Convertible notes payable outstanding balance
 
 
$ 621,500 
$ 500,000 
Debt discount
 
 
124,403 
184,398 
Debt issuance costs
 
 
52,856 
   
Convertible Note to Third Party Lender [Member]
 
 
 
 
Convertible Note Payable (Textual)
 
 
 
 
Convertible note
100,000 
400,000 
121,500 
400,000 
Interest rate
10.00% 
10.00% 
12.00% 
10.00% 
Maturity date
Dec. 27, 2017 
Dec. 29, 2017 
Sep. 01, 2017 
Nov. 01, 2017 
Warrant to purchase
100,000 
400,000 
102,550 
400,000 
Conversion price per share
$ 0.30 
 
 
 
Warrant purchase price
$ 0.40 
$ 0.30 
$ 0.20 
$ 0.30 
Warrant term
5 years 
5 years 
5 years 
5 years 
Convertible notes payable outstanding balance
 
 
453,028 
 
Debt discount
 
 
124,403 
 
Debt issuance costs
 
 
$ 44,069 
 
Related Party Loan (Details) (USD $)
6 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Related Party Transaction [Line Items]
 
 
Convertible notes payable - related parties gross
$ 50,000 
    
Less: Debt Discount
(1,096)
   
Convertible Notes - related party, net of debt discount
48,904 
   
April 25, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Convertible notes payable - related parties gross
25,000 
   
Interest Rate
12.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants Quantity
17,500 
 
Warrants Exercise Price
$ 0.20 
 
April 25, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Convertible notes payable - related parties gross
$ 25,000 
   
Interest Rate
12.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants Quantity
17,500 
 
Warrants Exercise Price
$ 0.20 
 
Related Party Loan (Details 1) (USD $)
6 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
$ 1,525,000 
$ 1,460,000 
Less: Debt Discount
(2,533)
(94,675)
Notes payable - related party
1,522,467 
1,365,325 
May 26, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
1,000,000 
1,000,000 
Interest Rate
13.00% 
 
Maturity Date
Nov. 26, 2017 
 
Warrants Quantity
1,000,000 
 
Warrants Exercise Price
$ 0.40 
 
September 12, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
40,000 
100,000 
Interest Rate
12.00% 
 
Maturity Date
Nov. 22, 2017 
 
Warrants Quantity
17,500 
 
Warrants Exercise Price
$ 0.20 
 
September 20, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
   
10,000 
Interest Rate
10.00% 
 
Maturity Date
Mar. 20, 2017 
 
Warrants Quantity
235,000 
 
Warrants Exercise Price
$ 0.40 
 
October 13, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
50,000 
50,000 
Interest Rate
12.00% 
 
Maturity Date
Nov. 22, 2017 
 
Warrants Quantity
50,000 
 
Warrants Exercise Price
$ 0.40 
 
October 24, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
15,000 
15,000 
Interest Rate
9.00% 
 
Maturity Date
Jan. 01, 2018 
 
Warrants Quantity
30,000 
 
Warrants Exercise Price
$ 0.30 
 
October 31, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
   
10,000 
Interest Rate
10.00% 
 
Maturity Date
Nov. 10, 2016 
 
Warrants Quantity
10,000 
 
Warrants Exercise Price
$ 0.30 
 
November 22, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
225,000 
225,000 
Interest Rate
10.00% 
 
Maturity Date
Nov. 22, 2017 
 
Warrants Quantity
750,000 
 
Warrants Exercise Price
$ 0.30 
 
December 21, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
50,000 
50,000 
Interest Rate
10.00% 
 
Maturity Date
Nov. 22, 2017 
 
Warrants Quantity
166,666 
 
Warrants Exercise Price
$ 0.30 
 
January 25, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
50,000 
   
Interest Rate
10.00% 
 
Maturity Date
Jan. 01, 2018 
 
Warrants Quantity
50,000 
 
Warrants Exercise Price
$ 0.30 
 
March 2, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
10,000 
   
Interest Rate
10.00% 
 
Maturity Date
Jan. 21, 2018 
 
Warrants Quantity
10,000 
 
Warrants Exercise Price
$ 0.30 
 
April 12, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
10,000 
   
Interest Rate
10.00% 
 
Maturity Date
Jan. 21, 2018 
 
Warrants Quantity
17,500 
 
Warrants Exercise Price
$ 0.20 
 
April 12, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
10,000 
   
Interest Rate
10.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants Quantity
17,500 
 
