JERRICK MEDIA HOLDINGS, INC., 10-K filed on 3/31/2017
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2016
Mar. 30, 2017
Jun. 30, 2016
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
Jerrick Media Holdings, Inc. 
 
 
Entity Central Index Key
0001357671 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2016 
 
 
Document Fiscal Period Focus
FY 
 
 
Document Fiscal Year Focus
2016 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Smaller Reporting Company 
 
 
Entity Public Float
 
 
$ 4,260,750 
Entity Common Stock, Shares Outstanding
 
33,974,582 
 
Consolidated Balance Sheets (USD $)
Dec. 31, 2016
Dec. 31, 2015
Current Assets
 
 
Cash
$ 174,494 
$ 438,629 
Prepaid expenses
10,000 
   
Total Current Assets
184,494 
438,629 
Property and equipment, net
71,829 
70,506 
Security deposit
38,445 
17,000 
Minority investment in business
83,333 
83,333 
Total Assets
378,101 
609,468 
Current Liabilities
 
 
Accounts payable and accrued liabilities
1,387,068 
678,955 
Accrued dividends
259,170 
81,936 
Demand loan
10,366 
   
Convertible Notes, net of debt discount and Issuance costs
268,823 
   
Current portion of capital lease payable
3,524 
3,524 
Note payable - related party, net of debt discount
1,350,325 
   
Note payable, net of debt discount
30,579 
   
Line of credit
235,141 
202,422 
Total Current Liabilities
3,544,996 
966,837 
Non-current Liabilities:
 
 
Capital lease payables
1,208 
3,095 
Total Non-current Liabilities
1,208 
3,095 
Total Liabilities
3,546,204 
969,932 
Commitments and contingencies
   
   
Stockholders' Deficit
 
 
Common stock par value $0.001: 90,000,000 shares authorized; 33,894,592 and 28,500,000 issued and outstanding as of December 31, 2016 and 2015 respectively
33,895 
28,500 
Additional paid in capital
10,075,991 
5,319,835 
Accumulated deficit
(13,277,981)
(5,708,839)
Total Stockholders' Equity
(3,168,103)
(360,464)
Total Liabilities and Stockholders' Deficit
378,101 
609,468 
Series A Preferred stock
 
 
Stockholders' Deficit
 
 
Preferred stock value
33 
33 
Total Stockholders' Equity
33 
33 
Series B Preferred stock
 
 
Stockholders' Deficit
 
 
Preferred stock value
Total Stockholders' Equity
Series D Preferred stock
 
 
Stockholders' Deficit
 
 
Preferred stock value
   
Total Stockholders' Equity
$ 1 
    
Consolidated Balance Sheets (Parenthetical) (Series D Preferred stock, USD $)
Dec. 31, 2016
Dec. 31, 2015
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares issued
914 
Preferred stock, shares outstanding
914 
Consolidated Statements of Operations (USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Income Statement [Abstract]
 
 
Net revenue
$ 223,927 
$ 767,527 
Cost of revenue
43,321 
183,528 
Gross margin
180,606 
583,999 
Operating expenses
 
 
Compensation
1,134,170 
917,586 
Consulting fees
1,350,917 
1,176,968 
Share based payments
332,711 
820,652 
General and administrative
1,054,564 
519,836 
Total operating expenses
3,872,362 
3,435,042 
Loss from operations
(3,691,756)
(2,851,043)
Other income (expenses)
 
 
Interest expense
(3,710,151)
(488,725)
Gain on the sale of assets
10,000 
   
Other income (expenses), net
(3,700,151)
(488,725)
Loss before income tax provision
(7,391,907)
(3,339,768)
Income tax provision
   
   
Net loss
$ (7,391,907)
$ (3,339,768)
Per-share data
 
 
Basic and diluted loss per share
$ (0.23)
$ (0.12)
Weighted average number of common shares outstanding
32,046,149 
28,500,000 
Consolidated Statements of Changes in Stockholders' Equity (USD $)
Total
Common Stock
Additional Paid In Capital
Accumulated Deficit
Series A Preferred Stock
Series B Preferred Stock
Series D Preferred Stock
Beginning balance at Dec. 31, 2014
$ (1,454,602)
$ 27,001 
$ 805,532 
$ (2,287,135)
    
    
    
Beginning balance, shares at Dec. 31, 2014
 
27,000,000 
 
 
   
 
 
Common stock issued for services
375,000 
1,500 
373,500 
   
   
   
   
Common stock issued for services, shares
 
1,500,000 
 
 
 
 
 
Series A Preferred stock issued with warrants
2,450,000 
   
2,449,976 
   
24 
   
   
Series A Preferred stock issued with warrants, shares
 
 
 
 
24,400 
 
 
Conversion of secured convertible notes and interest
891,400 
   
891,391 
   
   
   
Conversion of secured convertible notes and interest, shares
 
 
 
 
8,914 
 
 
Series B Preferred stock issued with warrants
700,000 
   
700,000 
   
   
   
Series B Preferred stock issued with warrants, shares
 
 
 
 
 
7,000 
 
Stock issuance costs padi in cash
(406,981)
   
(406,981)
   
   
   
   
Stock options and stock warrants
445,652 
   
445,652 
   
   
   
   
Dividends
(81,936)
 
 
(81,936)
 
 
 
Net loss for the year ended
(3,339,768)
   
   
(3,339,768)
   
   
   
Liquidated damages on preferred stock and warrants
   
 
 
 
 
 
 
Stock warrants issued with convetible notes
60,771 
   
60,771 
   
   
   
   
Ending balance at Dec. 31, 2015
(360,464)
28,500 
5,319,835 
(5,708,839)
33 
   
Ending balance, shares at Dec. 31, 2015
 
28,500,000 
 
 
33,314 
7,000 
 
Dividends
(177,234)
   
   
(177,234)
   
   
   
Net loss for the year ended
(7,391,907)
   
   
(7,391,907)
   
   
   
Net proceeds from issuance of common stock and warrants
344,248 
667 
343,581 
   
   
   
   
Net proceeds from issuance of common stock and warrants, shares
 
666,666 
 
 
 
 
 
Issuance of common stock for cashless exercise of warrants
   
393 
(393)
   
   
   
   
Issuance of common stock for cashless exercise of warrants, shares
 
392,764 
 
 
 
 
 
Conversion of series D preferred stock to common stock
   
1,099 
(1,098)
   
 
 
(1)
Conversion of series D preferred stock to common stock, shares
 
1,098,933 
 
 
 
 
(1,099)
Conversion of interest to series B preferred stock
108,844 
   
108,843 
   
   
   
Conversion of interest to series B preferred stock, shares
 
 
 
 
 
1,063 
 
Conversion of common stock to Series D preferred stock
   
   
   
   
   
Conversion of common stock to Series D preferred stock, shares
 
 
 
 
 
 
2,013 
Common stock issued commissions and placement agreement
322 
322 
   
   
   
   
   
Common stock issued commissions and placement agreement, shares
 
322,015 
 
 
 
 
 
Issuance of common stock for cash
2,626 
2,626 
   
   
   
   
   
Issuance of common stock for cash, shares
 
2,626,308 
 
 
 
 
 
Recapitalization
288 
288 
   
   
   
   
   
Recapitalization, shares
 
287,896 
 
 
 
 
 
Liquidated damages on preferred stock and warrants
3,329,993 
   
3,329,993 
   
   
   
   
Stock based compensation
484,692 
   
484,692 
   
   
   
   
Stock warrants issued with convetible notes
255,203 
   
255,203 
   
   
   
   
Stock warrants issued with note payable - related party
193,652 
   
193,652 
   
   
   
   
Stock warrants issued with promissory note
41,633 
   
41,633 
   
   
   
   
Ending balance at Dec. 31, 2016
$ (3,168,103)
$ 33,895 
$ 10,040,491 
$ (13,277,981)
$ 33 
$ 8 
$ 1 
Ending balance, shares at Dec. 31, 2016
 
33,894,582 
 
 
33,314 
8,063 
914 
Consolidated Statements of Cash Flows (USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
Net loss
$ (7,391,907)
$ (3,339,768)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation
42,634 
10,001 
Accretion of debt issuance costs
   
   
Accretion of debt discount
235,622 
211,587 
Share-based compensation
463,503 
820,652 
Changes in operating assets and liabilities:
 
 
Prepaid expenses
(10,000)
   
Inventory
   
21,861 
Security deposit
(21,445)
6,000 
Accounts payable and accrued expenses
834,487 
(18,015)
Liquidated damages
3,329,993 
   
Net Cash Used In Operating Activities
(2,517,113)
(2,287,682)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
Cash paid for property and equipment
(43,957)
(69,198)
Net Cash Used In Investing Activities
(43,957)
(69,198)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
Repayment of loans
(107,887)
(72,573)
Net proceeds from issuance of notes
146,000 
   
Net proceeds from issuance of preferred stock
344,250 
2,743,019 
Proceeds from issuance of demand loan
10,366 
   
Proceeds from issuance of convertible note
550,000 
   
Repayment of convertible notes
(50,000)
   
Proceeds from issuance of note payable - related party
1,446,500 
   
Repayment of note payable - related party
(1,500)
   
Proceeds from issuance of line of credit
39,195 
   
Repayment of line of credit
(24,007)
   
Cash paid for debt issuance costs
(55,982)
   
Net Cash Provided By Financing Activities
2,296,936 
2,670,446 
Net Change in Cash
(264,135)
313,566 
Cash - Beginning of Year
438,629 
125,063 
Cash - End of Year
174,494 
438,629 
Cash Paid During the Year for:
 
 
Income taxes
   
   
Interest
5,738 
   
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
Conversion of interest
108,843 
   
Debt discount on convertible note
24,425 
   
Debt discount on related party note payable
218,800 
   
Accrued dividends
177,234 
   
Warrants at issuance of debt
490,488 
   
Liquidated damages
3,329,993 
   
Conversion of bridge notes
    
$ 800,000 
Organization and Operations
Organization and Operations

Note 1 - Organization and Operations

 

Great Plains Holdings, Inc. (the “Company”) was incorporated under the laws of the state of Nevada on December 30, 1999 under the name LILM, Inc. The Company changed its name on December 3, 2013 as part of its plans to diversify its business through the acquisition and operation of commercial real estate, including but not limited to self-storage facilities, apartment buildings, 55+ senior manufactured homes communities, and other income producing properties. Historically, the Company has principally engaged in manufacture and marketing of the LiL Marc urinal used in the training of young boys, but is changing its focus to residential and commercial rental real estate as well as exploring other business opportunities.

