JERRICK MEDIA HOLDINGS, INC., S-1/A filed on 3/9/2018
Securities Registration Statement
Document and Entity Information
9 Months Ended
Sep. 30, 2017
Document and Entity Information [Abstract]
 
Entity Registrant Name
Jerrick Media Holdings, Inc. 
Entity Central Index Key
0001357671 
Trading Symbol
JMDA 
Amendment Flag
false 
Document Type
S-1 
Entity Filer Category
Smaller Reporting Company 
Document Period End Date
Sep. 30, 2017 
Condensed Consolidated Balance Sheet (USD $)
Sep. 30, 2017
Dec. 31, 2016
Dec. 31, 2015
Current Assets
 
 
 
Cash
$ 94,678 
$ 174,494 
$ 438,629 
Prepaid expenses
   
10,000 
   
Total Current Assets
94,678 
184,494 
438,629 
Property and equipment, net
43,618 
71,829 
70,506 
Security deposit
38,445 
38,445 
17,000 
Minority investment in business
83,333 
83,333 
83,333 
Total Assets
260,074 
378,101 
609,468 
Current Liabilities
 
 
 
Accounts payable and accrued liabilities
1,318,390 
1,387,068 
678,955 
Accrued dividends
414,144 
259,170 
81,936 
Demand loan
10,366 
10,366 
   
Convertible Notes - related party, net of debt discount
25,000 
   
 
Convertible Notes, net of debt discount and issuance costs
375,482 
268,823 
 
Current portion of capital lease payable
(4,732)
(3,524)
(3,524)
Notes payable - related party, net of debt discount
1,659,000 
1,365,325 
 
Notes payable, net of debt discount and issuance costs
450,000 
15,579 
 
Derivative liability
1,543,678 
 
 
Line of credit - related party
130,000 
 
 
Line of credit
119,246 
235,141 
202,422 
Total Current Liabilities
6,050,038 
3,544,996 
966,837 
Non-current Liabilities:
 
 
 
Capital lease payables
   
1,208 
3,095 
Convertible Notes - related party, net of debt discount
639,457 
 
 
Convertible Notes, net of debt discount and issuance costs
1,351,661 
 
 
Total Non-current Liabilities
1,991,118 
1,208 
3,095 
Total Liabilities
8,041,156 
3,546,204 
969,932 
Commitments and contingencies
   
   
   
Stockholders' Deficit
 
 
 
Common stock value
39,521 
33,895 
28,500 
Additional paid in capital
11,379,493 
10,075,941 
5,319,835 
Accumulated deficit
(19,200,135)
(13,277,981)
(5,708,839)
Total stockholders' Equity
(7,781,082)
(3,168,103)
(360,464)
Total Liabilities and Stockholders' Deficit
260,074 
378,101 
609,468 
Series A Preferred stock
 
 
 
Stockholders' Deficit
 
 
 
Preferred stock value
31 
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 
    
Condensed Consolidated Balance Sheet (Parenthetical) (Series D Preferred stock, USD $)
Sep. 30, 2017
Dec. 31, 2016
Dec. 31, 2015
Preferred stock, par value
$ 0.001 
$ 0.001 
$ 0.001 
Preferred stock, shares issued
914 
Preferred stock, shares outstanding
914 
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Income Statement [Abstract]
 
 
 
 
 
 
Net revenue
$ 11,244 
$ 16,389 
$ 105,345 
$ 201,029 
$ 223,927 
$ 767,527 
Cost of revenue
   
   
   
43,321 
43,321 
183,528 
Gross margin
11,244 
16,389 
105,345 
157,708 
180,606 
583,999 
Operating expenses
 
 
 
 
 
 
Compensation
444,675 
391,008 
1,536,082 
1,104,447 
1,134,170 
917,586 
Consulting fees
561,486 
324,985 
903,056 
839,992 
1,350,917 
1,176,968 
Share based payments
 
 
 
 
332,711 
820,652 
General and administrative
412,226 
233,033 
1,048,979 
780,890 
1,054,564 
519,836 
Total operating expenses
1,418,387 
949,026 
3,488,117 
2,725,329 
3,872,362 
3,435,042 
Loss from operations
(1,407,143)
(932,637)
(3,382,772)
(2,567,621)
(3,691,756)
(2,851,043)
Other income (expenses)
 
 
 
 
 
 
Interest expense
(228,120)
(61,382)
(372,825)
(4,458,996)
(3,710,151)
(488,725)
Accretion of debt discount and issuance cost
(1,074,002)
(55,347)
(2,025,486)
(71,321)
 
 
Derivative expense
   
   
(254,470)
   
 
 
Change In derivative liability
673,705 
   
1,257,716 
   
 
 
Settlement of vendor liabilities
   
   
(110,674)
   
 
 
Loss on extinguishment of debt
(876,038)
   
(876,038)
   
 
 
Gain on settlement of debt
2,079 
 
2,079 
   
 
 
Gain on the sale of assets
   
10,000 
   
10,000 
10,000 
   
Other income (expenses), net
(1,502,376)
(106,729)
(2,379,698)
(4,520,317)
(3,700,151)
(488,725)
Loss before income tax provision
(2,909,519)
(1,039,366)
(5,762,470)
(7,087,938)
(7,391,907)
(3,339,768)
Income tax provision
   
   
   
   
   
   
Net loss
$ (2,909,519)
$ (1,039,366)
$ (5,762,470)
$ (7,087,938)
$ (7,391,907)
$ (3,339,768)
Per-share data
 
 
 
 
 
 
Basic and diluted loss per share
$ (0.07)
$ (0.03)
$ (0.15)
$ (0.23)
$ (0.23)
$ (0.12)
Weighted average number of common shares outstanding
39,469,670 
32,359,841 
38,343,241 
31,489,608 
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 
   
   
   
   
Stock warrants issued with convetible notes
60,771 
   
60,771 
   
   
   
   
Dividends
(81,936)
   
 
(81,936)
 
   
 
Net loss
(3,339,768)
   
   
(3,339,768)
   
   
   
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 
 
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 
   
   
   
   
Dividends
(177,234)
   
   
(177,234)
   
   
   
Net loss
(7,391,907)
   
   
(7,391,907)
   
   
   
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 (Unaudited) (USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net loss
$ (5,762,470)
$ (7,087,938)
$ (7,391,907)
$ (3,339,768)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation
28,211 
31,717 
42,634 
10,001 
Accretion of debt issuance costs
234,989 
   
   
   
Accretion of debt discount
1,790,495 
95,746 
235,622 
211,587 
Share-based compensation
751,215 
360,220 
463,503 
820,652 
Loss on settlement of vendor liabilities
110,674 
   
 
 
Gain on settlement of debt
2,079 
   
 
 
Change in fair value of derivative liability
(1,257,716)
   
 
 
Derivative expense
254,470 
   
 
 
Loss on extinguishment of debt
876,038 
   
 
 
Changes in operating assets and liabilities:
 
 
 
 
Prepaid expenses
10,000 
(10,000)
(10,000)
   
Inventory
 
 
   
21,861 
Security deposit
   
(32,775)
(21,445)
6,000 
Accounts payable and accrued expenses
489,329 
368,298 
834,487 
(18,015)
Accrued liquidating damages
   
4,346,490 
3,329,993 
   
Net Cash Used In Operating Activities
(2,476,844)
(1,928,242)
(2,517,113)
(2,287,682)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Cash paid for property and equipment
   
(43,956)
(43,957)
(69,198)
Net Cash Used In Investing Activities
   
(43,956)
(43,957)
(69,198)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Repayment of loans
   
(107,415)
(107,887)
(72,573)
Net proceeds from issuance of notes
1,141,585 
106,000 
146,000 
   
Repayment of notes
(100,000)
   
 
 
Net proceeds from issuance of preferred stock
   
344,248 
344,250 
2,743,019 
Proceeds from issuance of demand loan
   
86,866 
10,366 
   
Proceeds from issuance of convertible note
1,066,500 
50,000 
550,000 
   
Repayment of convertible notes
(477,777)
(50,000)
(50,000)
   
Proceeds from issuance of convertible notes - related party
555,000 
   
 
 
Proceeds from issuance of note payable - related party
479,000 
1,110,000 
1,446,500 
   
Repayment of note payable - related party
(120,000)
   
(1,500)
   
Proceeds from issuance of line of credit - related party
130,000 
   
39,195 
   
Repayment of line of credit
(125,324)
   
(24,007)
   
Cash paid for debt issuance costs
(151,956)
   
(55,982)
   
Net Cash Provided By Financing Activities
2,397,028 
1,539,699 
2,296,936 
2,670,446 
Net Change in Cash
(79,816)
(432,499)
(264,135)
313,566 
Cash - Beginning of Period
174,494 
438,629 
438,629 
125,063 
Cash - End of Period
94,678 
6,130 
174,494 
438,629 
Cash Paid During the Year for:
 
 
 
 
Income taxes
   
   
   
   
Interest
3,534 
   
5,738 
   
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
 
Settlement of vendor liabilities
353,732 
   
 
 
Conversion of interest
   
108,843 
108,843 
   
Debt discount on convertible note
646,212 
24,425 
24,425 
   
Debt discount on related party note payable
13,627 
188,852 
218,800 
   
Debt discount on note payable
5,683 
   
 
 
Accrued dividends
159,684 
132,545 
177,234 
   
Warrants at issuance of debt
1,542,523 
   
490,488 
   
Liquidated damages
 
 
3,329,993 
   
Conversion of bridge notes
 
 
   
800,000 
Reclassification of derivative liability to equity
356,288 
   
 
 
Debt discount paid in the form of common shares
34,725 
   
 
 
Conversion of note payable and interest into convertible notes
700,383 
   
 
 
Conversion of note payable - related party and interest into convertible notes - related party
$ 327,893 
    
 
 
Organization and Operations
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Organization and Operations

Note 1 - Organization and Operations

 

Jerrick Media Holdings, Inc. (“we,” “us,” the “Company,” or “Jerrick Media”) (formerly Great Plains Holdings, Inc. or “GTPH”) 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 to Great Plains Holdings, Inc. as part of its plan 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 home communities, and other income producing properties. Historically, the Company has principally engaged in the manufacture and marketing of the LiL Marc, a plastic boys’ toilet-training device, which we discontinued as of December 31, 2014.