Warrants Exercise Price
$ 0.20 
 
May 4, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
15,000 
   
Interest Rate
12.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants Quantity
10,500 
 
Warrants Exercise Price
$ 0.30 
 
May 11, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
20,000 
   
Interest Rate
10.00% 
 
Maturity Date
Sep. 30, 2017 
 
Warrants Quantity
20,000 
 
Warrants Exercise Price
$ 0.20 
 
June 26, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
$ 30,000 
   
Interest Rate
10.00% 
 
Maturity Date
Jan. 21, 2018 
 
Warrants Quantity
22,500 
 
Warrants Exercise Price
$ 0.20 
 
Related Party Loan (Details Textual) (USD $)
0 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
May 9, 2017
Jun. 30, 2017
Dec. 31, 2016
May 26, 2016
May 2016 Rosen Loan Agreement [Member]
Sep. 12, 2016
September 2016 Rosen Loan Agreement [Member]
Oct. 13, 2016
October 2016 Gordon Loan Agreement [Member]
Oct. 24, 2016
October 2016 Schiller Loan Agreement [Member]
Oct. 31, 2016
October 2016 Rosen Loan Agreement [Member]
Dec. 21, 2016
December 2016 Gordon Loan Agreement [Member]
Jan. 25, 2017
January 2017 Rosen Loan Agreement [Member]
Jan. 26, 2017
January 2017 Gordon Loan Agreement [Member]
Feb. 7, 2017
February 2017 Schiller Loan Agreement [Member]
Apr. 12, 2017
April 2017 Schiller Loan Agreement [Member]
Apr. 12, 2017
April 2017 Rosen Loan Agreement [Member]
May 4, 2017
May 2017 Rosen Loan Agreement [Member]
May 11, 2017
May 2017 Schiller Loan Agreement [Member]
Jun. 26, 2017
June 2017 Schiller Loan Agreement [Member]
Jun. 16, 2017
Line of Credit [Member]
May 25, 2017
Line of Credit [Member]
May 22, 2017
Line of Credit [Member]
May 16, 2017
Line of Credit [Member]
May 9, 2017
Line of Credit [Member]
Apr. 25, 2017
April Rosen Note [Member]
Jun. 30, 2017
April Rosen Note [Member]
Apr. 25, 2017
April Gordon Notes [Member]
Jun. 30, 2017
April Gordon Notes [Member]
Oct. 31, 2016
Arthur Rosen [Member]
Jun. 26, 2017
Board [Member]
Related Party Loan (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 25,000 
 
$ 25,000 
 
 
 
Interest rate
 
 
 
12.50% 
12.00% 
12.00% 
9.00% 
10.00% 
10.00% 
10.00% 
10.00% 
10.00% 
10.00% 
10.00% 
12.00% 
10.00% 
10.00% 
 
 
 
 
 
12.00% 
 
12.00% 
 
 
 
Warrants issued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,500 
 
17,500 
 
 
 
Warrant purchase price
 
 
 
$ 0.40 
$ 0.40 
$ 0.40 
$ 0.30 
$ 0.30 
$ 0.40 
$ 0.30 
$ 0.30 
$ 0.30 
$ 0.30 
$ 0.30 
$ 0.30 
$ 0.20 
$ 0.20 
 
 
 
 
 
$ 0.20 
 
$ 0.20 
 
 
 
Convertible Notes - related party, net of debt discount
 
48,904 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
48,904 
 
48,904 
 
 
Maturity date, description
 
 
 
 
Extending maturity date to November 22, 2017. 
Extending the October 2016 Gordon Note Maturity Date to November 22, 2017. 
Extending the October 2016 Schiller Note Maturity Date to January 1, 2018. 
 
Extending the December 2016 Gordon Note Maturity Date to November 22, 2017. 
Extending the January 2017 Rosen Note Maturity Date to January 1, 2018. 
 