 

On February 5, 2016, Great Plains Holdings, Inc. a Nevada corporation (“GTPH”, or the “Company”), GPH Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of GTPH (“Merger Sub”), and Jerrick Ventures, Inc., a privately-held Nevada corporation headquartered in New Jersey (“Jerrick”), entered into an Agreement and Plan of Merger (the “Agreement”) pursuant to which the Merger Sub was merged with and into Jerrick, with Jerrick surviving as a wholly-owned subsidiary of GTPH (the “Merger”). The transaction (the “Closing”) took place on February 5, 2016 (the “Closing Date”). The Company acquired, through a reverse triangular merger, all of the outstanding capital stock of Jerrick in exchange for issuing Jerrick’s shareholders (the “Jerrick Shareholders”), pro-rata, a total of 28,500,000 shares of the Company’s common stock. GTPH shall assume 33,414.89 shares of Jerrick’s Series A Convertible Preferred Stock (the “Series A Preferred”) and 8,063.33 shares of Series B Convertible Preferred Stock (the “Series B Preferred”) and file the appropriate certificates of designation to reflect the rights, preferences and privileges of the Jerrick’s Series A Preferred and Series B Preferred. Jerrick shareholders that hold either Series A Preferred or Series B Preferred will be able to exchange such shares for the equivalent in GTPH on a one for one basis. Additionally, GTPH shall assume 12,391,667 outstanding common stock purchase warrants of Jerrick such that each Jerrick shareholder that holds a warrant to purchase shares of Jerrick common stock will by virtue of the Merger, be able to purchase the equivalent number of shares of GTPH Common Stock under the same terms and conditions.

   

In connection with the Merger, on February 5, 2016, the Company and Kent Campbell entered into a Spin-Off Agreement (the “Spin-Off Agreement”), pursuant to which Mr. Campbell purchased from the Company (i) all of the Company’s interest in Ashland Holdings, LLC, a Florida limited liability company, and (ii) all of the Company’s interest in Lil Marc, Inc., a Utah corporation, in exchange for the cancellation of 781,818 shares of the Parent Company’s Common Stock held by Mr. Campbell. In addition, Mr. Campbell assumed all debts, obligations and liabilities of the Company existing prior to the Merger, pursuant to the terms and conditions of the Spin-Off Agreement.

 

On February 5, 2016 and in conjunction with the Merger, the Company entered into a Share Exchange Agreement with Kent Campbell, Denis Espinoza and Sarah Campbell (the “Exchange Agreement”). Pursuant to the Exchange Agreement, (i) Kent Campbell cancelled 363,636 shares of the Company’s common stock, 6,000 shares of the Company’s Series A Preferred Stock and 10,000 shares of the Company’s Series B Preferred Stock in exchange for 1,648,881 shares of the Company’s Series D Preferred Stock, (ii) Denis Espinoza cancelled 58,951 shares of the Company’s common stock and 4,000 shares of the Company’s Series A Preferred Stock in exchange for 265,676 shares of the Company’s Series D Preferred Stock, and (iii) Sarah Campbell cancelled 21,818 shares of the Company’s common stock in exchange for 98,933 shares of the Company’s Series D Preferred Stock. 

 

In connection with the Statutory Merger, the Company changed its name to Jerrick Media Holdings, Inc.

 

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

 

The Merger is being accounted for as a “Reverse Business Combination,” and Ventures is deemed to be the accounting acquirer in the merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the Reverse Business Combination will be those of Ventures, and the consolidated financial statements after completion of the Merger will include the assets and liabilities of Ventures, historical operations of Ventures and combined operations of Ventures and Jerrick Media Holdings, Inc. from the Closing Date of the Merger.

 

The Reverse Business Combination will be treated as a recapitalization of the Company for financial accounting purposes. The historical financial statements of Predecessor before the Reverse Business Combination will be replaced with the historical financial statements of Ventures before the Reverse Business Combination in all future filings with the Securities and Exchange Commission (the “SEC”).

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

Note 2 - Significant and Critical Accounting Policies and Practices

 

Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

 

Basis of Presentation

 

The Company’s 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”).

 

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 applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10, all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

 

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 
      
Astoria Surgical Supplies North LLC The State of New Jersey  100%
       
Castle 6 Productions LLC The State of New Jersey  100%
       
Filthy Gorgeous LLC The State of Delaware  100%
       
Geek Room LLC The State of Delaware  100%
       
Graphic Expression Corporate Collectibles LLC The State of Delaware  100%
       
Guccione Stores LLC The State of New Jersey  100%
       
iLongevity LLC The State of New Jersey  100%
       
JAJ Enterprises LLC The State of Delaware  100%
       
Jerrick Ventures LLC The State of Delaware  100%
       
Miss Filthy LLC The State of Delaware  100%
       
Next Geek Thing LLC The State of Delaware  100%
       
No One’s Pet LLC The State of New Jersey  100%
       
OMNI Reboot LLC The State of Delaware  100%
       
Romper Zombie LLC The State of Delaware  100%
       
Steam Wars LLC The State of Delaware  100%

 

All inter-company balances and transactions have been eliminated.

 

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. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include: (i) current sales data and historical return rates, (ii) estimates of future demand, and (iii) competitive pricing pressures.

 

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 pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventory to net realizable value. 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 $21,861 as of December 31, 2016 and 2015, respectively, due to slow moving inventory.

 

There was no lower of cost or market adjustments for the reporting period ended December 31, 2016 or 2015.

 

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

 

The Company accounts for marketable debt and equity securities, available for sale, in accordance with sub-topic 320-10 of the FASB Accounting Standards Codification (“Sub-topic 320-10”).

 

Pursuant to Paragraph 320-10-35-1, investments in debt securities that are classified as available for sale and equity securities that have readily determinable fair values that are classified as available for sale shall be measured subsequently at fair value in the consolidated balance sheets at each balance sheet date. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized except an available-for-sale security that is designated as being hedged in a fair value hedge, from which all or a portion of the unrealized holding gain and loss of shall be recognized in earnings during the period of the hedge, pursuant to paragraphs 815-25-35-1 through 815-25-35-4.

 

The Company follows Paragraphs 320-10-35-17 through 320-10-35-34E and assess whether an investment is impaired in each reporting period. An investment is impaired if the fair value of the investment is less than its cost. Impairment indicators include, but are not limited to the following: a. a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee; b. a significant adverse change in the regulatory, economic, or technological environment of the investee; c. a significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates; d. a bona fide offer to purchase (whether solicited or unsolicited), an offer by the investee to sell, or a completed auction process for the same or similar security for an amount less than the cost of the investment; e. factors that raise significant concerns about the investee's ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants. If the fair value of an investment is less than its cost basis at the balance sheet date of the reporting period for which impairment is assessed, the impairment is either temporary or other than temporary. Pursuant to Paragraph 320-10-35-34, if it is determined that the impairment is other than temporary, then an impairment loss shall be recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. The measurement of the impairment shall not include partial recoveries after the balance sheet date. The fair value of the investment would then become the new basis of the investment and shall not be adjusted for subsequent recoveries in fair value. For presentation purpose, the entity shall present the total other-than-temporary impairment in the statement of earnings with an offset for the amount of the total other-than-temporary impairment that is recognized in other comprehensive income, in accordance with paragraph 320-10-35-34D, if any, pursuant to Paragraph 320-10-45-8A; and separately present, in the financial statement in which the components of accumulated other comprehensive income are reported, amounts recognized therein related to held-to-maturity and available-for-sale debt securities for which a portion of an other-than-temporary impairment has been recognized in earnings pursuant to Paragraph 320-10-45-9A. Pursuant to Paragraphs 320-10-35-36 and 37 the entire change in the fair value of foreign-currency-denominated available-for-sale debt securities shall be reported in other comprehensive income and An entity holding a foreign-currency-denominated available-for-sale debt security is required to consider, among other things, changes in market interest rates and foreign exchange rates since acquisition in determining whether an other-than-temporary impairment has occurred. Pursuant to FASB ASC Paragraph 320-10-50-2, the entity shall disclose all of the following by major security type as of each date for which a statement of financial position is presented: (a) cost basis (net of amortization of debt discount for debt securities), aggregate fair value, total other-than-temporary impairment recognized in accumulated other comprehensive income; (b) Total gains for securities with net gains in accumulated other comprehensive income; (c) Total losses for securities with net losses in accumulated other comprehensive income; and (d) Information about the contractual maturities of those securities as of the date of the most recent statement of financial position presented.

 

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. 


Commitments and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

  

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

 

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 for Obtaining Employee Services

 

The Company accounts for share-based payment transactions issued to employees under the guidance of the Topic 718 “Compensation—Stock Compensation” of the FASB Accounting Standards Codification (“ASC Topic 718”).

 

Pursuant to ASC Section 718-10-20 an employee is an individual over whom the grantor of a share-based compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. Internal Revenue Service (“IRS”) Revenue Ruling 87-41. A non-employee director does not satisfy this definition of employee. Nevertheless, non-employee directors acting in their role as members of a board of directors are treated as employees if those directors were elected by the employer’s shareholders or appointed to a board position that will be filled by shareholder election when the existing term expires. However, that requirement applies only to awards granted to non-employee directors for their services as directors. Awards granted to non-employee directors for other services shall be accounted for as awards to non-employees.

 

Pursuant to ASC Paragraphs 718-10-30-2 and 718-10-30-3 a share-based payment transaction with employees shall be measured based on the fair value of the equity instruments issued and an entity shall account for the compensation cost from share-based payment transactions with employees in accordance with the fair value-based method, i.e., the cost of services received from employees in exchange for awards of share-based compensation generally shall be measured based on the grant-date fair value of the equity instruments issued or the fair value of the liabilities incurred/settled.

 

Pursuant to ASC Paragraphs 718-10-30-6 and 718-10-30-9 the measurement objective for equity instruments awarded to employees is to estimate the fair value at the grant date of the equity instruments that the entity is obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments (for example, to exercise share options). That estimate is based on the share price and other pertinent factors, such as expected volatility, at the grant date. As such, the fair value of an equity share option or similar instrument shall be estimated using a valuation technique such as an option pricing model. For this purpose, a similar instrument is one whose fair value differs from its intrinsic value, that is, an instrument that has time value.