 

On February 5, 2016 (the “Closing Date”), GTPH, 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”). GTPH 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 GTPH’s common stock. GTPH assumed 33,415 shares of Jerrick’s Series A Convertible Preferred Stock (the “Jerrick Series A Preferred”) and 8,064 shares of Series B Convertible Preferred Stock (the “Jerrick Series B Preferred”).

   

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

 

Upon closing of the Merger on February 5, 2016, the Company changed its business plan to that of Jerrick Media.

 

Effective February 28, 2016, GTPH entered into an Agreement and Plan of Merger (the “Statutory Merger Agreement”) with Jerrick, pursuant to which GTPH became the parent company of Jerrick Ventures, LLC, a wholly-owned operating subsidiary of Jerrick (the “Statutory Merger”) and GTPH changed its name to Jerrick Media Holdings, Inc. to better reflect its new business strategy.

 

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

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
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Significant and Critical Accounting Policies and Practices

Note 2 - Significant and Critical Accounting Policies and Practices

 

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

 

Basis of Presentation

 

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

 

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


Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

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

 

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

   

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

 

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

 

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

 

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

 

Actual results could differ from those estimates.

 

Principles of consolidation

 

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

 

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

 

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

 

All inter-company balances and transactions have been eliminated.

 

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

 

Fair Value of Financial Instruments

 

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

 

Level 1   Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
     
Level 2   Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
     
Level 3   Pricing inputs that are generally observable inputs and not corroborated by market data.

 

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

 

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

 

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

 

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

   

Cash Equivalents

 

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

 

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

 

Inventories

 

Inventory Valuation

 

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

 

Inventory Obsolescence and Markdowns

 

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

 

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

 

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

 

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.   

Property and Equipment

 

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

 

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

 

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

 

Investments - Cost Method, Equity Method and Joint Venture

 

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

 

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

 

Related Parties

 

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

 

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

 

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

 

Derivative Liability

 

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

 

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

 

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

 

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

 

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

 

Revenue Recognition

 

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

 

Stock-Based Compensation

 

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

 

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

 

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

 

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

 

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

  

Income Taxes

 

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

 

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

 

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

 

Loss Per Share

 

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

 

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

 

    September 30,
2017
    September 30,
2016
 
Options     17,749,990       2,050,000  
Warrants     34,457,024       14,735,000  
Convertible notes     13,681,425       -  
Totals     65,888,439       16,785,000  


Reclassifications

 

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

 

Recently Issued Accounting Pronouncements

 

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

 

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

Significant and Critical Accounting Policies and Practices

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 methodi.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
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Going Concern

Note 3 – Going Concern

 

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

 

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

 

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

 

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

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
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Property and Equipment

Note 4 – Property and Equipment

 

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

 

   

September 30,
2017

    December 31,
2016
 
Computer Equipment   $ 219,653     $ 219,653  
Furniture and Fixtures     61,803       61,803  
      281,456       281,456  
Less: Accumulated Depreciation     (237,838 )     (209,627 )
    $ 43,618     $ 71,829  

 

Depreciation expense was $9,507 and $10,933 for the three months ended September 30, 2017 and 2016, respectively. Depreciation expense was $28,211 and $31,717 for the nine months ended September 30, 2017 and 2016, respectively.

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
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Line of Credit

Note 5 – Line of Credit

 

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

 

 

    Outstanding Balances as of
    September 30,
2017
  December 31, 2016
March 19, 2009     119,246       203,988  
October 4, 2016     0       31,153  
    $ 119,246     $ 235,141  

  

On March 19, 2009 Astoria Surgical Supplies North LLC signed a revolving note (the “Revolving Note”) at PNC Bank (the “Bank”). The outstanding balance of this Note is limited to $200,000 and expired March 19, 2010. The outstanding balance accrues interest at a variable rate. The interest rate is subject to change based on changes in an independent index which is the highest Prime Rate as published in the “Money Rates” section of the Wall Street Journal. Interest is payable monthly and the rate as of December 31, 2016 and 2015 was 3.75% and 4.50%, respectively. The Company had been in payment default since March 19, 2010; however, on May 3, 2017, the Company agreed to pay back the line of credit by December 1, 2017.

 

The balance outstanding on the Revolving Note at September 30, 2017 and December 31, 2016 was $119,246 and $203,988, respectively.

 

On October 4, 2016, the Company signed a revenue based factoring agreement (the “Factoring Agreement”) with Imperial Advance, LLC. The company received proceeds of $40,000 and agreed to pay $52,400 of future receivables. The note issued in connection with the Factoring Agreement is secured by an officer of the Company. On August 21, 2017, the Company and Imperial Advance, LLC entered into a Settlement Agreement pursuant to which the Company agreed to pay Imperial Advance, LLC $9,368 by August 23, 2017. The company recorded a gain on settlement of debt of $2,079.

 

The balance outstanding on the revenue based factoring agreement at September 30, 2017 and December 31, 2016 was $0 and $31,153, respectively. 

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
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Note Payable

Note 6 –Note Payable

 

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

 

    Outstanding Principal as of               Warrants  
    September 30, 2017     December 31, 2016     Interest Rate     Maturity Date   Quantity     Exercise
Price
 
October 25, 2016     -       25,000       9 %   July 1, 2017     50,000     $ 0.30  
February 22, 2017     400,000       -       12 %   September 1, 2017     6,161,615     $ 0.20  
August 18, 2017     50,000       -       15 %   October 2, 2017     -       -  
      450,000       25,000                              
Less: Debt Discount     -       (9,421 )                            
Less: Debt Issuance Costs     -       -                              
    $ 450,000     $ 15,579                              

  

From February 24, 2017 through March 17, 2017, the Company conducted multiple closings of a private placement offering (the “February 2017 Offering”) of the Company’s securities by entering into subscription agreements (the “Subscription Agreements”) with accredited investors (the “Accredited Investors”) for aggregate gross proceeds of $916,858 for which the Accredited Investors received $975,511 in principal value of secured promissory notes with an original issue discount of six percent (6%) (the “February 2017 Offering Notes”) and warrants to purchase the Company’s common stock (the “February 2017 Offering Warrants”). 

 

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

 

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

 

Pursuant to the Subscription Agreements, the February 2017 Offering Notes matured on September 1, 2017 (the February 2017 Offering Maturity Date). Prior to the February 2017 Offering Maturity Date, investors representing $575,511 in principal value converted their February 2017 Offering Notes into two year, 15% secured convertible promissory notes offered by the Company (the “August 2017 Convertible Note Offering”). The remaining investors representing an aggregate $400,000 in principal of the February 2017 Offering Notes agreed to forbear their right to declare an event of default until December 15, 2017 during which time they retain the right to convert their principal and any accrued but unpaid interest into the August 2017 Convertible Note Offering. In consideration of the forbearance for which the investors will receive a warrant to purchase up to fifteen percent (15%) of the shares of common stock underlying the warrant acquired with the purchase of the February 2017 Offering Notes at a purchase price of $0.20 per share, and the interest on their note would be increased to eighteen percent (18%) from September 1, 2017 through December 15, 2017 or the conversion date, whichever is sooner.

 

On July 21, 2017, the Company entered into a loan agreement (the “July 2017 Loan Agreement”) with an individual (the “July 2017 Lender”), the Company issued the July 2017 Lender a promissory note of $100,000 (the “July 2017 Note”). Pursuant to the July 2017 Loan Agreement, the July 2017 Note bears interest at a rate of 10% per annum. As additional consideration for entering in the July 2017 Loan Agreement, the Company issued the July 2017 Lender a five-year warrant to purchase 100,000 shares of the Company’s common stock with an exercise price of $0.20 per share. The maturity date of the July 2017 Note was April 21, 2017 (the “July 2017 Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the July 2017 Note were due. . On September 28, 2017, the July 2017 Note and accrued but unpaid interest was converted into the Company’s August 2017 Convertible Note Offering.

 

On August 18, 2017, the Company entered into a loan agreement (the “August 2017 Loan Agreement”) with an individual (the “August 2017 Lender”), the Company issued the August 2017 Lender a promissory note of $50,000 (the “August 2017 Note”). Pursuant to the August 2017 Loan Agreement, the August 2017 Note bears interest at a rate of 15% per annum. The maturity date of the August 2017 Note was October 2, 2017 at which time all outstanding principal, accrued and unpaid interest and other amounts due under the August 2017 Note were due. During September 2017, the August 2017 Note and accrued but unpaid interest was converted into the Company’s August Convertible Note Offering. 

 

Private Placement Offering:

 

From February 24, 2017 through March 17, 2017, the Company conducted multiple closings of a private placement offering (the “February 2017 Offering”) of the Company’s securities by entering into subscription agreements (the “Subscription Agreements”) with accredited investors (the “Accredited Investors”) for aggregate gross proceeds of $916,858 for which the Accredited Investors received $975,511 in principal value of secured promissory notes with an original issue discount of six percent (6%) (the “February 2017 Offering Notes”) and warrants to purchase the Company’s common stock (the “February 2017 Offering Warrants”). Pursuant to the Subscription Agreements, the February 2017 Offering Notes matured on September 1, 2017.  