Extending the February 2017 Schiller Note Maturity Date to January 21, 2018. 
 
Extending the maturity date to January 21, 2018. 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity Date was extended to January 1, 2018. 
Extending the note's maturity date to January 21, 2018. 
Net of debt discount
 
1,096 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,096 
 
1,096 
 
 
Secured debt
 
 
 
1,000,000 
100,000 
50,000 
30,000 
10,000 
275,000 
50,000 
50,000 
10,000 
10,000 
10,000 
15,000 
20,000 
30,000 
 
 
 
 
 
 
 
 
 
 
 
Warrant term
 
 
 
5 years 
5 years 
 
 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
 
 
 
 
 
5 years 
 
5 years 
 
 
 
Warrants issued to purchase shares
 
 
 
1,000,000 
150,000 
50,000 
15,000 
10,000 
166,666 
50,000 
50,000 
10,000 
10,000 
10,000 
10,500 
20,000 
22,500 
 
 
 
 
 
 
 
 
 
 
 
Maturity date
 
 
 
May 26, 2017 
Oct. 12, 2016 
Nov. 12, 2016 
Jan. 01, 2018 
Nov. 10, 2016 
Jan. 20, 2017 
Jul. 01, 2017 
Nov. 22, 2017 
May 07, 2017 
Sep. 01, 2017 
Jun. 30, 2017 
Sep. 01, 2017 
Sep. 30, 2017 
Jul. 03, 2017 
 
 
 
 
 
Sep. 01, 2017 
 
Sep. 01, 2017 
 
 
 
Related party notes payable
 
1,522,467 
1,365,325 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt discount
 
2,533 
94,675 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit borrow principal
130,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit interest rate, description
The LOC bears interest at a rate of 18%. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate principal amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,000 
35,000 
6,000 
30,000 
56,000 
 
 
 
 
 
 
Line of credit - related party
 
$ 130,000 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Leases Payable (Details) (USD $)
Jun. 30, 2017
Dec. 31, 2016
Capital Leases Payable [Abstract]
 
 
Capital lease obligation to a financing company for a term of five (5) years, collateralized by equipment, with interest at 10.0% per annum, with principal and interest due and payable in monthly installments of $383.10
$ 4,732 
$ 4,732 
Less current maturities
(4,732)
(3,524)
Capital lease obligation, net of current maturities
   
1,208 
TOTAL CAPITAL LEASE OBLIGATION
$ 4,732 
$ 4,732 
Capital Leases Payable (Details 1) (USD $)
Jun. 30, 2017
Dec. 31, 2016
Capital Leases Payable [Abstract]
 
 
2017
$ 3,524 
$ 3,524 
2018
$ 1,208 
$ 1,208 
Capital Leases Payable (Details Textual) (USD $)
6 Months Ended
Jun. 30, 2017
Capital Leases Payable (Textual)
 
Capital leases due amount
$ 383.10 
Capital leases interest per annum
10.00% 
Capital lease obligation term
5 years 
Derivative Liabilities (Details)
6 Months Ended
Jun. 30, 2017
Schedule of fair value of the derivative liability and warrant liability (Line Items)
 
Annual dividend rate
0.00% 
Expected life
5 years 
Low [Member] |
Derivative Liabilities [Member]
 
Schedule of fair value of the derivative liability and warrant liability (Line Items)
 
Annual dividend rate
0.00% 
Expected life
0 years 4 months 2 days 
Risk-free interest rate
1.14% 
Expected volatility
88.89% 
High [Member] |
Derivative Liabilities [Member]
 
Schedule of fair value of the derivative liability and warrant liability (Line Items)
 
Annual dividend rate
0.00% 
Expected life
0 years 9 months 29 days 
Risk-free interest rate
1.93% 
Expected volatility
92.96% 
Derivative Liabilities (Details 1) (USD $)
6 Months Ended
Jun. 30, 2017
Level 1 [Member]
 
Schedule of changes in derivative liabilities (Line Items)
 