 

If the Company’s common shares are traded in one of the national exchanges, the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares are thinly traded the use of share prices established in its most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

  

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

 

 a.The exercise price of the option.
 b.The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding.  Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method , i.e., expected term = ((vesting term + original contractual term) / 2) , if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
 c.The current price of the underlying share.
 d.The expected volatility of the price of the underlying share for the expected term of the option.  Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement.  Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.  The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.
 e.The expected dividends on the underlying share for the expected term of the option.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
 f.The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

 

Pursuant to ASC Paragraphs 718-10-30-11 and 718-10-30-17 a restriction that stems from the forfeitability of instruments to which employees have not yet earned the right, such as the inability either to exercise a non-vested equity share option or to sell non-vested shares, is not reflected in estimating the fair value of the related instruments at the grant date. Instead, those restrictions are taken into account by recognizing compensation cost only for awards for which employees render the requisite service and a non-vested equity share or non-vested equity share unit awarded to an employee shall be measured at its fair value as if it were vested and issued on the grant date.

 

Pursuant to ASC Paragraphs 718-10-35-2 and 718-10-35-3 the compensation cost for an award of share-based employee compensation classified as equity shall be recognized over the requisite service period, with a corresponding credit to equity (generally, paid-in capital). The requisite service period is the period during which an employee is required to provide service in exchange for an award, which often is the vesting period. The total amount of compensation cost recognized at the end of the requisite service period for an award of share-based compensation shall be based on the number of instruments for which the requisite service has been rendered (that is, for which the requisite service period has been completed). An entity shall base initial accruals of compensation cost on the estimated number of instruments for which the requisite service is expected to be rendered. That estimate shall be revised if subsequent information indicates that the actual number of instruments is likely to differ from previous estimates. The cumulative effect on current and prior periods of a change in the estimated number of instruments for which the requisite service is expected to be or has been rendered shall be recognized in compensation cost in the period of the change. Previously recognized compensation cost shall not be reversed if an employee share option (or share unit) for which the requisite service has been rendered expires unexercised (or unconverted).

 

Under the requirement of ASC Paragraph 718-10-35-8 the Company made a policy decision to recognize compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.

 

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under the guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

  

Pursuant to ASC paragraphs 505-50-25-6 and 505-50-25-7, a grantor shall recognize the goods acquired or services received in a share-based payment transaction when it obtains the goods or as services are received. A grantor may need to recognize an asset before it actually receives goods or services if it first exchanges share-based payment for an enforceable right to receive those goods or services. Nevertheless, the goods or services themselves are not recognized before they are received. If fully vested, nonforfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, nonforfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

 

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

 

Pursuant to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty's performance is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued; however, if the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

 

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

 

 a.The exercise price of the option.
 b.The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
 c.The current price of the underlying share.
 d.The expected volatility of the price of the underlying share for the expected term of the option.  Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement.  Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.  The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.
 e.The expected dividends on the underlying share for the expected term of the option.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
 f.The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

 

Pursuant to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

  

Deferred Tax Assets and Income Tax Provision

 

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

 

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.

 

Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (the “Indirect Method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments

 

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as a filer with the United States Securities & Exchange Commission (the “SEC”) considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

 

Recently Issued Accounting Pronouncements

 

In August 2014, the FASB issued the FASB Accounting Standards Update No. 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”).

 

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

 

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

  

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):

 

 a.Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)
 b.Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
 c.Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:

 

 a.Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern
 b.Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
 c.Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company has elected to adopt early application of ASU No. 2014-15.

 

In November 2015, the FASB issued the FASB Accounting Standards Update No. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). This update simplifies the presentation of deferred income taxes; the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position.

 

For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.

 

In January 2016, the FASB issued the FASB Accounting Standards Update No. 2016-01 “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”).

 

This Update makes limited amendments to the guidance in U.S. GAAP on the classification and measurement of financial instruments. The new standard significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. Some of the major changes as a result of the ASU 2016-01 are summarized below.

 

 Requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.
 Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.
 Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
 Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
 Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
 Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
 Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

 

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

 

In February 2016, the FASB issued ASU 2016-02, “Leases”, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

  

On March 30, 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation" which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. For public business entities, the ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Early adoption will be permitted in any interim or annual period for which financial statements have not yet been issued or have not been made available for issuance. If early adoption is elected, all amendments in the ASU that apply must be adopted in the same period. In addition, if early adoption is elected in an interim period, any adjustments should be reflected as of the beginning of the annual period that includes that interim period. The Company is in the process of evaluating the impact of the standard on its consolidated financial statements.

 

In April 2016, the FASB issued ASU 2016–10 “Revenue from Contract with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended render more detailed implementation guidance with the expectation to reduce the degree of judgment necessary to comply with Topic 606. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.

 

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard.

 

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 has elected to adopt early application of ASU No. 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”).

 

The Company's 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 consolidated financial statements, the Company had an accumulated deficit at December 31, 2016, 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, 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 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:

 

  December 31,
2016
  December 31,
2015
 
Computer Equipment $219,653   175,695 
Furniture and Fixtures  61,803   61,803 
   281,456   237,498 
Less: Accumulated Depreciation  (209,627)  (166,992)
  $71,829  $70,506 

 

Depreciation expense was $42,634 and $10,001 for the years ended December 31, 2016 and 2015, respectively.

Line of Credit
Line of Credit

Note 5 – Line of Credit

 

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 has been in payment default since March 19, 2010. The Company does not believe it is probable that the loan will be called or that the interest rate shall be increased to the default interest rate due to the fact that the Company is current and has been current since the maturity date with its monthly installment payment obligation.

 

The balance outstanding on the revolving note at December 31, 2016 and 2015 was $219,176 and $202,422, respectively.

Note Payable
Note Payable

Note 6 –Note Payable

 

On October 24, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with an individual (the “Lender”), pursuant to which on October 24, 2016 (the “Closing Date”), the Lender issued the Company a promissory note of $15,000 (the “Loan”).

 

The maturity date of the Loan is April 24, 2017 (the “Maturity Date”). Pursuant to the Loan Agreement, the Loan bears interest at a rate of 9% per annum. All outstanding principal, accrued and unpaid interest and other amounts due under the Loan are due on the Maturity Date.

 

As additional consideration for entering in the Loan Agreement, the Company issued Lender a warrant to purchase 30,000 shares of the Company’s common stock with an exercise price of $0.30 per share (the “Warrant”). The Warrant has a term of five (5) years

 

On October 25, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with an individual (the “Lender”), pursuant to which on October 25, 2016 (the “Closing Date”), the Lender issued the Company a promissory note of $25,000 (the “Loan”).

 

The maturity date of the Loan is April 25, 2017 (the “Maturity Date”). Pursuant to the Loan Agreement, the Loan bears interest at a rate of 9% per annum. All outstanding principal, accrued and unpaid interest and other amounts due under the Loan are due on the Maturity Date.

 

As additional consideration for entering in the Loan Agreement, the Company issued Lender a warrant to purchase 50,000 shares of the Company’s common stock with an exercise price of $0.30 per share (the “Warrant”). The Warrant has a term of five (5) years.

 

As of December 31, 2016, the total outstanding balance of notes payable was $30,579, net of debt discount of $9,421.

Convertible Note Payable
Convertible Note Payable

Note 7 – Convertible Note Payable

 

On December 2, 2015, the Company issued a convertible note to a third party lender totaling $100,000. The note accrues interest at 12% per annum and matures with interest and principal both due on December 1, 2016. In addition the Company issued a warrant to purchase 300,000 shares of Company common stock. The note and accrued interest are convertible at a conversion price of $0.35 per share subject to adjustment.

 

The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $0.35 per share for a period of five years from the issue date.

 

On December 21, 2015, the notes were automatically converted into Series B preferred stock.

 

On March 17, 2016, the Company issued a convertible note to a third party lender totaling $200,000. The note accrues interest at 12% per annum and matures with interest and principal both due on April 21, 2016. In addition the Company issued a warrant to purchase 150,000 shares of Company common stock. The note and accrued interest are convertible at a conversion price as defined.

 

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.

  

On May 27, 2016, the notes and accrued interest were paid off in full satisfaction.

 

On August 2, 2016, the Company issued a convertible note to a third party lender totaling $50,000. The note accrues interest equal to 10% of the principal balance and matures with interest and principal both due on August 31, 2016. The note and accrued interest are convertible at a conversion price as defined. On August 22, 2016, the notes and accrued interest were paid off in full satisfaction.

 

During the months of November and December 2016, the Company issued a convertible notes to third party lenders totaling $400,000. The note accrues interest at 10% per annum and mature with interest and principal both due on November 1, 2017. In addition the Company issued a warrant to purchase 400,000 shares of Company common stock. The note and accrued interest are convertible at a conversion price as defined.

 

The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $0.30 per share for a period of five years from the issue date.

 

On December 27, 2016, the Company issued a convertible note to a third party lender totaling $100,000. The 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 note and accrued interest are convertible at a conversion price of $0.30 per share subject to adjustment.

 

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.

 

As of December 31, 2016, the total outstanding balance of convertible notes payable was $268,823, net of debt discount and debt issuance costs of $184,398 and $46,779, respectively.

Related Party Loan
Related Party Loan

Note 8 – Related Party Loan

 

On May 26, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with Arthur Rosen, an individual (the “Lender”), pursuant to which on May 26, 2016 (the “Closing Date”), the Lender issued the Company a secured term loan of $1,000,000 (the “Loan”). In connection with the Loan Agreement, on May 26, 2016, the Company and Lender entered into a security agreement (the “Security Agreement”), pursuant to which the Company granted to Lender a senior security interest in substantially all of the Company’s assets as security for repayment of the Loan.

  

The maturity date of the Loan is May 26, 2017 (the “Maturity Date”). Pursuant to the Loan Agreement, the Loan bears interest at a rate of 12.5% per annum, compounded annually and payable on the Maturity Date. All outstanding principal, accrued and unpaid interest and other amounts due under the Loan are due on the Maturity Date.

 

As additional consideration for entering in the Loan Agreement, the Company issued Lender a warrant to purchase 1,000,000 shares of the Company’s common stock with an exercise price of $0.40 per share (the “Warrant”). The Warrant has a term of five (5) years and contains anti-dilution provisions as further described therein.

 

On September 12, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with Arthur Rosen, an individual (the “Lender”), pursuant to which on September 12, 2016 (the “Closing Date”), the Lender issued the Company a promissory note of $100,000 (the “Loan”).

 

The original maturity date of the Loan was October 12, 2016 (the “Maturity Date”). Pursuant to the Loan Agreement, the Loan bears interest at a rate of 12% per annum. All outstanding principal, accrued and unpaid interest and other amounts due under the Loan are due on the Maturity Date. On October 12, 2016 the Company entered into an amendment to the note. The note’s Maturity Date was extended 90 days.