 

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

 

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

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
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Convertible Note Payable

Note 7 – Convertible Note Payable

 

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

 

    Outstanding Principal as of                   Warrants  
    September 30, 2017     December 31, 2016     Interest
Rate
    Conversion
Price
  Maturity Date   Quantity     Exercise
Price
 
November - December, 2016     200,000       400,000       10 %   0.30   November 1, 2017     400,000       0.30  
December 27, 2016     -       100,000       10 %   0.30   December 27, 2017     100,000       0.30  
June, 2017     121,500       -       12 %   Not Applicable   September 1, 2017     114,700       0.20  
July, 2017     -       -       8.5 %   0.20(*)   April 11, 2018     350,000       0.20  
August – September 2017     1,618,611       -       15 %   0.20(*)   August – September 2019     8,093,052       0.20  
      1,940,111       500,000                                  
Less: Debt Discount     (177,971 )     (184,398 )                                
Less: Debt Issuance Costs     (34,997 )     (46,779 )                                
      1,727,143       268,823                                  
Less: Current Debt     (375,482     (268,823                                
Total Long-Term Debt   $ 1,351,661     $ -                                  

 

(*) As subject to adjustment as further outlined in the notes

 

During the months of November and December 2016, the Company issued convertible notes to third party lenders totaling $400,000. These notes accrue interest at 10% per annum and mature with interest and principal both due on November 1, 2017 through December 29, 2017. The notes and accrued interest are convertible at a conversion price as defined therein. In addition, in connection with the notes the Company issued five-year warrants to purchase an aggregate of 400,000 shares of Company common stock at a purchase price of $0.30 per share. Subsequent to September 30, 2017, the investors converted $200,000 of principal and $16,384 of interest into the August 2017 Convertible Note Offering. 

 

On December 27, 2016, the Company issued a convertible note to a third party lender totaling $100,000 (the “December 2016 Note”). The December 2016 Note accrues interest at 10% per annum and matures with interest and principal both due on December 27, 2017. In addition, the Company issued a warrant to purchase 100,000 shares of Company common stock. The warrant entitles the holder to purchase the Company’s common stock at a purchase price of $0.40 per share for a period of five years from the issue date. The December 2016 Note and accrued interest is convertible at a conversion price of $0.30 per share, subject to adjustment. On August 31, 2017 the investor converted $100,000 of principal and $6,767 of interest into the August Offering.

 

During the month of June 2017, the Company issued convertible notes to third party lenders totaling $121,500. The notes accrue interest at 12% per annum and mature with interest and principal both due on September 1, 2017. The notes and accrued interest may be converted into a subsequent offering at a 15% discount to the offering price are convertible at a conversion price as defined therein. In addition, the Company issued warrants to purchase 102,550 shares of Company common stock. The warrants entitle the holders to purchase the Company’s common stock at a purchase price of $0.20 per share for a period of five years from the issue date. Subsequent to September 30, 2017, the company repaid $40,000 of the outstanding principal balance of the note. The Company is currently in default on $85,000 in principal due on the notes.

 

The July 2017 Convertible Offering

 

During the month of July 2017, the Company entered into Securities Purchase Agreements and conducted closings of a private placement offering (the “July 2017 Convertible Note Offering”) of the Company’s securities for aggregate gross proceeds of $450,000. In aggregate, the Company entered into Securities Purchase Agreements with three accredited investors for (i) the issuance and sale of 8.5% Convertible Redeemable Debentures, containing a ten percent (10%) original issuance discount, due April 18, 2018 (the “Debentures”) and (ii) the issuance and sale of five-year Common Stock Purchase Warrants to purchase up to 778,750 shares of the Company’s common stock, par value $0.001 per share. The Warrants were immediately exercisable upon issuance at an exercise price of $0.20 per share, subject to adjustment, and expire five years from the date of issuance. The accredited investors also received a total of 245,000 shares of the Company’s common stock as inducement for participating in the July 2017 Convertible Note Offering (the “Consideration Shares”).

 

During September 8, 2017 through September 13, 2017, the Company redeemed the 8.5% Convertible Redeemable Debentures by paying the three accredited investors an aggregate $606,812 representing 117.5% of the principal along with interest. Pursuant to such redemption, the Debentures are no longer in full force and effect.

 

The Company also repurchased 25,000 consideration shares of one of the accredited investors for $3,520, cancelling the accredited investor’s Consideration Shares.

 

Due to the fact that these convertible notes have an option to convert at a variable amount, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The conversion feature has been measured at fair value using a Black Scholes model at the issuance date and the period end. The conversion feature of The July 2017 Convertible Offering issued during the nine months ended September 30, 2017, gave rise to a derivative liability of $321,231 which was recorded as a debt discount. The debt discount is charged to accretion of debt discount and issuance cost ratably over the term of the convertible note.

 

The Company recorded an $52,743 debt discount relating to 778,750 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.

 

The August 2017 Convertible Note Offering

 

During the three months ended September 30, 2017, the Company conducted multiple closings of a private placement offering to accredited investors (the “August 2017 Convertible Note Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “Investors”) for aggregate gross proceeds of $500,000. In addition, $992,177 of the Company’s short term debt along with accrued but unpaid interest of $24,876 was converted into the August 2017 Convertible Note Offering . The conversions resulted in the issuance of 4,377,826 warrants with a fair value of $250,036, a derivative liability from the conversion feature of $247,754 and an original issue discount of $101,561. These were recorded as a loss on extinguishment of debt.

 

The August 2017 Convertible Note Offering consisted of a maximum of $6,000,000 of units of the Company’s securities (each, a “Unit” and collectively, the “Units”), with each Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a “Note” and together the “Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $0.20 per share (the “Conversion Price”), and (b) a five-year warrant (each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into (“Warrant Shares”) at an exercise price of $0.20 per share (“Exercise Price”). The Notes mature on the second (2nd) anniversary of their issuance dates.

 

The Conversion Price of the Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.

 

Due to the fact that these convertible notes have an option to convert at a variable amount, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The conversion feature has been measured at fair value using a Black Scholes model at the issuance date and the period end. The conversion feature of The August Offering issued during the nine months ended September 30, 2017, gave rise to a derivative liability of $106,916 which was recorded as a debt discount. The debt discount is charged to accretion of debt discount and issuance cost ratably over the term of the convertible note.

 

The Company recorded a $138,180 debt discount relating to 2,500,000 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.

 

In connection with the Offering, the Company paid a placement agent a cash fee of $49,420 to carry out the Offering on a “best-efforts” basis, which was recorded as issuance cost and is being accreted over the life of the note to accretion of debt discount and issuance cost.

 

Subsequent to September 30, 2017, the Company completed the August 2017 Convertible Note Offering. The aggregate principal of the Notes was $4,062,009, representing $2,104,938 in gross proceeds and $2,219,913 in the conversion of unpaid principal and interest of existing short term debt. For services in its capacity as Placement Agent, the Company paid the Placement Agent a cash fee of one hundred and fifteen thousand nine hundred and ninety-four dollars ($115,994) and warrants to purchase up to 579,969 shares of Common Stock at an exercise price of $0.20 per share.

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
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Related Party Loan

Note 8 – Related Party Loan

 

Convertible notes

 

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

 

    Outstanding Principal as of               Warrants  
    September 30, 2017     December 31,
2016
    Interest Rate     Maturity Date   Quantity     Exercise
Price
 
April 25, 2017     -       -       12 %   September 1, 2017     17,500       0.20  
April 25, 2017     25,000          -       12 %   September 1, 2017     17,500       0.20  
August – September 2017     917,893       -       15 %   August – September 2019     4,589,466       0.20  
      942,893       -                              
Less: Debt Discount     (278,436 )     -                              
      664,457       -                              
Less: Current Debt     (25,000     -                              
Total Long-Term Debt   $ 639,457     $ -                              

  

On April 25, 2017, the Company issued convertible notes to Arthur Rosen, a lender, totaling $25,000 (the “April Rosen Notes”). The April Rosen Notes accrue interest at 12% per annum and mature with interest and principal both due on September 1, 2017. In addition, in connection with the April Rosen Notes, the Company issued a five-year warrant to purchase 17,500 shares of Company common stock at a purchase price of $0.20 per share. On September 7, 2017, the April Rosen Notes and accrued interest was converted into the August 2017 Convertible Note Offering.

  

On April 25, 2017, the Company issued a convertible note to Chris Gordon, a lender totaling $25,000 (the “April Gordon Notes”). The April Gordon Notes accrue interest at 12% per annum and matures with interest and principal both due on September 1, 2017. In addition, the Company issued a five-year warrant to purchase 17,500 shares of Company common stock at a purchase price of $0.20 per share. Subsequent to September 30, 2017. the April Gordon Notes and accrued interest were converted into the August 2017 Convertible Note Offering.

 

The August 2017 Convertible Note Offering – Related Party 

 

During the three months ended September 30, 2017, the Company conducted multiple closings of a private placement offering to accredited investors (the “The August 2017 Convertible Offering”) of units of the Company’s securities by entering into subscription agreements with “accredited investors” (the “Investors”) for aggregate gross proceeds of $500,000. In addition, $992,177 of the Company’s short term debt along with accrued but unpaid interest of $24,876 was converted into the August 2017 Convertible Offering. The conversions resulted in the issuance of 2,064,466 warrants with a fair value of $121,800, a derivative liability from the conversion feature of $127,595 and the increase of principal of $60,000. These were recorded as a loss on extinguishment of debt.