Derivative liabilities as January 1, 2017
   
Addition
   
Conversion
   
Loss on changes in fair value
   
Derivative liabilities as June 30, 2017
   
Level 2 [Member]
 
Schedule of changes in derivative liabilities (Line Items)
 
Derivative liabilities as January 1, 2017
   
Addition
   
Conversion
   
Loss on changes in fair value
   
Derivative liabilities as June 30, 2017
   
Level 3 [Member]
 
Schedule of changes in derivative liabilities (Line Items)
 
Derivative liabilities as January 1, 2017
   
Addition
1,529,414 
Conversion
   
Loss on changes in fair value
(584,011)
Derivative liabilities as June 30, 2017
$ 945,403 
Derivative Liabilities (Details Textual)
6 Months Ended
Jun. 30, 2017
Derivative Liabilities (Textual)
 
Dividend yield
0.00% 
Stockholders' Deficit (Details)
6 Months Ended 12 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Expected dividends
0.00% 
 
Expected life of option
5 years 
 
Stock Options [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Expected dividends
0.00% 
0.00% 
Expected life of option
5 years 0 months 0 days 
 
Stock Options [Member] |
Minimum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.20 
$ 0.25 
Expected volatility
63.72% 
73.44% 
Risk free interest rate
1.81% 
1.00% 
Expected life of option
 
4 years 8 months 5 days 
Stock Options [Member] |
Maximum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.75 
$ 0.40 
Expected volatility
92.14% 
90.05% 
Risk free interest rate
2.10% 
1.39% 
Expected life of option
 
5 years 
Stockholders' Deficit (Details 1) (Stock Option [Member], USD $)
6 Months Ended
Jun. 30, 2017
Stock Option [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Options/Warrant, Outstanding
2,250,000 
Options, Granted
15,399,990 
Options, Exercised
   
Options, Cancelled/Modified
(100,000)
Options/Warrant, Outstanding
17,549,990 
Options, Exercisable
8,883,322 
Outstanding options held by related party
17,549,990 
Exercisable options held by related party
8,883,322 
Weighted Average Exercise Price, Outstanding
$ 0.34 
Weighted Average Exercise Price, Granted
$ 0.43 
Weighted Average Exercise Price, Exercised
   
Weighted Average Exercise Price Cancelled/Modified
$ 0.40 
Weighted Average Exercise Price, Outstanding
$ 0.42 
Weighted Average Exercise Price, Exercisable
$ 0.27 
Weighted Average Exercise Price Outstanding options held by related party
$ 0.42 
Weighted Average Exercise Price Exercisable options held by related party
$ 0.27 
Weighted Average Remaining Contractual Life (in years), Outstanding
4 years 4 months 17 days 
Weighted Average Remaining Contractual Life (in years), Granted
4 years 10 months 21 days 
Weighted Average Remaining Contractual Life (in years), Outstanding
4 years 9 months 7 days 
Weighted Average Remaining Contractual Life (in years), Exercisable
4 years 7 months 24 days 
Weighted Average Remaining Contractual Life (in years), Outstanding options held by related party
4 years 9 months 7 days 
Weighted Average Remaining Contractual Life (in years), Exercisable options held by related party
4 years 7 months 24 days 
Stockholders' Deficit (Details 2) (USD $)
6 Months Ended
Jun. 30, 2017
Stockholders' Deficit [Abstract]
 
Options
15,399,990 
Value
$ 457,179 
Purpose for Grant
Service Rendered 
Stockholders' Deficit (Details 3)
6 Months Ended 12 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Expected dividends
0.00% 
 
Expected life of warrant
5 years 
 
Warrants [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.40 
 
Expected dividends
0.00% 
0.00% 
Expected volatility, minimum
62.63% 
73.44% 
Expected volatility, maximum
92.96% 
91.54% 
Risk free interest rate, minimum
1.77% 
1.13% 
Risk free interest rate, maximum
2.03% 
1.39% 
Expected life of warrant
5 years 
5 years 
Warrants [Member] |
Minimum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.20 
 
Warrants [Member] |
Maximum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.30 
 