 

As additional consideration for entering in the Loan Agreement, the Company issued Lender a warrant to purchase 150,000 shares of the Company’s common stock with an exercise price of $0.40 per share (the “Warrant”). The Warrant has a term of five (5) years.

 

On September 20, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with 202 S Dean LLC, a company partially owned by an officer of the Company, (the “Lender”), pursuant to which on September 20, 2016 (the “Closing Date”), the Lender issued the Company a promissory note of $10,000 (the “Loan”).

 

The maturity date of the Loan is March 20, 2017 (the “Maturity Date”). Pursuant to the Loan Agreement, the Loan bears interest at a rate of 10% per annum.

 

As additional consideration for entering in the Loan Agreement, the Company issued Lender a warrant to purchase 235,000 shares of the Company’s common stock with an exercise price of $0.40 per share (the “Warrant”). The Warrant has a term of five (5) years.

 

On October 13, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with Chris Gordon, an individual (the “Lender”), pursuant to which on October 13, 2016 (the “Closing Date”), the Lender issued the Company a promissory note of $50,000 (the “Loan”).

 

The original maturity date of the Loan was November 12, 2016 (the “Maturity Date”). Pursuant to the Loan Agreement, the Loan bears interest at a rate of 12% per annum. All outstanding principal, accrued and unpaid interest and other amounts due under the Loan are due on the Maturity Date. The Company is currently in payment default.

 

As additional consideration for entering in the Loan Agreement, the Company issued Lender a warrant to purchase 50,000 shares of the Company’s common stock with an exercise price of $0.40 per share (the “Warrant”). The Warrant has a term of five (5) years.

 

On October 31, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with Arthur Rosen, an individual (the “Lender”), pursuant to which on October 31, 2016 (the “Closing Date”), the Lender issued the Company a promissory note of $10,000 (the “Loan”).

 

The original maturity date of the Loan was November 10, 2016 (the “Maturity Date”). Pursuant to the Loan Agreement, the Loan bears interest at a rate of 10% per annum. All outstanding principal, accrued and unpaid interest and other amounts due under the Loan are due on the Maturity Date. The Company is currently in payment default.

 

As additional consideration for entering in the Loan Agreement, the Company issued Lender a warrant to purchase 10,000 shares of the Company’s common stock with an exercise price of $0.30 per share (the “Warrant”). The Warrant has a term of five (5) years.

 

On December 21, 2016, the Company entered into a loan agreement (the “Loan Agreement”) with Chris Gordon, an individual (the “Lender”), pursuant to which on December 21, 2016 (the “Closing Date”), the Lender issued the Company a promissory note of $275,000 (the “Loan”).

 

The maturity date of the Loan is January 20, 2017 (the “Maturity Date”). Pursuant to the Loan Agreement, the Loan bears interest at a rate of 10% per annum. All outstanding principal, accrued and unpaid interest and other amounts due under the Loan are due on the Maturity Date. The Company is currently in payment default.

 

As additional consideration for entering in the Loan Agreement, the Company issued Lender a warrant to purchase 166,666 shares of the Company’s common stock with an exercise price of $0.40 per share (the “Warrant”). The Warrant has a term of five (5) years.

 

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.

Capital Leases Payable
Capital Leases Payable

Note 9 – Capital Leases Payable

 

Capital lease obligation consisted of the following:

 

    December 31, 2016  December 31,
2015
 
         
(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  $6,619 
           
  Less current maturities  (3,524)  (3,524)
           
  Capital lease obligation, net of current maturities  1,208   3,095 
           
  TOTAL CAPITAL LEASE OBLIGATION $4,732  $6,619 

 

The capital leases mature as follows:

 

2017: $1,208  $3,524 
2018:     $1,208 
Stockholders' Deficit
Stockholders' Deficit

Note 10 - Stockholders’ Deficit

 

Shares Authorized

 

Upon incorporation, the total number of shares of all classes of stock which the Company is authorized to issue is One Hundred Million (100,000,000) shares of which Ninety Million (90,000,000) shares shall be Common Stock, par value $0.001 per share and Ten Million (10,000,000) 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.

 

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 year ended December 31, 2016, the Company accrued $3,318,353 for liquidating damages on the Series A and $309,665 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 year ended December 31, 2016, the Company accrued $667,313 for liquidating damages on the Series B and $51,159 on the warrants associated with the Series B.

 

During the year ended December 31, 2016, the Company issued 1,063 shares of Series B upon conversion of interest totaling $108,844.


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.

 

During the year ended December 31, 2016, a holder of common stock converted to 2,013 shares of Series D.

 

Common Stock

 

During the year ended December 31, 2015, the Company awarded various employees, consultants and advisors 1,500,000 shares of common stock for services rendered. The Company recorded the shares based on the estimated fair value of the Company’s common stock at issuance ($0.25/per share). The Company recorded $375,000 in compensation expense.

 

On February 1, 2016, the Company issued 268,333 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.

 

On February 6, 2016, the Company entered into Stock Purchase Agreements (the “Purchase Agreements”) with three investors providing for the issuance and sale of an aggregate of 2,626,308 shares of the Company’s common stock, par value $0.001 per share, for an aggregate purchase price of $2,626.

 

On August 17, 2016, the Company entered into a subscription agreement (the “Subscription Agreement”) with an accredited investor for the sale of 666,666 shares of the Company’s Common Stock (the “Shares”) and warrants to purchase 333,333 shares of the Company’s Common Stock (the “Warrant”) for a purchase price of $250,000. The Warrant is exercisable at any time after the date of issuance and has a five year term. The Warrant is exercisable at price of $0.40 per share.

 

During the year ended December 31, 2016, the Company issued 392,764 common shares for cashless exercise of warrants.


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 year ended December 31, 2016 and 2015 are as follows:

 

  December 31, 2016  December 31, 2015 
Exercise price $ 0.25 - 0.40   $0.35 
Expected dividends  0%  0%
Expected volatility   73.44% - 90.05%  69.7
Risk free interest rate  1% - 1.39%  1.35%
Expected life of option  4.68 - 5 years   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, 2014 – outstanding  -   -   - 
Granted  500,000   0.25   5.0 
Exercised  -   -   - 
Cancelled/Modified  -   -   - 
Balance – December 31, 2015 – outstanding  500,000   0.25   4.93 
Balance –  December 31, 2015 – exercisable  500,000  $0.25   4.93 
             
Outstanding options held by related party – December 31, 2015  500,000  $0.25   4.93 
Exercisable options held by related party – December 31, 2015  500,000  $0.25   4.93 
             
Balance – December 31, 2015  500,000  $0.25   4.68 
Granted  1,750,000   0.36   5.0 
Exercised  -   -   - 
Cancelled/Modified  -   -   - 
Balance – December 31, 2016 – outstanding  2,250,000  $0.34   4.38 
Balance –  December 31, 2016 – exercisable  2,200,000  $0.34   4.38 
             
Outstanding options held by related party – December 31, 2016  2,250,000  $0.33   4.38 
Exercisable options held by related party – December 31, 2016  2,200,000  $0.30   4.38 

 

At December 31, 2016, the aggregate intrinsic value of options outstanding and exercisable was $47,500 and $47,500, respectively.

 

The following is a summary of the Company’s stock options granted during the year ended December 31, 2016:

 

  Options  Value  Purpose for Grant
  1,750,000  $231,035  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 year ended December 31, 2016 are as follows:

 

  December 31, 2016 December 31, 2015 
Exercise price $0.40 $0.35 
Expected dividends  0% 0%
Expected volatility  73.44% - 91.54% 69.7%
Risk free interest rate  1.13% - 1.39% 1.35%
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, 2014  2,470,000  $0.35 
Granted  8,280,000  $0.35 
Exercised  -  $- 
Forfeited/Cancelled  -  $- 
Outstanding – December 31, 2015  10,750,000  $0.35 
Exercisable – December 31, 2015  10,750,000  $0.35 
Granted  4,791,666  $0.40 
Exercised  -  $- 
Forfeited/Cancelled  -  $- 
Outstanding – December 31, 2016  15,541,666  $0.36 
Exercisable – December 31, 2016  14,958,333  $0.36 

  

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 
$0.35 – 0.40   15,541,666   3.75  $0.36   14,958,333  $0.36 

 

During the year ended December 31, 2016, a total of 80,000 warrants were issued with promissory notes (See Note 6 above). The warrants have a grant date fair value of $41,633 using a Black-Scholes option-pricing model and the above assumptions.

 

During the year ended December 31, 2016, a total of 575,000 warrants were issued with convertible notes (See Note 7 above). The warrants have a grant date fair value of $255,203 using a Black-Scholes option-pricing model and the above assumptions.

 

During the year ended December 31, 2016, a total of 226,666 warrants were issued with notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $255,203 using a Black-Scholes option-pricing model and the above assumptions.

 

Stock Incentive Plan

 

On December 9, 2015, Jerrick adopted the 2015 Stock Incentive and Award Plan (the “Plan”) which will provide for the issuance of up to 18,000,000 shares of the Company’s Common Stock.

 

The purpose of the Plan is to provide additional incentive to those officers, employees, consultants and non-employee directors of the Company and its parents, subsidiaries and affiliates whose contributions are essential to the growth and success of the Company’s business.

 

Eligible recipients of option awards are employees, officers, consultants or directors (including non-employee directors) of the Company or of any parent, subsidiary or affiliate of the Company. Upon recommendation from the Compensation Committee, the board has the authority to grant to any eligible recipient any options, restricted stock or other awards valued in whole or in part by reference to, or otherwise based on, our Common Stock.

 

The provisions of each option granted need not be the same with respect to each option recipient. Option recipients shall enter into award agreements with us, in such form as the board shall determine.


The Plan shall be administered by the Compensation Committee consisting of two or more independent, non-employee and outside directors. In the absence of such a Committee, the Board of the Company shall administer the Plan.

 

Each Option shall contain the following material terms:

 

 (i)the purchase price of each share of Common Stock with respect to Incentive Options shall be determined by the Committee at the time of grant, shall not be less than 100% of the Fair Market Value (defined as the closing price on the final trading day immediately prior to the grant on the principal exchange or quotation system on which the Common Stock is listed or quoted, as applicable) of the Common Stock of the Jerrick,  provided  that if the recipient of the Option owns more than ten percent (10%) of the total combined voting power of the Jerrick, the exercise price shall be at least 110% of the Fair Market Value;
   
 (ii)The purchase price of each share of Common Stock purchasable under a Non-qualified Option shall be at least 100% of the Fair Market Value of such share of Common Stock on the date the Non-qualified Option is granted,  unless  the Committee, in its sole and absolute discretion, determines to set the purchase price of such Non-qualified Option below Fair Market Value.
   