 

The Company offered, through a placement agent, $6,000,000 of units of its securities (each, a “Unit” and collectively, the “Units”), with each Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a “Note” and together the “Notes”), convertible into shares of the Company’s common stock, par value $.001 per share (“Conversion Shares”) at a conversion price of $0.20 per share (the “Conversion Price”), and (b) a five-year warrant ( each a “Warrant and together the “Warrants”) to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into (“Warrant Shares”) at an exercise price of $0.20 per share (“Exercise Price”). The Notes mature on the second (2nd) anniversary of their issuance dates.

 

The Conversion Price of the Note and the Exercise Price of the Warrants are subject to adjustment for issuances of the Company’s common stock or any equity linked instruments or securities convertible into the Company’s common stock at a purchase price of less than the prevailing Conversion Price or Exercise Price. Such adjustment shall result in the Conversion Price and Exercise Price being reduced to such lower purchase price, subject to carve-outs as described therein.

 

Due to the fact that these convertible notes have an option to convert at a variable amount, they are subject to derivative liability treatment. The Company has applied ASC 815, due to the potential for settlement in a variable quantity of shares. The conversion feature has been measured at fair value using a Black Scholes model at the issuance date and the period end. The conversion feature of The August 2017 Convertible Offering issued during the nine months ended September 30, 2017, gave rise to a derivative liability of $127,594 which was recorded as a debt discount. The debt discount is charged to accretion of debt discount and issuance cost ratably over the term of the convertible note.

 

The Company recorded a $161,552 debt discount relating to 2,525,000 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.

 

As of September 30, 2017, the total outstanding balance of the convertible notes - related party was $942,893, net of debt discount of $278,436.

 

Notes payable

  

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

 

    Outstanding Principal as of               Warrants  
    September 30, 2017     December 31, 2016     Interest
Rate
    Maturity Date   Quantity     Exercise
Price
 
May 26, 2016     1,000,000       1,000,000       13 %   November 26, 2017     1,000,000       0.40  
September 12, 2016     -       100,000       12 %   November 22, 2017     17,500       0.20  
September 20, 2016     -       10,000       10 %   March 20, 2017     235,000       0.40  
October 13, 2016     50,000       50,000       12 %   November 22, 2017     50,000       0.40  
October 24, 2016     15,000       15,000       9 %   January 1, 2018     30,000       0.30  
October 31, 2016     -       10,000       10 %   November 10, 2016     10,000       0.30  
November 22, 2016     225,000       225,000       10 %   November 22, 2017     750,000       0.30  
December 21, 2016     50,000       50,000       10 %   November 22, 2017     166,666       0.30  
January 25, 2017     -       -       10 %   January 1, 2018     50,000       0.30  
March 2, 2017     10,000       -       10 %   January 21, 2018     10,000       0.30  
April 12, 2017     -       -       10 %   January 21, 2018     17,500       0.20  
April 12, 2017     10,000       -       10 %   September 1, 2017     17,500       0.20  
May 4, 2017     -       -       12 %   September 1, 2017     10,500       0.30  
May 11, 2017     20,000       -       10 %   September 30, 2017     20,000       0.20  
June 26, 2017     30,000       -       10 %   January 21, 2018     22,500       0.20  
July 6, 2017     25,000       -       10 %   July 21, 2017     18,750       0.20  
July 6, 2017     -       -       10 %   July 21, 2017     18,750       0.20  
August 24, 2017     -       -       12 %   November 1, 2017     -       -  
September 8, 2017     224,000       -             September 24, 2017     1,650,000       0.20  
      1,659,000       1,460,000                              
Less: Debt Discount     (-)       (94,675 )                            
    $ 1,659,000     $ 1,365,325                              

 

(a) Subsequent to September 30, 2017, notes were converted into August 2017 Convertible Note Offering with maturity dates between September - October 2019.  

 

On May 26, 2016, the Company entered into a loan agreement (the “May 2016 Rosen Loan Agreement”) with Arthur Rosen, an individual (“Rosen”), pursuant to which on May 26, 2016 (the “Closing Date”), Rosen provided the Company a secured term loan of $1,000,000 (the “May 2016 Rosen Loan”). In connection with the May 2016 Rosen Loan Agreement, on May 26, 2016, the Company and Rosen entered into a security agreement (the “Rosen Security Agreement”), pursuant to which the Company granted to Rosen a senior security interest in substantially all of the Company’s assets as security for repayment of the May 2016 Rosen Loan. Pursuant to the May 2016 Rosen Loan Agreement, the May 2016 Rosen Loan bears interest at a rate of 12.5% per annum, compounded annually and payable on the maturity date of May 26, 2017 (the “May 2016 Rosen Maturity Date”) at which time all outstanding principal, accrued and unpaid interest and other amounts due under the May 2016 Rosen Loan are due. The Company entered into an amendment to the May 2016 Rosen Loan extending the May 2016 Rosen Maturity Date to November 26, 2017. As additional consideration for entering in the May 2016 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 1,000,000 shares of the Company’s common stock at a purchase price of $0.40 per share (the “May 2016 Rosen Warrant”). The May 2016 Rosen Warrant contains anti-dilution provisions as further described therein. On September 7, 2017 (the “Conversion Date”), Rosen converted all accrued but unpaid interest on the May 26 Rosen Loan from May 26, 2016 through September 6, 2017 in the amount of $150,127.97 (the “May 26 Rosen Loan Interest”) into the Company’s August Convertible Note Offering, after which May 26 Rosen Loan Interest was deemed paid in full through the Conversion Date.

 

On September 12, 2016, the Company entered into a loan agreement (the “September 2016 Rosen Loan Agreement”) with Rosen, pursuant to which on September 12, 2016 (the “Closing Date”), the Company issued Rosen a promissory note of $100,000 (the “September 2016 Rosen Note”). Pursuant to the September 2016 Rosen Loan Agreement, the September 2016 Rosen Note bears interest at a rate of 12% per annum. As additional consideration for entering in the September 2016 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 150,000 shares of the Company’s common stock at a purchase price of $0.40 per share. On September 7, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

  

On October 13, 2016, the Company entered into a loan agreement (the “October 2016 Gordon Loan Agreement”) with Chris Gordon, an individual (the “Gordon”), pursuant to which on October 13, 2016 (the “Closing Date”), the Company issued a promissory note of $50,000 to Gordon (the “October 2016 Gordon Note”). Pursuant to the October 2016 Gordon Loan Agreement, the October 2016 Gordon Note bears interest at a rate of 12% per annum. As additional consideration for entering in the October 2016 Gordon Loan Agreement, the Company issued Gordon a five-year warrant to purchase 50,000 shares of the Company’s common stock at a purchase price of $0.40 per share. Subsequent to September 30, 2017, the principal and interest of the October 2016 Gordon Note were converted into the August 2017 Convertible Note Offering.

 

On October 24, 2016, the Company entered into a loan agreement (the “October 2016 Schiller Loan Agreement”) with Leonard Schiller, a Board Member (the “Schiller”), pursuant to which on October 24, 2016 (the “Closing Date”), the Company issued Schiller a promissory note of $15,000 (the “October 2016 Schiller Note”). Pursuant to the October 2016 Schiller Loan Agreement, the October 2016 Schiller Note bears interest at a rate of 9% per annum. As additional consideration for entering in the October 2016 Schiller Loan Agreement, the Company issued Schiller a 5-year warrant to purchase 30,000 shares of the Company’s common stock at a purchase price of $0.30 per share. Subsequent to September 30, 2017, the principal and interest of the October 2016 Gordon Note were converted into the August 2017 Convertible Note Offering

 