Stockholders' Deficit (Details 4) (Warrants [Member], USD $)
6 Months Ended
Jun. 30, 2017
Warrants [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Options/Warrant, Outstanding
15,541,666 
Warrants, Granted
6,531,815 
Warrants, Exercised
   
Warrants, Forfeited/Cancelled
   
Options/Warrant, Outstanding
22,073,481 
Warrants, Exercisable
22,073,481 
Weighted Average Exercise Price, Outstanding
$ 0.36 
Weighted Average Exercise Price, Granted
$ 0.20 
Weighted Average Exercise Price, Exercised
   
Weighted Average Exercise Price, Forfeited/Cancelled
   
Weighted Average Exercise Price, Outstanding
$ 0.31 
Weighted Average Exercise Price, Exercisable
$ 0.31 
Stockholders' Deficit (Details 5) (Warrant [Member], USD $)
6 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Warrant [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Warrants Outstanding, Exercise price, Minimum
$ 0.20 
 
Warrants Outstanding, Exercise price, Maximum
$ 0.40 
 
Warrants Outstanding, Number Outstanding
22,073,481 
15,541,666 
Warrants Outstanding, Weighted Average Remaining Contractual Life (in years)
3 years 8 months 12 days 
 
Warrants Outstanding, Weighted Average Exercise Price
$ 0.31 
$ 0.36 
Warrants Exercisable , Number Exercisable
22,073,481 
 
Warrants Exercisable, Weighted Average Exercise Price
$ 0.31 
 
Stockholders' Deficit (Details Textual) (USD $)
1 Months Ended 3 Months Ended 6 Months Ended 0 Months Ended 1 Months Ended 3 Months Ended 0 Months Ended 6 Months Ended 12 Months Ended 1 Months Ended 6 Months Ended 12 Months Ended 1 Months Ended 6 Months Ended
Aug. 31, 2016
Mar. 31, 2015
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
Jun. 30, 2017
Promissory Notes [Member]
Jun. 30, 2017
Convertible Notes Payable [Member]
Jun. 30, 2017
Notes Payable Related Party [Member]
Jun. 30, 2017
Convertible notes payable related party [Member]
Feb. 1, 2017
Common Stock [Member]
Jan. 30, 2017
Common Stock [Member]
Jun. 30, 2016
Stock Options [Member]
Jun. 30, 2015
Stock Options [Member]
Jun. 30, 2017
Stock Options [Member]
Feb. 13, 2015
Series A Preferred Stock [Member]
Jun. 30, 2017
Series A Preferred Stock [Member]
Dec. 31, 2015
Series A Preferred Stock [Member]
Dec. 31, 2016
Series A Preferred Stock [Member]
Dec. 21, 2015
Series B Preferred Stock [Member]
Jun. 30, 2017
Series B Preferred Stock [Member]
Dec. 31, 2015
Series B Preferred Stock [Member]
Dec. 31, 2016
Series B Preferred Stock [Member]
Aug. 31, 2016
Series D Convertible Preferred Stock [Member]
Jan. 29, 2016
Series D Convertible Preferred Stock [Member]
Jun. 30, 2017
Series D Convertible Preferred Stock [Member]
Jun. 30, 2017
Preferred Stock [Member]
Stockholders' Deficit (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, shares authorized
 
 
310,000,000 
 
310,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100,000,000 
Series B Preferred stock issued with warrants, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,000 
 
 
 
 
 
Series A Preferred stock issued with warrants, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24,400 
 
 
 
 
 
 
 
 
 
Preferred stock, par value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.001 
 
$ 0.001 
$ 100.00 
$ 0.001 
 
$ 0.001 
 
$ 100 
 
 
Preferred stock, shares issued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32,166 
 
33,314 
 
8,063 
 
7,000 
 
 
 
 
Preferred stock, shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32,166 
 
33,314 
 
8,063 
 
7,000 
 
 
 
 
Common stock, shares authorized
 
 
300,000,000 
 
300,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par value
 
 
$ 0.001 
 
$ 0.001 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares issued
 
 
38,401,322 
 
33,894,582 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding
 
 
38,401,322 
 
33,894,582 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 91,400 
 
 
 
 
 
 
 
 
 