 (iii)the term of each Option shall be fixed by the Committee,  provided  that such Option shall not be exercisable more than five (5) years after the date such Option is granted, and  provided further  that with respect to an Incentive Option, if the recipient owns more than ten percent (10%) of the total combined voting power of the Jerrick, the Incentive Option shall not be exercisable more than five (5) years after the date such Incentive Option is granted;
   
 (iv)subject to acceleration in the event of a Change of Control of the Jerrick (as further described in the Plan), the period during which the Options vest shall be designated by the Committee or, in the absence of any Option vesting periods designated by the Committee at the time of grant, shall vest and become exercisable in equal amounts on each fiscal quarter of the Jerrick through the four (4) year anniversary of the date on which the Option was granted;
   
 (vi)no Option is transferable and each is exercisable only by the recipient of such Option except in the event of the death of the recipient; and
   
 (vii)with respect to Incentive Options, the aggregate Fair Market Value of Common Stock exercisable for the first time during any calendar year shall not exceed $100,000.

 

Each award of Restricted Stock is subject to the following material terms:

 

 (i)no rights to an award of Restricted Stock are granted to the intended recipient of Restricted Stock unless and until the grant of Restricted Stock is accepted within the period prescribed by the Compensation Committee;
   
 (ii)Restricted Stock shall not be delivered until they are free of any restrictions specified by the Compensation Committee at the time of grant;
   
 (iii)recipients of Restricted Stock have the rights of a stockholder of the Jerrick as of the date of the grant of the Restricted Stock;
   
 (iv)shares of Restricted Stock are forfeitable until the terms of the Restricted Stock grant have been satisfied or the employment with the Company is terminated; and
   
 (v)the Restricted Stock is not transferable until the date on which the Compensation Committee has specified such restrictions have lapsed.
Income Taxes
Income Taxes

Note 11 — Income Taxes

 

Deferred Tax Assets

 

At December 31, 2016, the Company has available for federal income tax purposes a net operating loss (“NOL”) carry-forwards of approximately $9,000,000 that may be used to offset future taxable income through the fiscal year ending December 31, 2035. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying consolidated financial statements since the Company believes that the realization of its net deferred tax asset of approximately $3,100,000 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance.

 

Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. The valuation allowance changed by approximately $1,900,000 and $1,200,000 for the years ended December 31, 2016 and 2015, respectively.

  

Components of deferred tax assets are as follows:

 

  December 31, 2016  December 31,
2015
 
Net deferred tax assets – Non-current:      
       
Expected income tax benefit from NOL carry-forwards $3,100,000  $1,910,000 
Less valuation allowance  (3,100,000)  (1,910,000)
Deferred tax assets, net of valuation allowance $-  $- 

 

Income Tax Provision in the Consolidated Statements of Operations

 

A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:

 

  For the Year Ended
December 31, 2016
  For the Year Ended
December 31, 2015
 
       
Federal statutory income tax rate  34.0%  34.0%
         
Change in valuation allowance on net operating loss carry-forwards  (34.0)%  (34.0)%
         
Effective income tax rate  0.0%  0.0%
Subsequent Events
Subsequent Events

Note 12 - Subsequent Events

 

The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.

 

Private Placement Offering:

 

On February 22, 2017, the Company  conducted the initial closing (the “Initial Closing”) of a private placement offering (the “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 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 with an original issue discount of six percent (6%) and warrants to purchase the Company’s common stock. Pursuant to the Subscription Agreements, the Company issued $975,511 aggregate principal amount of the 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 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 Warrants have a five-year term. Investors received 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 Offering received a 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 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 Notes and Warrants.

 

Issuance of Related Party Notes:

 

On January 25, 2017, the Company issued a related party an unsecured convertible promissory note in the amount fo $50,000.  The Note matures on April 14, 2017 and bears interest at 10%.  The Note is convertible at a rate of $0.30. 

 

On January 26, 2017, The Company issued a related party an unsecured promissory note in the amount of $50,000.  The Note matures on November 22, 2017 and bears interest at a rate of 10%.

 

On February 7, 2017, the Company issued a related party an unsecured promissory note in the amount of $10,000.  The Note matures on February 7, 2018 and bears interest at a rate of 10%.

Significant and Critical Accounting Policies and Practices (Policies)

Basis of Presentation

 

The Company’s 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”).

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 applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10, all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8, the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

 

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 
      
Astoria Surgical Supplies North LLC The State of New Jersey  100%
       
Castle 6 Productions LLC The State of New Jersey  100%
       
Filthy Gorgeous LLC The State of Delaware  100%
       
Geek Room LLC The State of Delaware  100%
       
Graphic Expression Corporate Collectibles LLC The State of Delaware  100%
       
Guccione Stores LLC The State of New Jersey  100%
       
iLongevity LLC The State of New Jersey  100%
       
JAJ Enterprises LLC The State of Delaware  100%
       
Jerrick Ventures LLC The State of Delaware  100%
       
Miss Filthy LLC The State of Delaware  100%
       
Next Geek Thing LLC The State of Delaware  100%
       
No One’s Pet LLC The State of New Jersey  100%
       
OMNI Reboot LLC The State of Delaware  100%
       
Romper Zombie LLC The State of Delaware  100%
       
Steam Wars LLC The State of Delaware  100%

 

All inter-company balances and transactions have been eliminated.

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. The Company reduces inventory for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include: (i) current sales data and historical return rates, (ii) estimates of future demand, and (iii) competitive pricing pressures.

 

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 pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventory to net realizable value. 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 $21,861 as of December 31, 2016 and 2015, respectively, due to slow moving inventory.

 

There was no lower of cost or market adjustments for the reporting period ended December 31, 2016 or 2015.

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

 

The Company accounts for marketable debt and equity securities, available for sale, in accordance with sub-topic 320-10 of the FASB Accounting Standards Codification (“Sub-topic 320-10”).

 

Pursuant to Paragraph 320-10-35-1, investments in debt securities that are classified as available for sale and equity securities that have readily determinable fair values that are classified as available for sale shall be measured subsequently at fair value in the consolidated balance sheets at each balance sheet date. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized except an available-for-sale security that is designated as being hedged in a fair value hedge, from which all or a portion of the unrealized holding gain and loss of shall be recognized in earnings during the period of the hedge, pursuant to paragraphs 815-25-35-1 through 815-25-35-4.

 

The Company follows Paragraphs 320-10-35-17 through 320-10-35-34E and assess whether an investment is impaired in each reporting period. An investment is impaired if the fair value of the investment is less than its cost. Impairment indicators include, but are not limited to the following: a. a significant deterioration in the earnings performance, credit rating, asset quality, or business prospects of the investee; b. a significant adverse change in the regulatory, economic, or technological environment of the investee; c. a significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates; d. a bona fide offer to purchase (whether solicited or unsolicited), an offer by the investee to sell, or a completed auction process for the same or similar security for an amount less than the cost of the investment; e. factors that raise significant concerns about the investee's ability to continue as a going concern, such as negative cash flows from operations, working capital deficiencies, or noncompliance with statutory capital requirements or debt covenants. If the fair value of an investment is less than its cost basis at the balance sheet date of the reporting period for which impairment is assessed, the impairment is either temporary or other than temporary. Pursuant to Paragraph 320-10-35-34, if it is determined that the impairment is other than temporary, then an impairment loss shall be recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. The measurement of the impairment shall not include partial recoveries after the balance sheet date. The fair value of the investment would then become the new basis of the investment and shall not be adjusted for subsequent recoveries in fair value. For presentation purpose, the entity shall present the total other-than-temporary impairment in the statement of earnings with an offset for the amount of the total other-than-temporary impairment that is recognized in other comprehensive income, in accordance with paragraph 320-10-35-34D, if any, pursuant to Paragraph 320-10-45-8A; and separately present, in the financial statement in which the components of accumulated other comprehensive income are reported, amounts recognized therein related to held-to-maturity and available-for-sale debt securities for which a portion of an other-than-temporary impairment has been recognized in earnings pursuant to Paragraph 320-10-45-9A. Pursuant to Paragraphs 320-10-35-36 and 37 the entire change in the fair value of foreign-currency-denominated available-for-sale debt securities shall be reported in other comprehensive income and An entity holding a foreign-currency-denominated available-for-sale debt security is required to consider, among other things, changes in market interest rates and foreign exchange rates since acquisition in determining whether an other-than-temporary impairment has occurred. Pursuant to FASB ASC Paragraph 320-10-50-2, the entity shall disclose all of the following by major security type as of each date for which a statement of financial position is presented: (a) cost basis (net of amortization of debt discount for debt securities), aggregate fair value, total other-than-temporary impairment recognized in accumulated other comprehensive income; (b) Total gains for securities with net gains in accumulated other comprehensive income; (c) Total losses for securities with net losses in accumulated other comprehensive income; and (d) Information about the contractual maturities of those securities as of the date of the most recent statement of financial position presented.

 

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.

Commitments and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

  

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

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 for Obtaining Employee Services

 

The Company accounts for share-based payment transactions issued to employees under the guidance of the Topic 718 “Compensation—Stock Compensation” of the FASB Accounting Standards Codification (“ASC Topic 718”).

 

Pursuant to ASC Section 718-10-20 an employee is an individual over whom the grantor of a share-based compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. Internal Revenue Service (“IRS”) Revenue Ruling 87-41. A non-employee director does not satisfy this definition of employee. Nevertheless, non-employee directors acting in their role as members of a board of directors are treated as employees if those directors were elected by the employer’s shareholders or appointed to a board position that will be filled by shareholder election when the existing term expires. However, that requirement applies only to awards granted to non-employee directors for their services as directors. Awards granted to non-employee directors for other services shall be accounted for as awards to non-employees.

 

Pursuant to ASC Paragraphs 718-10-30-2 and 718-10-30-3 a share-based payment transaction with employees shall be measured based on the fair value of the equity instruments issued and an entity shall account for the compensation cost from share-based payment transactions with employees in accordance with the fair value-based method, i.e., the cost of services received from employees in exchange for awards of share-based compensation generally shall be measured based on the grant-date fair value of the equity instruments issued or the fair value of the liabilities incurred/settled.

 

Pursuant to ASC Paragraphs 718-10-30-6 and 718-10-30-9 the measurement objective for equity instruments awarded to employees is to estimate the fair value at the grant date of the equity instruments that the entity is obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments (for example, to exercise share options). That estimate is based on the share price and other pertinent factors, such as expected volatility, at the grant date. As such, the fair value of an equity share option or similar instrument shall be estimated using a valuation technique such as an option pricing model. For this purpose, a similar instrument is one whose fair value differs from its intrinsic value, that is, an instrument that has time value.