On October 31, 2016, the Company entered into a loan agreement (the “October 2016 Rosen Loan Agreement”) with Rosen, pursuant to which on October 31, 2016 (the “Closing Date”), Company issued Rosen a promissory note of $10,000 (the “October 2016 Rosen Note”). Pursuant to the October 2016 Rosen Loan Agreement, the October 2016 Rosen Note bears interest at a rate of 10% per annum. As additional consideration for entering in the October 2016 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 10,000 shares of the Company’s common stock at a purchase price of $0.30 per share. On September 7, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On December 21, 2016, the Company entered into a loan agreement (the “December 2016 Gordon Loan Agreement”) with Gordon, pursuant to which on December 21, 2016 (the “Closing Date”), the Company issued Gordon a promissory note of $275,000 (the “December 2016 Gordon Note”). Pursuant to the December 2016 Gordon Loan Agreement, the December 2016 Gordon Note bears interest at a rate of 10% per annum. As additional consideration for entering in the December 2016 Gordon Loan Agreement, the Company issued Gordon a five-year warrant to purchase 166,666 shares of the Company’s common stock at a purchase price of $0.40 per share. Subsequent to September 30, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On January 25, 2017, the Company entered into a loan agreement (the “January 2017 Rosen Loan Agreement”) with Rosen pursuant to which on January 25, 2017 (the “Closing Date”), the Company issued Rosen a promissory note of $50,000 (the “January 2017 Rosen Note”). The January 2017 Rosen Note is secured by an officer of the Company. Pursuant to the January 2017 Rosen Loan Agreement, the January 2017 Rosen Note bears interest at a rate of 10% per annum. As additional consideration for entering in the January 2017 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 50,000 shares of the Company’s common stock at a purchase price of $0.30 per share. On September 7, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On January 26, 2017, the Company entered into a loan agreement (the “January 2017 Gordon Loan Agreement”) with Gordon pursuant to which on January 26, 2017 (the “Closing Date”), the Company issued Gordon a promissory note of $50,000 (the “January 2017 Gordon Note”). The January 2017 Gordon Note is secured by an officer of the Company. Pursuant to the January 2017 Gordon Loan Agreement, the January 2017 Gordon Note bears interest at a rate of 10% per annum. As additional consideration for entering in the January 2017 Gordon Loan Agreement, the Company issued Gordon a five-year warrant to purchase 50,000 shares of the Company’s common stock at a purchase price of $0.30 per share. Subsequent to September 30, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On February 7, 2017, the Company entered into a loan agreement (the “February 2017 Schiller Loan Agreement”) with Schiller, a member of the Board, pursuant to which on October 24, 2016 (the “Closing Date”), the Company issued Schiller a promissory note of $10,000 (the “February 2017 Schiller Note”). The February 2017 Schiller Note is secured by an officer of the Company. Pursuant to the February 2017 Schiller Loan Agreement, the February 2017 Schiller Note bears interest at a rate of 10% per annum. As additional consideration for entering in the February 2017 Schiller Note Loan Agreement, the Company issued Schiller a five-year warrant to purchase 10,000 shares of the Company’s common stock at a purchase price of $0.30 per share. Subsequent to September 30, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On April 12, 2017, the Company entered into a loan agreement (the “April 2017 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note of $10,000 (the “April 2017 Schiller Note”). The April 2017 Schiller Note is secured by an officer of the Company. Pursuant to the April 2017 Schiller Loan Agreement, the April 2017 Schiller Note bears interest at a rate of 10% per annum. As additional consideration for entering in the April 2017 Schiller Loan Agreement, the Company issued Schiller a five-year warrant to purchase 10,000 shares of the Company’s common stock at a purchase price of $0.30 per share. Subsequent to September 30, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On April 12, 2017, the Company entered into a loan agreement (the “April 2017 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note of $10,000 (the “April 2017 Rosen Note”). The April 2017 Rosen Note is secured by an officer of the Company. Pursuant to the April 2017 Rosen Loan Agreement, the April 2017 Rosen Note bears interest at a rate of 10% per annum. As additional consideration for entering in the April 2017 Rosen Loan Agreement, the Company issued Rosen a five-year warrant to purchase 10,000 shares of the Company’s common stock at a purchase price of $0.30 per share. . On September 7, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On May 4, 2017, the Company entered into a loan agreement (the “May 2017 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note of $15,000 (the “May 2017 Rosen Note”). The May 2017 Rosen Note is secured by an officer of the Company. Pursuant to the May 2017 Rosen Note Loan Agreement, the May 2017 Rosen Note bears interest at a rate of 12% per annum. As additional consideration for entering in the May 2017 Rosen Note Loan Agreement, the Company issued Rosen a five-year warrant to purchase 10,500 shares of the Company’s common stock at a purchase price of $0.30 per share. On September 7, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On May 11, 2017, the Company entered into a loan agreement (the “May 2017 Schiller Loan Agreement”) with Schiller, a member of the Board, whereby the Company issued Schiller a promissory note of $20,000 (the “May 2017 Schiller Note”). Pursuant to the May 2017 Schiller Loan Agreement, the May 2017 Schiller Note bears interest at a rate of 10% per annum. As additional consideration for entering in the May 2017 Schiller Note Loan Agreement, the Company issued Schiller a five-year warrant to purchase 20,000 shares of the Company’s common stock at a purchase price of $0.20 per share. Subsequent to September 30, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

  

On June 26, 2017, the Company entered into a loan agreement (the “June 2017 Schiller Loan Agreement”) Schiller, a member of the Board, whereby the Company issued Schiller a promissory note of $30,000 (the “June 2017 Schiller Note”). Pursuant to the June 2017 Schiller Loan Agreement, the June 2017 Schiller Note bears interest at a rate of 10% per annum. As additional consideration for entering in the June 2017 Schiller Loan Agreement, the Company issued Schiller a five-year warrant to purchase 22,500 shares of the Company’s common stock at a purchase price of $0.20 per share. Subsequent to September 30, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering

 

On July 6, 2017, the Company entered into a loan agreement (the “July 2017 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note of $25,000 (the “July 2017 Rosen Note”). The July 2017 Rosen Note is secured by an officer of the Company. Pursuant to the July 2017 Rosen Note Loan Agreement, the July 2017 Rosen Note bears interest at a rate of 10% per annum. As additional consideration for entering in the July 2017 Rosen Note Loan Agreement, the Company issued Rosen a five-year warrant to purchase 18,750 shares of the Company’s common stock at a purchase price of $0.20 per share. On September 7,2017 the principal and interest of this note was converted into the August 2017 Convertible Note Offering.

 

On July 6, 2017, the Company entered into a loan agreement (the “July 2017 Gordon Loan Agreement”) with Gordon, whereby the Company issued Gordon a promissory note of $25,000 (the “July 2017 Gordon Note”). The July 2017 Gordon Note is secured by an officer of the Company. Pursuant to the July 2017 Gordon Note Loan Agreement, the July 2017 Gordon Note bears interest at a rate of 10% per annum. As additional consideration for entering in the July 2017 Gordon Note Loan Agreement, the Company issued Gordon a five-year warrant to purchase 18,750 shares of the Company’s common stock at a purchase price of $0.20 per share. Subsequent to September 30, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On August 24, 2017, the Company entered into a loan agreement (the “August 2017 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note of $20,000 (the “August 2017 Rosen Note”). The August 2017 Rosen Note is secured by an officer of the Company. Pursuant to the August 2017 Rosen Note Loan Agreement, the August 2017 Rosen Note bears interest at a rate of 12% per annum. On September 7, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

On September 8, 2017, the Company entered into a loan agreement (the “September 2017 Rosen Loan Agreement”) with Rosen, whereby the Company issued Rosen a promissory note of $224,000 (the “September 2017 Rosen Note”). The September 2017 Rosen Note is secured by an officer of the Company. As additional consideration for entering in the September 2017 Rosen Note Loan Agreement, the Company issued Rosen a five-year warrant to purchase 1,650,000 shares of the Company’s common stock at a purchase price of $0.20 per share. On September 7, 2017 the principal and interest of this note were converted into the August 2017 Convertible Note Offering.

 

As of September 30, 2017, the total outstanding balance of related party notes payable was $1,659,000, net of debt discount of $0. As of December 31, 2016, the total outstanding balance of related party notes payable was $1,350,325, net of debt discount of $94,675.

  

Line of credit

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Capital Leases Payable

Note 9 – Capital Leases Payable

 

Capital lease obligation consisted of the following:

 

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

 

The capital leases mature as follows:

 

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

Note 10 – Derivative Liabilities

 

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

 

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

 

    Low     High  
Annual dividend rate     0 %     0 %
Expected life     0.34       5.00  
Risk-free interest rate     1.14 %     1.93 %
Expected volatility     65.38 %     92.96 %

 

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

 

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

 

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

 

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

 

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

 

    Three Months Ended
September 30, 2017
 
    Level 1     Level 2     Level 3  
Derivative liabilities as January 1, 2017   $ -     $ -     $ -  
Addition     -       -       3,157,682  
Conversion     -       -          
Reclassification of derivative liability to equity                     (356,288 )
Loss on changes in fair value     -       -       (1,257,716 )
Derivative liabilities as September 30, 2017   $ -     $ -     $ 1,543,678
Stockholders' Deficit
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Stockholders' Deficit

Note 11 - Stockholders’ Deficit

 

Shares Authorized

 

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

 

Preferred Stock

 

Series A Cumulative Convertible Preferred Stock

 

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

 

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

 

During the nine months ended September 30, 2017, the Company converted 1,733 shares of Series A for 1,146,307 shares of common stock. 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(c) effecting a Liquidation Event;

 

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

 

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

 

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

 

Series B Cumulative Convertible Preferred Stock

 

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

 

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

 

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

 

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

 

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

   

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

 

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

 

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

 

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

 

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

 

(c) effecting a Liquidation Event;

 

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

 

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

 

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

 

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

 

Series D Convertible Preferred Stock

 

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

 

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

 

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

 

The Company 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 nine months ended September 30, 2017, the Company converted 914 shares of Series D for 266,325 shares of common stock. 

  

Common Stock

 

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

 

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

 

On February 13, 2017, the Company issued 133,333 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. 

 

Stock Options

 

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

  

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

 

    September 30,
2017
  December 31,
2016
Exercise price   0.20-0.75   0.25-0.40
Expected dividends   0%   0%
Expected volatility   63.72% - 92.14%   73.44%-90.05%
Risk free interest rate   1.74% - 2.10%   1%-1.39%
Expected life of option   5 years   4.68-5 years

 

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

 

    Options    

Weighted

Average

Exercise

Price

   

Weighted

Average

Remaining
Contractual
Life (in
years)

 
Balance – December 31, 2016     2,250,000     $ 0.34       4.38  
Granted     15,499,990     $ 0.43       4.89  
Exercised     -       -       -  
Cancelled/Modified     (100,000 )   $ 0.40       -  
Balance – September 30, 2017 – outstanding     17,649,990     $ 0.42       4.77  
Balance – September 30, 2017 – exercisable     8,983,322     $ 0.27       4.65  
                         
Outstanding options held by related party – September 30, 2017     17,549,990     $ 0.42       4.77  
Exercisable options held by related party – September 30, 2017     8,983,322     $ 0.27       4.65  

 

At September 30, 2017, the aggregate intrinsic value of options outstanding and exercisable was $220 and $220, respectively.

 

Stock-based compensation for stock options has been recorded in the condensed consolidated statements of operations and totaled $560,794 and $0, for the three months ended September 30, 2017 and 2016, respectively.