Convertible preferred stock, Shares
1,098,933 
 
1,148 
 
 
 
 
 
 
 
 
 
 
 
100,000 
700,000 
8,914 
 
20,000 
 
 
 
1,099 
2,100,000 
 
 
Aggregate intrinsic value of options outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,450,000 
 
 
 
 
 
 
 
 
 
Aggregate intrinsic value of options exercisable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
800,000 
 
 
 
 
 
 
 
 
 
Proceeds from the issuance of stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
700,000 
 
 
 
 
 
Stock-based compensation for stock options
 
 
 
 
 
 
 
 
 
463,619 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued for liquidating damages
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants associated value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.25 
 
 
 
$ 0.30 
 
 
 
 
$ 0.25 
 
Dividend rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.00% 
 
 
 
6.00% 
 
 
 
 
 
 
Dividend, description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Upon the occurrence of an Event of Default (as defined below) and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series A Stated Value. At the Company's option, such dividend payments may be made in (i) cash (ii) additional shares of Series A valued at the Series A Stated Value thereof, in an amount equal to 150% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series A, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series A Preferred. 
 
 
 
Upon the occurrence of an Event of Default as defined below and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series B Stated Value. At the Corporation's option, such dividend payments may be made in (i) cash (ii) additional shares of Series B valued at the Series B Stated Value thereof, in an amount equal to 100% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series B, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series B Preferred. 
 
 
 
 
 
 
Beneficial ownership by holder and affiliates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.99% 
 
 
 
4.99% 
 
 
 
 
4.99% 
 
Restricted stock issued during period
 
 
 
 
 
 
 
 
 
800,000 
2,946,740 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of interest to series B preferred stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of interest to series B preferred stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants issued
 
 
 
 
 
6,199,115.00 
114,700.00 
183,000 
35,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants grant date fair value
 
 
 
 
 
844,686 
14,214.28 
15,650 
2,245 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Settlement of vendor liabilities
 
 
 
 
 
 
 
 
 
 
353,732 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on settlement of vendor liabilities
 
 
$ 110,674 
    
 
 
 
 
 
 
$ 110,674 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subsequent Events (Details Textual) (Subsequent Events [Member], USD $)
0 Months Ended 1 Months Ended
Jul. 6, 2017
July 2017 Rosen Loan Agreement [Member]
Jul. 11, 2017
First July 2017 Note [Member]
Jul. 18, 2017
Second July 2017 Note [Member]
Jul. 21, 2017
Third July 2017 Loan Agreement [Member]
Jul. 24, 2017
Fourth July 2017 Note [Member]
Subsequent Events (Textual)
 
 
 
 
 
Convertible notes
$ 25,000 
$ 222,000 
$ 222,000 
$ 100,000 
$ 50,000 
Interest rate
10.00% 
8.50% 
8.50% 
10.00% 
8.50% 
Warrant term
5 years 
5 years 
5 years 
5 years 
5 years 
Warrants issued to purchase shares
18,750 
350,000 
350,000 
100,000 
78,750 
Warrant purchase price
$ 0.20 
$ 0.20 
$ 0.20 
 
$ 0.20 
Maturity date, description
Extending the maturity date to January 21, 2018. 
 
 
The maturity date of the Third July 2017 Note is May 21, 2017. 
Matures with interest and principal both due on April 24, 2018. 
Common stock conversion, description
 
The First July 2017 Note and accrued interest are convertible after January 11, 2018 at a conversion price of $0.20 per share, subject to adjustment. In connection with the First July 2017 Note the lender purchased 110,000 shares of the Company's restricted common stock for proceeds of $22,000. 
The Second July 2017 Note and accrued interest are convertible after January 11, 2018 at a conversion price of $0.20 per share, subject to adjustment. In connection with the Second July 2017 Note the lender purchased 110,000 shares of the Company's restricted common stock for proceeds of $22,000. 
 
The Fourth July 2017 Note and accrued interest are convertible after January 24, 2018 at a conversion price of $0.20 per share, subject to adjustment. In connection with the Fourth July 2017 Note the lender purchased 25,000 shares of the Company's restricted common stock for proceeds of $5,000.