 

If the Company’s common shares are traded in one of the national exchanges, the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares are thinly traded the use of share prices established in its most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.


Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

 

 a.The exercise price of the option.
 b.The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding.  Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method , i.e., expected term = ((vesting term + original contractual term) / 2) , if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
 c.The current price of the underlying share.
 d.The expected volatility of the price of the underlying share for the expected term of the option.  Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement.  Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.  The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.
 e.The expected dividends on the underlying share for the expected term of the option.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
 f.The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

 

Pursuant to ASC Paragraphs 718-10-30-11 and 718-10-30-17 a restriction that stems from the forfeitability of instruments to which employees have not yet earned the right, such as the inability either to exercise a non-vested equity share option or to sell non-vested shares, is not reflected in estimating the fair value of the related instruments at the grant date. Instead, those restrictions are taken into account by recognizing compensation cost only for awards for which employees render the requisite service and a non-vested equity share or non-vested equity share unit awarded to an employee shall be measured at its fair value as if it were vested and issued on the grant date.

 

Pursuant to ASC Paragraphs 718-10-35-2 and 718-10-35-3 the compensation cost for an award of share-based employee compensation classified as equity shall be recognized over the requisite service period, with a corresponding credit to equity (generally, paid-in capital). The requisite service period is the period during which an employee is required to provide service in exchange for an award, which often is the vesting period. The total amount of compensation cost recognized at the end of the requisite service period for an award of share-based compensation shall be based on the number of instruments for which the requisite service has been rendered (that is, for which the requisite service period has been completed). An entity shall base initial accruals of compensation cost on the estimated number of instruments for which the requisite service is expected to be rendered. That estimate shall be revised if subsequent information indicates that the actual number of instruments is likely to differ from previous estimates. The cumulative effect on current and prior periods of a change in the estimated number of instruments for which the requisite service is expected to be or has been rendered shall be recognized in compensation cost in the period of the change. Previously recognized compensation cost shall not be reversed if an employee share option (or share unit) for which the requisite service has been rendered expires unexercised (or unconverted).

 

Under the requirement of ASC Paragraph 718-10-35-8 the Company made a policy decision to recognize compensation cost for an award with only service conditions that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under the guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

 

Pursuant to ASC paragraphs 505-50-25-6 and 505-50-25-7, a grantor shall recognize the goods acquired or services received in a share-based payment transaction when it obtains the goods or as services are received. A grantor may need to recognize an asset before it actually receives goods or services if it first exchanges share-based payment for an enforceable right to receive those goods or services. Nevertheless, the goods or services themselves are not recognized before they are received. If fully vested, nonforfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, nonforfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

 

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

 

Pursuant to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty's performance is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued; however, if the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

 

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

 

 a.The exercise price of the option.
 b.The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
 c.The current price of the underlying share.
 d.The expected volatility of the price of the underlying share for the expected term of the option.  Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement.  Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.  The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.
 e.The expected dividends on the underlying share for the expected term of the option.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
 f.The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

 

Pursuant to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

Deferred Tax Assets and Income Tax Provision

 

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

 

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.

Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (the “Indirect Method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as a filer with the United States Securities & Exchange Commission (the “SEC”) considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

Recently Issued Accounting Pronouncements

 

In August 2014, the FASB issued the FASB Accounting Standards Update No. 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”).

 

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

 

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):

 

 a.Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)
 b.Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
 c.Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:

 

 a.Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern
 b.Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations
 c.Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company has elected to adopt early application of ASU No. 2014-15.

 

In November 2015, the FASB issued the FASB Accounting Standards Update No. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). This update simplifies the presentation of deferred income taxes; the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position.

 

For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.

 

In January 2016, the FASB issued the FASB Accounting Standards Update No. 2016-01 “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”).

 

This Update makes limited amendments to the guidance in U.S. GAAP on the classification and measurement of financial instruments. The new standard significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. Some of the major changes as a result of the ASU 2016-01 are summarized below.

 

 Requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.
 Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.
 Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
 Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
 Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
 Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
 Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.

 

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.

 

In February 2016, the FASB issued ASU 2016-02, “Leases”, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

On March 30, 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation" which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. For public business entities, the ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Early adoption will be permitted in any interim or annual period for which financial statements have not yet been issued or have not been made available for issuance. If early adoption is elected, all amendments in the ASU that apply must be adopted in the same period. In addition, if early adoption is elected in an interim period, any adjustments should be reflected as of the beginning of the annual period that includes that interim period. The Company is in the process of evaluating the impact of the standard on its consolidated financial statements.

 

In April 2016, the FASB issued ASU 2016–10 “Revenue from Contract with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended render more detailed implementation guidance with the expectation to reduce the degree of judgment necessary to comply with Topic 606. The Company is currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.

 

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard.

 

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 
      
Astoria Surgical Supplies North LLC The State of New Jersey  100%
       
Castle 6 Productions LLC The State of New Jersey  100%
       
Filthy Gorgeous LLC The State of Delaware  100%
       
Geek Room LLC The State of Delaware  100%
       
Graphic Expression Corporate Collectibles LLC The State of Delaware  100%
       
Guccione Stores LLC The State of New Jersey  100%
       
iLongevity LLC The State of New Jersey  100%
       
JAJ Enterprises LLC The State of Delaware  100%
       
Jerrick Ventures LLC The State of Delaware  100%
       
Miss Filthy LLC The State of Delaware  100%
       
Next Geek Thing LLC The State of Delaware  100%
       
No One’s Pet LLC The State of New Jersey  100%
       
OMNI Reboot LLC The State of Delaware  100%
       
Romper Zombie LLC The State of Delaware  100%
       
Steam Wars LLC The State of Delaware  100%
 Estimated Useful
Life (Years)
 
    
Computer equipment and software  3 
     
Furniture and fixture  5 
Property and Equipment (Tables)
Summary of property and equipment
  December 31,
2016
  December 31,
2015
 
Computer Equipment $219,653   175,695 
Furniture and Fixtures  61,803   61,803 
   281,456   237,498 
Less: Accumulated Depreciation  (209,627)  (166,992)
  $71,829  $70,506 
Capital Leases Payable (Tables)
    December 31, 2016  December 31,
2015
 
         
(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  $6,619 
           
  Less current maturities  (3,524)  (3,524)
           
  Capital lease obligation, net of current maturities  1,208   3,095 
           
  TOTAL CAPITAL LEASE OBLIGATION $4,732  $6,619 

 

2017: $1,208  $3,524 
2018:     $1,208 
Stockholders' Deficit (Tables)
  December 31, 2016 December 31, 2015 
Exercise price $0.40 $0.35 
Expected dividends  0% 0%
Expected volatility  73.44% - 91.54% 69.7%
Risk free interest rate  1.13% - 1.39% 1.35%
Expected life of warrant  5 years  5 years 
  Warrants    Weighted Average
Exercise Price
 
       
Outstanding – December 31, 2014  2,470,000  $0.35 
Granted  8,280,000  $0.35 
Exercised  -  $- 
Forfeited/Cancelled  -  $- 
Outstanding – December 31, 2015  10,750,000  $0.35 
Exercisable – December 31, 2015  10,750,000  $0.35 
Granted  4,791,666  $0.40 
Exercised  -  $- 
Forfeited/Cancelled  -  $- 
Outstanding – December 31, 2016  15,541,666  $0.36 
Exercisable – December 31, 2016  14,958,333  $0.36
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 
$0.35 – 0.40   15,541,666   3.75  $0.36   14,958,333  $0.36
  December 31, 2016  December 31, 2015 
Exercise price $ 0.25 - 0.40   $0.35 
Expected dividends  0%  0%
Expected volatility   73.44% - 90.05%  69.7
Risk free interest rate  1% - 1.39%  1.35%
Expected life of option  4.68 - 5 years   5 years 
  Options  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining Contractual Life (in years)

 
Balance – December 31, 2014 – outstanding  -   -   - 
Granted  500,000   0.25   5.0 
Exercised  -   -   - 
Cancelled/Modified  -   -   - 
Balance – December 31, 2015 – outstanding  500,000   0.25   4.93 
Balance –  December 31, 2015 – exercisable  500,000  $0.25   4.93 
             
Outstanding options held by related party – December 31, 2015  500,000  $0.25   4.93 
Exercisable options held by related party – December 31, 2015  500,000  $0.25   4.93 
             
Balance – December 31, 2015  500,000  $0.25   4.68 
Granted  1,750,000   0.36   5.0 
Exercised  -   -   - 
Cancelled/Modified  -   -   - 
Balance – December 31, 2016 – outstanding  2,250,000  $0.34   4.38 
Balance –  December 31, 2016 – exercisable  2,200,000  $0.34   4.38 
             
Outstanding options held by related party – December 31, 2016  2,250,000  $0.33   4.38 
Exercisable options held by related party – December 31, 2016  2,200,000  $0.30   4.38 
  Options  Value  Purpose for Grant
  1,750,000  $231,035  Service Rendered
Income Taxes (Tables)
  December 31, 2016  December 31,
2015
 
Net deferred tax assets – Non-current:      
       
Expected income tax benefit from NOL carry-forwards $3,100,000  $1,910,000 
Less valuation allowance  (3,100,000)  (1,910,000)
Deferred tax assets, net of valuation allowance $-  $- 
  For the Year Ended
December 31, 2016
  For the Year Ended
December 31, 2015
 
       
Federal statutory income tax rate  34.0%  34.0%
         
Change in valuation allowance on net operating loss carry-forwards  (34.0)%  (34.0)%
         
Effective income tax rate  0.0%  0.0%
Organization and Operations (Details)
0 Months Ended 12 Months Ended 0 Months Ended
Feb. 6, 2016
Feb. 5, 2016
Kent Campbell [Member]
Spin-Off Agreement [Member]
Feb. 5, 2016
Kent Campbell [Member]
Exchange Agreement [Member]
Feb. 5, 2016
Denis Espinoza [Member]
Exchange Agreement [Member]
Feb. 5, 2016
Sarah Campbell [Member]
Exchange Agreement [Member]
Feb. 5, 2016
Common Stock [Member]
Dec. 31, 2016
Common Stock [Member]
Feb. 5, 2016
Series A Convertible Preferred Stock [Member]
Kent Campbell [Member]
Exchange Agreement [Member]
Feb. 5, 2016
Series A Convertible Preferred Stock [Member]
Denis Espinoza [Member]
Exchange Agreement [Member]
Feb. 5, 2016
Series B Convertible Preferred Stock [Member]
Kent Campbell [Member]
Exchange Agreement [Member]
Feb. 5, 2016
Series D Preferred Stock [Member]
Kent Campbell [Member]
Exchange Agreement [Member]
Feb. 5, 2016
Series D Preferred Stock [Member]
Denis Espinoza [Member]
Exchange Agreement [Member]
Feb. 5, 2016
Series D Preferred Stock [Member]
Sarah Campbell [Member]
Exchange Agreement [Member]
Feb. 5, 2016
Jerrick Ventures, Inc. [Member]
Feb. 5, 2016
Jerrick Ventures, Inc. [Member]
Series A Convertible Preferred Stock [Member]
Feb. 5, 2016
Jerrick Ventures, Inc. [Member]
Series B Convertible Preferred Stock [Member]
Organization and Operations (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of stock, shares
2,626,308 
 