 

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

 

Options     Value     Purpose for Grant
  15,499,990     $ 681,246     Service Rendered

   

Warrants

 

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

 

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

 

    September 30,
2017
  December 31,
2016
 
Exercise price   $ 0.20-0.30   $ 0.40  
Expected dividends     0%   0%
Expected volatility     62.63%-92.96%   73.44-91.54%
Risk free interest rate     1.64%-2.03%   1.13%-1.39%
Expected life of warrant     5 years     5 years  

 

Warrant Activities

 

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

 

    Warrants     Weighted Average
Exercise
Price
 
             
Outstanding – December 31, 2016     15,541,666     $ 0.36  
Granted     18,915,358     $ 0.20  
Exercised     -     $ -  
Forfeited/Cancelled     -     $ -  
Outstanding – September 30, 2017     34,457,024     $ 0.27  
Exercisable – September 30, 2017     34,457,024     $ 0.27  

 

Warrants Outstanding     Warrants Exercisable  
Exercise price     Number Outstanding     Weighted
Average
Remaining
Contractual
Life
(in years)
    Weighted
Average
Exercise Price
    Number
Exercisable
    Weighted
Average
Exercise Price
 
$     0.20 – 0.40         34,457,024       3.97       0.27       34,457,024       0.27  

 

During the nine months ended September 30, 2017, a total of 5,811,360 warrants were issued with promissory notes (See Note 6 above). In addition, the placement agent was granted a total of 487,756 warrants to purchase common stock. The warrants have a grant date fair value of $1,104,731 using a Black-Scholes option-pricing model and the above assumptions.

 

During the nine months ended September 30, 2017, a total of 7,759,126 warrants were issued with convertible notes (See Note 7 above). In addition, the placement agent was granted a total of 12,150 warrants to purchase common stock. The warrants have a grant date fair value of $455,173 using a Black-Scholes option-pricing model and the above assumptions. 

 

During the nine months ended September 30, 2017, a total of 255,500 warrants were issued with notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $23,437 using a Black-Scholes option-pricing model and the above assumptions.

 

During the nine months ended September 30, 2017, a total of 4,589,466 warrants were issued with convertible notes payable – related party (See Note 8 above). The warrants have a grant date fair value of $283,352 using a Black-Scholes option-pricing model and the above assumptions. 

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

 

Preferred Stock

 

Series A Cumulative Convertible Preferred Stock

 

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

 

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

 

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
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Subsequent Events

Note 12 - Subsequent Events

  

Subsequent to September 30, 2017, the Company sold Units under The August 2017 Convertible Note Offering for gross proceeds of $1,954,918. In addition, $659,112 of the Company’s short term debt along with accrued but unpaid interest of $24,876 was converted. As additional consideration for entering in the private placement offering, the investors were granted a total of 13,070,148 warrants to purchase common stock. As part of the transaction, the Company incurred placement agent fees of $66,574. In addition, the placement agent was granted a total of 579,969 warrants to purchase common stock at an exercise price of $0.2.

 

On October 24, 2017, the Company entered into a Settlement Agreement (the “Settlement Agreement”) by and among the Company and Alpha Capital Anstalt (“Alpha Capital”) to resolve a dispute related to Alpha Capital’s claims brought against the Company on September 13, 2017 in United States District Court, Southern District of New York, for the alleged failure to honor a conversion notice submitted by Alpha Capital whereby Alpha Capital believed it was to be issued a certain amount of the Company’s Common Stock for its conversion of the Company’s Series A Cumulative Convertible Preferred Stock (the “Dispute”). Pursuant to the Settlement Agreement, the Company agreed to pay Alpha Capital $150,000. In November 2017, the Company fulfilled is settlement obligation by paying Alpha Capital a total of $150,000. Upon receipt of the payments, Alpha Capital no longer has any rights under the Series A Cumulative Convertible Preferred Stock. The payments to Alpha Capital represents the settlement of the Dispute and all of the claims related to such have been dismissed.

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)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Significant and Critical Accounting Policies and Practices [Abstract]
 
 
Basis of Presentation
Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions
Principles of consolidation
Fair Value of Financial Instruments
Cash Equivalents
Inventories
Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis
Property and Equipment
Investments - Cost Method, Equity Method and Joint Venture
Related Parties
Derivative Liability
 
Commitments and Contingencies
 
Revenue Recognition
Stock-Based Compensation
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services
 
Income Taxes
Cash Flows Reporting
 
Subsequent Events
 
Loss Per Share
 
Reclassifications
 
Recently Issued Accounting Pronouncements

Basis of Presentation

 

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

 

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

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.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

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

 

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

   

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

 

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

 

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

 

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

 

Actual results could differ from those estimates.

Principles of consolidation

 

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

 

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

 

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

 

All inter-company balances and transactions have been eliminated.

 

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

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 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.

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.

Cash Equivalents

 

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

 

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

Inventories

 

Inventory Valuation

 

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

 

Inventory Obsolescence and Markdowns

 

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

 

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

 

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

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.

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.  

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.

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.

Property and Equipment

 

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

 

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

 

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

Investments - Cost Method, Equity Method and Joint Venture

 

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

 

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

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.

Related Parties

 

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

 

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

 

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

Derivative Liability

 

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

   

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

 

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

 

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

 

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

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.

Revenue Recognition

 

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

Stock-Based Compensation

 

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

 

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

 

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

  

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

 

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

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.

Income Taxes

 

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

 

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

 

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

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.

Loss Per Share

 

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

 

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

 

    September 30,
2017
    September 30,
2016
 
Options     17,749,990       2,050,000  
Warrants     34,457,024       14,735,000  
Convertible notes     13,681,425       -  
Totals     65,888,439       16,785,000  

Reclassifications

 

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

Recently Issued Accounting Pronouncements

 

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

 

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

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)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Significant and Critical Accounting Policies and Practices [Abstract]
 
 
Schedule of consolidated subsidiaries and/or entities
Schedule of property and equipment estimated useful life
Schedule of common stock equivalents
 
Name of combined affiliate   State or other jurisdiction of
incorporation or organization
  Company interest  
           
Jerrick Ventures LLC   The State of Delaware   100 %
 
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
 Estimated Useful
Life (Years)
 
    
Computer equipment and software  3 
     
Furniture and fixture  5 

 

    September 30,
2017
    September 30,
2016
 
Options     17,749,990       2,050,000  
Warrants     34,457,024       14,735,000  
Convertible notes     13,681,425       -  
Totals     65,888,439       16,785,000  

Property and Equipment (Tables)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Summary of property and equipment
   

September 30,
2017

    December 31,
2016
 
Computer Equipment   $ 219,653     $ 219,653  
Furniture and Fixtures     61,803       61,803  
      281,456       281,456  
Less: Accumulated Depreciation     (237,838 )     (209,627 )
    $ 43,618     $ 71,829  
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 
Line of Credit (Tables)
Schedule of line of credit
    Outstanding Balances as of
    September 30,
2017
  December 31, 2016
March 19, 2009     119,246       203,988  
October 4, 2016     0       31,153  
    $ 119,246     $ 235,141  
Note Payable (Tables)
Schedule of notes payable

    Outstanding Principal as of               Warrants  
    September 30, 2017     December 31, 2016     Interest Rate     Maturity Date   Quantity     Exercise
Price
 
October 25, 2016     -       25,000       9 %   July 1, 2017     50,000     $ 0.30  
February 22, 2017     400,000       -       12 %   September 1, 2017     6,161,615     $ 0.20  
August 18, 2017     50,000       -       15 %   October 2, 2017     -       -  
      450,000       25,000                              
Less: Debt Discount     -       (9,421 )                            
Less: Debt Issuance Costs     -       -                              
    $ 450,000     $ 15,579                              

Convertible Note Payable (Tables)
Schedule of convertible notes payable

    Outstanding Principal as of                   Warrants  
    September 30, 2017     December 31, 2016     Interest
Rate
    Conversion
Price
  Maturity Date   Quantity     Exercise
Price
 
November - December, 2016     200,000       400,000       10 %   0.30   November 1, 2017     400,000       0.30  
December 27, 2016     -       100,000       10 %   0.30   December 27, 2017     100,000       0.30  
June, 2017     121,500       -       12 %   Not Applicable   September 1, 2017     114,700       0.20  
July, 2017     -       -       8.5 %   0.20(*)   April 11, 2018     350,000       0.20  
August – September 2017     1,618,611       -       15 %   0.20(*)   August – September 2019     8,093,052       0.20  
      1,940,111       500,000                                  
Less: Debt Discount     (177,971 )     (184,398 )                                
Less: Debt Issuance Costs     (34,997 )     (46,779 )                                
      1,727,143       268,823                                  
Less: Current Debt     (375,482     (268,823                                
Total Long-Term Debt   $ 1,351,661     $ -                                  

 

Related Party Loan (Tables)

    Outstanding Principal as of               Warrants  
    September 30, 2017     December 31,
2016
    Interest Rate     Maturity Date   Quantity     Exercise
Price
 
April 25, 2017     -       -       12 %   September 1, 2017     17,500       0.20  
April 25, 2017     25,000          -       12 %   September 1, 2017     17,500       0.20  
August – September 2017     917,893       -       15 %   August – September 2019     4,589,466       0.20  
      942,893       -                              
Less: Debt Discount     (278,436 )     -                              
      664,457       -                              
Less: Current Debt     (25,000     -                              
Total Long-Term Debt   $ 639,457     $ -                              

    Outstanding Principal as of               Warrants  
    September 30, 2017     December 31, 2016     Interest
Rate
    Maturity Date   Quantity     Exercise
Price
 