 
 
 
28,500,000 
666,666 
 
 
 
 
 
 
 
33,414.89 
8,063.33 
Warrants purchase of common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
12,391,667 
 
 
Cancelled of common stock
 
781,818 
363,636 
58,951 
21,818 
 
 
6,000 
4,000 
10,000 
1,648,881 
265,676 
98,933 
 
 
 
Significant and Critical Accounting Policies and Practices (Details)
12 Months Ended
Dec. 31, 2016
Astoria Surgical Supplies North LLC [Member]
 
Name of combined affiliate
Astoria Surgical Supplies North LLC 
State or other jurisdiction of incorporation or organization
The State of New Jersey 
Company interest
100.00% 
Castle 6 Productions LLC [Member]
 
Name of combined affiliate
Castle 6 Productions LLC 
State or other jurisdiction of incorporation or organization
The State of New Jersey 
Company interest
100.00% 
Filthy Gorgeous LLC [Member]
 
Name of combined affiliate
Filthy Gorgeous LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
Geek Room LLC [Member]
 
Name of combined affiliate
Geek Room LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
Graphic Expression Corporate Collectibles LLC [Member]
 
Name of combined affiliate
Graphic Expression Corporate Collectibles LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
Guccione Stores LLC [Member]
 
Name of combined affiliate
Guccione Stores LLC 
State or other jurisdiction of incorporation or organization
The State of New Jersey 
Company interest
100.00% 
iLongevity LLC [Member]
 
Name of combined affiliate
iLongevity LLC 
State or other jurisdiction of incorporation or organization
The State of New Jersey 
Company interest
100.00% 
JAJ Enterprises LLC [Member]
 
Name of combined affiliate
JAJ Enterprises LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
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% 
Miss Filthy LLC [Member]
 
Name of combined affiliate
Miss Filthy LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
Next Geek Thing LLC [Member]
 
Name of combined affiliate
Next Geek Thing LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
No One's Pet LLC [Member]
 
Name of combined affiliate
No One's Pet LLC 
State or other jurisdiction of incorporation or organization
The State of New Jersey 
Company interest
100.00% 
OMNI Reboot LLC [Member]
 
Name of combined affiliate
OMNI Reboot LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
Romper Zombie LLC [Member]
 
Name of combined affiliate
Romper Zombie LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
Steam Wars LLC [Member]
 
Name of combined affiliate
Steam Wars 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)
12 Months Ended
Dec. 31, 2016
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 Textual) (USD $)
0 Months Ended 12 Months Ended
Jan. 2, 2013
Dec. 31, 2016
Dec. 31, 2015
Significant and Critical Accounting Policies and Practices (Textual)
 
 
 
Inventory markdown charges
 
$ 0 
$ 21,861 
Investments minority interest
$ 83,333 
 
 
Income tax benefits recognized, percent
 
50.00% 
 
Property and Equipment (Details) (USD $)
Dec. 31, 2016
Dec. 31, 2015
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 281,456 
$ 237,498 
Less: Accumulated Depreciation
(209,627)
(166,992)
Property and equipment, net
71,829 
70,506 
Furniture and Fixtures [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
61,803 
61,803 
Computer Equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 219,653 
$ 175,695 
Property and Equipment (Details Textual) (USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Property and Equipment (Textual)
 
 
Depreciation expense
$ 42,634 
$ 10,001 
Line of Credit (Details) (USD $)
1 Months Ended 12 Months Ended
Mar. 19, 2009
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
 
$ 235,141 
$ 202,422 
Note Payable (Details) (USD $)
1 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Oct. 24, 2016
Loan Agreement [Member]
Oct. 25, 2016
Loan Agreement [Member]
Note Payable [Textual]
 
 
 
 
Promissory note
 
 
$ 15,000 
$ 25,000 
Maturity date
 
 
Apr. 24, 2017 
May 25, 2017 
Interest rate
 
 
9.00% 
9.00% 
Warrants purchase of common stock
 
 
30,000 
50,000 
Warrant exercisable price per share
 
 
$ 0.30 
$ 0.30 
Warrant term
 
 
5 years 
5 years 
Notes payable, outstanding balance
30,579 
   
 
 
Debt discount
$ 9,421 
 
 
 
Convertible Note Payable (Details) (USD $)
0 Months Ended 1 Months Ended 0 Months Ended 12 Months Ended
Aug. 2, 2016
Dec. 27, 2016
Nov. 30, 2016
Mar. 17, 2016
Dec. 2, 2015
Dec. 31, 2016
Convertible Note Payable (Textual)
 
 
 
 
 
 
Convertible Notes Payable outstanding balance
 
 
 
 
 
$ 268,823 
Debt discount
 
 
 
 
 
184,398 
Debt issuance costs
 
 
 
 
 
46,779 
Convertible note to third party lender [Member]
 
 
 
 
 
 
Convertible Note Payable (Textual)
 
 
 
 
 
 
Convertible note
$ 50,000 
$ 100,000 
$ 400,000 
$ 200,000 
$ 100,000 
$ 400,000 
Interest rate
10.00% 
10.00% 
10.00% 
12.00% 
12.00% 
10.00% 
Maturity date
Aug. 31, 2016 
Dec. 27, 2017 
Nov. 01, 2017 
Apr. 21, 2016 
Dec. 01, 2016 
Nov. 01, 2017 
Warrants issued
 
100,000 
400,000 
150,000 
300,000 
400,000 
Conversion price per share
 
$ 0.30 
 
 
$ 0.35 
 
Warrant purchase price
 
$ 0.40 
$ 0.30 
$ 0.40 
$ 0.35 
$ 0.30 
Warrant term
 
5 years 
5 years 
5 years 
5 years 
5 years 
Related Party Loan (Details) (USD $)
0 Months Ended 1 Months Ended 0 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Oct. 31, 2016
Arthur Rosen [Member]
Sep. 12, 2016
Arthur Rosen [Member]
May 26, 2016
Arthur Rosen [Member]
Sep. 20, 2016
202 S Dean LLC [Member]
Dec. 21, 2016
Chris Gordon [Member]
Oct. 13, 2016
Chris Gordon [Member]
Related Party Loan (Textual)
 
 
 
 
 
 
 
 
Secured debt
 
 
$ 10,000 
$ 100,000 
$ 1,000,000 
$ 10,000 
$ 275,000 
$ 50,000 
Interest rate
 
 
10.00% 
12.00% 
12.50% 
10.00% 
10.00% 
12.00% 
Warrant term
 
 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
Warrants issued to purchase shares
 
 
10,000 
150,000 
1,000,000 
235,000 
166,666 
50,000 
Warrant exercise price
 
 
$ 0.30 
$ 0.40 
$ 0.40 
$ 0.40 
$ 0.40 
$ 0.40 
Maturity date
 
 
Nov. 10, 2016 
Oct. 16, 2016 
May 26, 2017 
Mar. 20, 2017 
Jan. 20, 2017 
Nov. 12, 2016 
Related party notes payable
1,350,325 
   
 
 
 
 
 
 
Debt discount- related party
$ 94,675 
 
 
 
 
 
 
 
Capital Leases Payable (Details) (USD $)
Dec. 31, 2016
Dec. 31, 2015
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 
$ 6,619 
Less current maturities
3,524 
3,524 
Capital lease obligation, net of current maturities
1,208 
3,095 
TOTAL CAPITAL LEASE OBLIGATION
$ 4,732 
$ 6,619 
Capital Leases Payable (Details 1) (USD $)
Dec. 31, 2016
Dec. 31, 2015
Capital Leases Payable [Abstract]
 
 
2017:
$ 1,208 
$ 3,524 
2018:
    
$ 1,208 
Capital Leases Payable (Details Textual) (USD $)
12 Months Ended
Dec. 31, 2016
Capital Leases Payable (Textual)
 
Capital leases due amount
$ 383.10 
Capital leases interest per annum
10.00% 
Capital lease obligation term
5 years 
Stockholders' Deficit (Details) (Warrants [Member], USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Warrants [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.40 
$ 0.35 
Expected dividends
0.00% 
0.00% 
Expected volatility
 
69.70% 
Expected volatility, minimum
73.44% 
 
Expected volatility, maximum
91.54% 
 
Risk free interest rate
 
1.35% 
Risk free interest rate, minimum
1.13% 
 
Risk free interest rate, maximum
1.39% 
 
Expected life of warrant
5 years 
5 years 
Stockholders' Deficit (Details 1) (Warrants [Member], USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Warrants [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Number of Options/Warrant, Outstanding
10,750,000 
2,470,000 
Number of Warrants, Granted
4,791,666 
8,280,000 
Number of Warrants, Exercised
   
   
Number of Warrants, Cancelled/Modified
   
   
Number of Options/Warrant, Outstanding
15,541,666 
10,750,000 
Number of Warrants, Exercisable
14,151,667 
10,750,000 
Weighted Average Exercise Price, Outstanding
$ 0.35 
$ 0.35 
Weighted Average Exercise Price, Granted
$ 0.40 
$ 0.35 
Weighted Average Exercise Price, Exercised
   
   
Weighted Average Exercise Price, Forfeited/Cancelled
   
   
Weighted Average Exercise Price, Outstanding
$ 0.36 
$ 0.35 
Weighted Average Exercise Price, Exercisable
$ 0.36 
$ 0.35 
Stockholders' Deficit (Details 2) (Warrant [Member], USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Warrant [Member]
 
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
 
Warrants Outstanding, Exercise price, Minimum
$ 0.35 
 
 
Warrants Outstanding, Exercise price, Maximum
$ 0.40 
 
 
Warrants Outstanding, Number Outstanding
15,541,666 
10,750,000 
2,470,000 
Warrants Outstanding, Weighted Average Remaining Contractual Life (in years)
3 years 9 months 
 