May 26, 2016     1,000,000       1,000,000       13 %   November 26, 2017     1,000,000       0.40  
September 12, 2016     -       100,000       12 %   November 22, 2017     17,500       0.20  
September 20, 2016     -       10,000       10 %   March 20, 2017     235,000       0.40  
October 13, 2016     50,000       50,000       12 %   November 22, 2017     50,000       0.40  
October 24, 2016     15,000       15,000       9 %   January 1, 2018     30,000       0.30  
October 31, 2016     -       10,000       10 %   November 10, 2016     10,000       0.30  
November 22, 2016     225,000       225,000       10 %   November 22, 2017     750,000       0.30  
December 21, 2016     50,000       50,000       10 %   November 22, 2017     166,666       0.30  
January 25, 2017     -       -       10 %   January 1, 2018     50,000       0.30  
March 2, 2017     10,000       -       10 %   January 21, 2018     10,000       0.30  
April 12, 2017     -       -       10 %   January 21, 2018     17,500       0.20  
April 12, 2017     10,000       -       10 %   September 1, 2017     17,500       0.20  
May 4, 2017     -       -       12 %   September 1, 2017     10,500       0.30  
May 11, 2017     20,000       -       10 %   September 30, 2017     20,000       0.20  
June 26, 2017     30,000       -       10 %   January 21, 2018     22,500       0.20  
July 6, 2017     25,000       -       10 %   July 21, 2017     18,750       0.20  
July 6, 2017     -       -       10 %   July 21, 2017     18,750       0.20  
August 24, 2017     -       -       12 %   November 1, 2017     -       -  
September 8, 2017     224,000       -             September 24, 2017     1,650,000       0.20  
      1,659,000       1,460,000                              
Less: Debt Discount     (-)       (94,675 )                            
    $ 1,659,000     $ 1,365,325                              

 

Capital Leases Payable (Tables)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
      September 30,
2017
    December  31,
2016
 
               
(i) Capital lease obligation to a financing company for a term of five (5) years, collateralized by equipment, with interest at 10.0% per annum, with principal and interest due and payable in monthly installments of $383.10   $ 4,732     $ 4,732  
                   
  Less current maturities     (4,732 )     (3,524 )
                   
  Capital lease obligation, net of current maturities     -       1,208  
                   
  TOTAL CAPITAL LEASE OBLIGATION   $ 4,732     $ 4,732
    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:   $ 3,524     $ 3,524  
2018:     1,208     $ 1,208

 

2017: $1,208  $3,524 
2018:     $1,208 
Derivative Liabilities (Tables)
    Low     High  
Annual dividend rate     0 %     0 %
Expected life     0.34       5.00  
Risk-free interest rate     1.14 %     1.93 %
Expected volatility     65.38 %     92.96 %
    Three Months Ended
September 30, 2017
 
    Level 1     Level 2     Level 3  
Derivative liabilities as January 1, 2017   $ -     $ -     $ -  
Addition     -       -       3,157,682  
Conversion     -       -          
Reclassification of derivative liability to equity                     (356,288 )
Loss on changes in fair value     -       -       (1,257,716 )
Derivative liabilities as September 30, 2017   $ -     $ -     $ 1,543,678  
Stockholders' Deficit (Tables)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
    September 30,
2017
  December 31,
2016
 
Exercise price   $ 0.20-0.30   $ 0.40  
Expected dividends     0%   0%
Expected volatility     62.63%-92.96%   73.44-91.54%
Risk free interest rate     1.64%-2.03%   1.13%-1.39%
Expected life of warrant     5 years     5 years
  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, 2016     15,541,666     $ 0.36  
Granted     18,915,358     $ 0.20  
Exercised     -     $ -  
Forfeited/Cancelled     -     $ -  
Outstanding – September 30, 2017     34,457,024     $ 0.27  
Exercisable – September 30, 2017     34,457,024     $ 0.27
  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
 
$     0.20 – 0.40         34,457,024       3.97       0.27       34,457,024       0.27  
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
    September 30,
2017
  December 31,
2016
Exercise price   0.20-0.75   0.25-0.40
Expected dividends   0%   0%
Expected volatility   63.72% - 92.14%   73.44%-90.05%
Risk free interest rate   1.74% - 2.10%   1%-1.39%
Expected life of option   5 years   4.68-5 years
  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, 2016     2,250,000     $ 0.34       4.38  
Granted     15,499,990     $ 0.43       4.89  
Exercised     -       -       -  
Cancelled/Modified     (100,000 )   $ 0.40       -  
Balance – September 30, 2017 – outstanding     17,649,990     $ 0.42       4.77  
Balance – September 30, 2017 – exercisable     8,983,322     $ 0.27       4.65  
                         
Outstanding options held by related party – September 30, 2017     17,549,990     $ 0.42       4.77  
Exercisable options held by related party – September 30, 2017     8,983,322     $ 0.27       4.65
  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
  15,499,990     $ 681,246     Service Rendered
  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 
 
 
 
 
 
 
 
33,415 
8,064 
Warrants, Quantity
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
9 Months Ended 12 Months Ended
Sep. 30, 2017
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 
Jerrick Ventures LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
The State of Delaware 
Company interest
100.00% 
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)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Computer equipment and software [Member]
 
 
Property and equipment, estimated useful life (years)
3 years 
3 years 
Furniture and fixture [Member]
 
 
Property and equipment, estimated useful life (years)
5 years 
5 years 
Significant and Critical Accounting Policies and Practices (Details 2)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
65,888,439 
16,785,000 
Warrant [Member]
 
 
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
34,457,024 
14,735,000 
Options [Member]
 
 
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
17,749,990 
2,050,000 
Convertible Debt [Member]
 
 
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
13,681,425 
   
Significant and Critical Accounting Policies and Practices (Details Textual) (USD $)
0 Months Ended 9 Months Ended 12 Months Ended
Jan. 2, 2013
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Significant and Critical Accounting Policies and Practices (Textual)
 
 
 
 
 
Inventory markdown charges
 
$ 0 
$ 0 
$ 0 
$ 21,861 
Investments minority interest
$ 83,333 
 
 
 
 
Income tax benefits recognized, percent
 
 
 
50.00% 
 
Description of investments cost method equity method and joint venture
 
The Company holds 50% or less of the common stock or in-substance common stock. 
 
 
 
Property and Equipment (Details) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Dec. 31, 2015
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
$ 281,456 
$ 281,456 
$ 237,498 
Less: Accumulated Depreciation
(237,838)
(209,627)
(166,992)
Property and equipment, net
43,618 
71,829 
70,506 
Furniture and Fixtures [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
61,803 
61,803 
61,803 
Computer Equipment [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Property and equipment, gross
$ 219,653 
$ 219,653 
$ 175,695 
Property and Equipment (Details Textual) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Property and Equipment (Textual)
 
 
 
 
 
 
Depreciation expense
$ 9,507 
$ 10,933 
$ 28,211 
$ 31,717 
$ 42,634 
$ 10,001 
Line of Credit (Details) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Line of credit outstanding balances
$ 119,246 
$ 235,141 
$ 202,422 
March Nineteen Two Thousand Nine [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Line of credit outstanding balances
119,246 
203,988 
 
October Four Two Thousand Sixteen [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Line of credit outstanding balances
$ 0 
$ 31,153 
 
Line of Credit (Details Textual) (USD $)
0 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended
Aug. 21, 2017
Oct. 4, 2016
Sep. 30, 2017
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Mar. 19, 2009
Revolving Credit Facility [Member]
Sep. 30, 2017
Revolving Credit Facility [Member]
Dec. 31, 2016
Revolving Credit Facility [Member]
Line of Credit (Textual)
 
 
 
 
 
 
 
 
 
 
Line of credit maximum outstanding balance
 
 
 
 
 
 
 
$ 200,000 
$ 119,246 
$ 203,988 
Line of credit facility, expiration date
 
 
 
 
 
 
 
Mar. 19, 2010 
 
 
Line of credit monthly interest rate during period
 
 
 
 
 
3.75% 
4.50% 
 
 
 
Line of credit
 
 
119,246 
119,246 
 
235,141 
202,422 
 
 
 
Company received proceeds from imperial advance, LLC
 
40,000 
 
130,000 
   
39,195 
   
 
 
 
Agrees to pay for future receivable
9,368 
52,400 
 
125,324 
   
24,007 
   
 
 
 
Gain on settlement of debt
 
 
2,079 
2,079 
   
 
 
 
 
 
Line of credit balance outstanding on revenue factoring agreement
 
 
 
$ 0 
 
$ 31,153 
 
 
 
 
Note Payable (Details) (USD $)
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Notes Payable
$ 450,000 
$ 25,000 
Less: Debt Discount
   
(9,421)
Less: Debt Issuance Costs
   
   
Note payable, Outstanding Principal, Balance
450,000 
15,579 
October 25, 2016 [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Note payable, Outstanding Principal, Balance
 
25,000 
Interest Rate
9.00% 
 
Maturity Date
Jul. 01, 2017 
 
Warrants, Quantity
50,000 
 
Warrants, Exercise Price
$ 0.30 
 
February 22, 2017 [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Note payable, Outstanding Principal, Balance
400,000 
 
Interest Rate
12.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants, Quantity
6,161,615 
 
Warrants, Exercise Price
$ 0.20 
 
August 18, 2017 [Member]
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Note payable, Outstanding Principal, Balance
$ 50,000 
 