 
Warrants Outstanding, Weighted Average Exercise Price
$ 0.36 
$ 0.35 
$ 0.35 
Warrants Exercisable , Number Exercisable
14,151,667 
10,750,000 
 
Warrants Exercisable, Weighted Average Exercise Price
$ 0.36 
$ 0.35 
 
Stockholders' Deficit (Details 3) (Stock Option [Member], USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
 
$ 0.35 
Expected dividends
0.00% 
0.00% 
Expected volatility
 
69.70% 
Expected volatility, minimum
73.44% 
 
Expected volatility, maximum
90.05% 
 
Risk free interest rate
 
1.35% 
Risk free interest rate, minimum
1.00% 
 
Risk free interest rate, maximum
1.39% 
 
Expected life of option
 
5 years 
Minimum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.25 
 
Expected life of option
4 years 8 months 5 days 
 
Maximum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.40 
 
Expected life of option
5 years 
 
Stockholders' Deficit (Details 4) (Stock Option [Member], USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Stock Option [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Number of Options/Warrant, Outstanding
500,000 
   
Number of Options, Granted
1,750,000 
500,000 
Number of Options, Exercised
   
   
Number of Options, Cancelled/Modified
   
   
Number of Options/Warrant, Outstanding
2,250,000 
500,000 
Number of Options, Exercisable
2,200,000 
500,000 
Outstanding options held by related party
2,250,000 
500,000 
Exercisable options held by related party
2,200,000 
500,000 
Weighted Average Exercise Price, Outstanding
$ 0.25 
    
Weighted Average Exercise Price, Granted
$ 0.36 
$ 0.25 
Weighted Average Exercise Price, Exercised
   
 
Weighted Average Exercise Price Cancelled/Modified
   
 
Weighted Average Exercise Price, Outstanding
$ 0.34 
$ 0.25 
Weighted Average Exercise Price, Exercisable
$ 0.34 
$ 0.25 
Weighted Average Exercise Price Outstanding options held by related party
$ 0.33 
$ 0.25 
Weighted Average Exercise Price Exercisable options held by related party
$ 0.30 
$ 0.25 
Weighted Average Remaining Contractual Life (in years), Outstanding
4 years 8 months 5 days 
 
Weighted Average Remaining Contractual Life (in years), Granted
5 years 
5 years 
Weighted Average Remaining Contractual Life (in years), Outstanding options held by related party
4 years 4 months 17 days 
4 years 11 months 5 days 
Weighted Average Remaining Contractual Life (in years), Exercisable options held by related party
4 years 4 months 17 days 
4 years 11 months 5 days 
Stockholders' Deficit (Details 5) (USD $)
12 Months Ended
Dec. 31, 2016
Stockholders' Deficit [Abstract]
 
Options
1,750,000 
Value
$ 231,035 
Purpose for Grant
Service Rendered 
Stockholders' Deficit (Details Textual) (USD $)
0 Months Ended 12 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended
Feb. 6, 2016
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2016
Director [Member]
Dec. 31, 2016
Promissory Notes [Member]
Dec. 31, 2016
Convertible Notes Payable [Member]
Dec. 31, 2016
Notes Payable Related Party [Member]
Feb. 5, 2016
Common Stock [Member]
Dec. 31, 2016
Common Stock [Member]
Dec. 31, 2015
Common Stock [Member]
Dec. 31, 2015
Common Stock [Member]
Employees [Member]
Dec. 31, 2015
Common Stock [Member]
Consultants [Member]
Dec. 31, 2015
Common Stock [Member]
Adivisors [Member]
Aug. 17, 2016
Warrants [Member]
Apr. 24, 2016
Warrants [Member]
Dec. 31, 2016
Stock Incentive Plan [Member]
Dec. 9, 2015
Stock Incentive Plan [Member]
Feb. 13, 2015
Series A Preferred Stock [Member]
Dec. 31, 2016
Series A Preferred Stock [Member]
Dec. 31, 2015
Series A Preferred Stock [Member]
Aug. 31, 2016
Series A Preferred Stock [Member]
Dec. 21, 2015
Series B Preferred Stock [Member]
Dec. 31, 2016
Series B Preferred Stock [Member]
Dec. 31, 2015
Series B Preferred Stock [Member]
Aug. 31, 2016
Series D Convertible Preferred Stock [Member]
Jan. 29, 2016
Series D Convertible Preferred Stock [Member]
Dec. 31, 2016
Series D Convertible Preferred Stock [Member]
Dec. 21, 2015
Series D Convertible Preferred Stock [Member]
Stockholders' Deficit (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, shares authorized
 
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 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 100.00 
$ 0.001 
$ 0.001 
 
$ 100.00 
$ 0.001 
$ 0.001 
 
 
 
$ 100.00 
Preferred stock, shares issued
 
 
 
10,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33,414 
33,314 
 
 
8,063 
7,000 
 
 
 
 
Preferred stock, shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33,414 
33,314 
 
 
8,063 
7,000 
 
 
 
 
Common stock, shares authorized
 
90,000,000 
90,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par value
$ 0.001 
$ 0.001 
$ 0.001 
 
 
 
 
 
$ 0.25 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares issued
 
33,894,592 
28,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
18,000,000 
 
 
 
1,098,933 
 
 
 
 
 
 
 
Common stock, shares outstanding
 
33,894,592 
28,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares sold
2,626,308 
 
 
 
 
 
 
28,500,000 
666,666 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 800,000 
 
 
 
 
 
 
 
 
Convertion preferred stock, Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100,000 
 
8,914 
 
20,000 
 
 
1,099 
2,100,000 
 
 
Aggregate intrinsic value of options outstanding
 
47,500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate intrinsic value of options exercisable
 
47,500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
91,400 
 
 
 
 
 
 
 
 
Proceeds from the issuance of stock
2,626 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,450,000 
 
 
 
700,000 
 
 
 
 
Compensation expense
 
 
 
 
 
 
 
 
375,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued for liquidating damages
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,318,353 
 
 
 
667,313 
 
 
 
 
 
Warrants associated value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
309,665 
 
 
 
51,159 
 
 
 
 
 
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
 
268,333 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sale of shares of common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
666,666 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants to purchase shares of common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
333,333 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants to purchase price of common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
250,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrant exercisable term
 
 
 
 
 
 
 
 
 
 
 
 
 
P5Y 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrant exercisable price per share
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.40 
$ 0.30 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of interest to series B preferred stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,063 
 
 
 
 
 
Conversion of interest to series B preferred stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
108,844 
 
 
 
 
 
Conversion of common stock to Series D preferred stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,013 
 
Issuance of common stock for cashless exercise of warrants, shares
 
 
 
 
 
 
 
 
392,764 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants issued
 
 
 
 
80,000 
575,000 
226,666 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants grant date fair value
 
 
 
 
41,633 
255,203 
255,203 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value assumptions
 
 
 
 
Black-Scholes option-pricing model. 
Black-Scholes option-pricing model. 
Black-Scholes option-pricing model. 
 
 
 
 
 
 
 
 
Option shall not be exercisable more than five (5) years after the date such Option is granted, and provided further that with respect to an Incentive Option, if the recipient owns more than ten percent (10%) of the total combined voting power of the Jerrick, the Incentive Option shall not be exercisable more than five (5) years after the date such Incentive Option is granted 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock service rendered
 
 
 
 
 
 
 
 
 
1,500,000 
1,500,000 
1,500,000 
1,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair market value of common stock exercisable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 100,000 
 
 
 
 
 
 
 
 
 
 
 
 
Fair market value exercise price
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
110.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Stock option granted term
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 years 
 
 
 
 
 
 
 
 
 
 
 
 
Income Taxes (Details) (USD $)
Dec. 31, 2016
Dec. 31, 2015
Net deferred tax assets - Non-current:
 
 
Expected income tax benefit from NOL carry-forwards
$ 3,100,000 
$ 1,910,000 
Less valuation allowance
(3,100,000)
(1,910,000)
Deferred tax assets, net of valuation allowance
   
   
Income Taxes (Details 1)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Income Taxes [Abstract]
 
 
Federal statutory income tax rate
34.00% 
34.00% 
Change in valuation allowance on net operating loss carry-forwards
(34.00%)
(34.00%)
Effective income tax rate
0.00% 
0.00% 
Income Taxes (Details Textual) (USD $)
12 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Income Taxes (Textual)
 
 
NOL carry-forwards
$ 9,000,000 
 
NOL carry-forwards, expiring date
Dec. 31, 2035 
 
Deferred tax assets NOL carry-forwards
3,100,000 
1,910,000 
Changes in valuation allowance
$ 1,900,000 
$ 1,200,000 
Subsequent Events (Details) (USD $)
12 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended
Dec. 31, 2016
Dec. 31, 2015
Feb. 7, 2017
Subsequent Event [Member]
Unsecured Debt [Member]
Related Party [Member]
Jan. 25, 2017
Subsequent Event [Member]
Unsecured Debt [Member]
Related Party [Member]
Jan. 26, 2017
Subsequent Event [Member]
Unsecured Debt [Member]
Related Party [Member]
Mar. 17, 2017
Subsequent Event [Member]
Private Placement [Member]
Number
Feb. 22, 2017
Subsequent Event [Member]
Private Placement [Member]
Subsequent Event [Line Items]
 
 
 
 
 
 
 
Gross proceeds
 
 
 
 
 
$ 775,980 
$ 140,605 
Number of individuals
 
 
 
 
 
 
Face value of promissory notes
 
 
 
 
 
1,000,000 
 
Original issue discount, percentage
 
 
 
 
 
6.00% 
 
Aggregate principal amount
 
 
10,000 
50,000 
50,000 
975,511 
 
Promissory notes due date
 
 
Feb. 07, 2018 
Apr. 14, 2017 
Nov. 22, 2017 
Sep. 01, 2017 
 
Proceeds from issuance of promissory note
550,000 
   
 
 
 
916,585 
 
Convertible notes conversion, percentage
 
 
 
 
 
85.00% 
 
Investors warrant, description
 
 
 
 
 
(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 Offering received a 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 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"). 
 
Warrants, term
 
 
 
 
 
5 years 
 
Promissory note
 
 
$ 10,000 
$ 50,000 
$ 50,000 
$ 975,511 
 
Interest rate
 
 
10.00% 
10.00% 
10.00% 
 
 
Maturity date
 
 
Feb. 07, 2018 
Apr. 14, 2017 
Nov. 22, 2017 
Sep. 01, 2017 
 
Conversion price per share
 
 
 
$ 0.30