Interest Rate
15.00% 
 
Maturity Date
Oct. 02, 2017 
 
Warrants, Quantity
   
 
Warrants, Exercise Price
   
 
Note Payable (Details Textual) (USD $)
1 Months Ended 1 Months Ended 1 Months Ended 0 Months Ended 9 Months Ended 0 Months Ended 9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Jul. 21, 2017
Loan Agreement [Member]
Oct. 24, 2016
Loan Agreement [Member]
Oct. 25, 2016
Loan Agreement [Member]
Aug. 18, 2017
Loan Agreement [Member]
Feb. 28, 2017
August 2017 Convertible Note Offering [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering [Member]
Feb. 28, 2017
February 2017 Offering Note [Member]
Mar. 17, 2017
Private Placement Offering [Member]
Mar. 17, 2017
Subscription Arrangement [Member]
Sep. 30, 2017
Subscription Arrangement [Member]
Mar. 17, 2017
Subscription Arrangement [Member]
Private Placement Offering [Member]
Sep. 30, 2017
Subscription Arrangement [Member]
Private Placement Offering [Member]
Note Payable [Textual]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Promissory note
$ 60,000 
 
$ 100,000 
$ 15,000 
$ 25,000 
$ 50,000 
 
$ 500,000 
 
$ 975,511 
 
 
$ 1,000,000 
 
Maturity date
 
 
 
Apr. 24, 2017 
Apr. 25, 2017 
 
 
 
Sep. 01, 2017 
Sep. 01, 2017 
 
 
Sep. 01, 2017 
 
Interest rate
 
 
10.00% 
9.00% 
9.00% 
15.00% 
15.00% 
0.20% 
15.00% 
 
6.00% 
 
6.00% 
 
Warrants, Quantity
 
 
100,000 
30,000 
50,000 
 
 
 
 
 
 
 
 
 
Warrant exercisable price per share
 
 
$ 0.20 
$ 0.30 
$ 0.30 
 
 
$ 0.20 
$ 0.20 
 
 
 
 
$ 0.20 
Warrant term
 
 
5 years 0 months 0 days 
5 years 
5 years 
 
 
 
 
 
 
 
 
 
Debt discount
 
9,421 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate principal amount
 
 
 
 
 
 
 
 
575,511 
 
975,511 
 
975,511 
 
Aggregate gross proceeds of common stock
 
 
 
 
 
 
$ 400,000 
 
 
 
$ 916,858 
 
$ 916,858 
 
Notes conversion description
 
 
 
 
 
 
 
 
 
 
 
 
The February 2017 Offering Notes are convertible into shares of the Company's common stock at the time of Company's next round of financing (the "Subsequent Offering") at a price equal to eighty-five percent (85%) of the price per share offered in the Subsequent Offering (the "Conversion Price"). The February 2017 Offering Warrants have a five-year term. Investors received the February 2017 Offering Warrants in the following amounts: (i) Investors purchasing $150,000 or more of the Offering received a February 2017 Offering Warrant equal to one hundred thirty percent (130%) of the dollar amount invested in the Offering; (ii) investors purchasing at least $100,000 but less than $150,000 of the February 2017 Offering received a February 2017 Offering Warrant equal to one hundred percent (100%) of the dollar amount invested in the Offering; and (iii) investors purchasing less than $100,000 of the Offering received to a February 2017 Offering Warrant equal to seventy percent (70%) of the dollar amount invested in the Offering. 
The February 2017 Offering Warrants have a five-year term. Investors received the February 2017 Offering Warrants in the following amounts: (i) Investors purchasing $150,000 or more of the Offering received a February 2017 Offering Warrant equal to one hundred thirty percent (130%) of the dollar amount invested in the Offering; (ii) investors purchasing at least $100,000 but less than $150,000 of the February 2017 Offering received a February 2017 Offering Warrant equal to one hundred percent (100%) of the dollar amount invested in the Offering; and (iii) investors purchasing less than $100,000 of the Offering received to a February 2017 Offering Warrant equal to seventy percent (70%) of the dollar amount invested in the Offering. The Warrants entitle the holder to purchase shares of the Company’s common stock at $0.20 per share (the “Exercise Price”).
Convertible Note Payable (Details) (USD $)
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
$ 1,940,111 
$ 500,000 
Less: Debt Discount
(177,971)
(184,398)
Less: Debt Issuance Costs
(34,997)
(46,779)
Debt unamortized discount premium and debt issuance costs net
1,727,143 
268,823 
Convertible notes payable, Outstanding Principal, Total
375,482 
268,823 
Total Long-Term Debt
1,351,661 
   
November - December, 2016 [Member]
 
 
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
200,000 
400,000 
Interest Rate
10.00% 
 
Conversion Price
$ 0.30 
 
Maturity date
Nov. 01, 2017 
 
Warrants quantity
400,000 
 
Warrants exercise price
$ 0.30 
 
December 27, 2016 [Member]
 
 
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
   
100,000 
Interest Rate
10.00% 
 
Conversion Price
$ 0.30 
 
Maturity date
Dec. 27, 2017 
 
Warrants quantity
100,000 
 
Warrants exercise price
$ 0.30 
 
June, 2017 [Member]
 
 
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
121,500 
 
Interest Rate
12.00% 
 
Maturity date
Sep. 01, 2017 
 
Warrants quantity
114,700 
 
Warrants exercise price
$ 0.20 
 
July, 2017 [Member]
 
 
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
   
 
Interest Rate
8.50% 
 
Conversion Price
$ 0.20 1
 
Maturity date
Apr. 11, 2018 
 
Warrants quantity
350,000 
 
Warrants exercise price
$ 0.20 
 
August - September 2017 [Member]
 
 
Short-term Debt [Line Items]
 
 
Convertible notes payable, Outstanding Principal
$ 1,618,611 
 
Interest Rate
15.00% 
 
Conversion Price
$ 0.20 1
 
Warrants quantity
8,093,052 
 
Warrants exercise price
$ 0.20 
 
August - September 2017 [Member] |
Minimum [Member]
 
 
Short-term Debt [Line Items]
 
 
Maturity date
Aug. 01, 2019 
 
August - September 2017 [Member] |
Maximum [Member]
 
 
Short-term Debt [Line Items]
 
 
Maturity date
Sep. 30, 2019 
 
Convertible Note Payable (Details Textual) (USD $)
0 Months Ended 9 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended 0 Months Ended 1 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended 9 Months Ended
Sep. 13, 2017
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Aug. 2, 2016
Convertible note to third party lender [Member]
Mar. 17, 2016
Convertible note to third party lender [Member]
Dec. 2, 2015
Convertible note to third party lender [Member]
Aug. 31, 2017
Convertible note to third party lender [Member]
Dec. 27, 2016
Convertible note to third party lender [Member]
Nov. 30, 2016
Convertible note to third party lender [Member]
Sep. 30, 2017
Convertible note to third party lender [Member]
Dec. 31, 2016
Convertible note to third party lender [Member]
Sep. 13, 2017
July 2017 Convertible Offering [Member]
Jul. 31, 2017
July 2017 Convertible Offering [Member]
Sep. 30, 2017
July 2017 Convertible Offering [Member]
Aug. 31, 2017
August 2017 Convertible Note Offering [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering [Member]
Feb. 28, 2017
August 2017 Convertible Note Offering [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering One [Member]
Aug. 17, 2016
Warrants [Member]
Apr. 24, 2016
Warrants [Member]
Sep. 30, 2017
Warrants [Member]
August 2017 Convertible Note Offering [Member]
Sep. 30, 2017
Three Investor [Member]
Sep. 13, 2017
Three Investor [Member]
Sep. 30, 2017
Three Investor [Member]
August 2017 Convertible Note Offering [Member]
Convertible Note Payable (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible note
 
 
 
 
$ 50,000 
$ 200,000 
$ 100,000 
 
$ 100,000 
$ 400,000 
$ 121,500 
$ 400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate
 
 
 
 
10.00% 
12.00% 
12.00% 
 
10.00% 
10.00% 
12.00% 
10.00% 
 
8.50% 
 
 
0.20% 
0.20% 
15.00% 
 
 
 
 
 
 
 
Maturity date
 
 
 
 
Aug. 31, 2016 
Apr. 21, 2016 
Dec. 01, 2016 
 
Dec. 27, 2017 
Nov. 01, 2017 
Sep. 01, 2017 
Dec. 29, 2017 
 
Apr. 18, 2018 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants issued
 
2,500,000 
 
 
 
150,000 
300,000 
 
100,000 
400,000 
102,550 
400,000 
 
245,000 
 
 
 
2,064,466 
 
 
 
 
4,377,826 
778,750 
 
2,525,000 
Conversion price per share
 
 
 
 
 
 
$ 0.35 
 
$ 0.30 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Offering of gross proceeds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,954,918 
 
2,104,938 
 
 
 
 
 
 
Warrant term
 
 
 
 
 
5 years 
5 years 
 
5 years 
5 years 
5 years 0 months 0 days 
5 years 
 
5 years 0 months 0 days 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible Notes Payable outstanding balance
 
1,940,111 
 
500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less: Debt Discount
 
(177,971)
 
(184,398)
 
 
 
 
 
 
 
 
 
 
 
 
138,180 
138,180 
 
 
 
 
 
52,743 
 
 
Debt issuance costs
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101,561 
 
 
 
Proceeds from issuance of convertible notes
 
555,000 
   
 
 
 
 
 
 
 
 
 
 
450,000 
 
 
 
 
 
 
 
 
 
 
 
Warrants issued to purchase shares
 
 
 
 
 
 
 
 
 
 
 
 
 
778,750 
 
 
579,969 
579,969 
 
 
 
 
 
13,070,148 
 
 
Warrants, Exercise Price
 
 
 
 
 
$ 0.40 
$ 0.35 
 
$ 0.40 
$ 0.30 
$ 0.20 
$ 0.30 
 
$ 0.20 
 
 
$ 0.20 
$ 0.20 
 
 
$ 0.40 
$ 0.30 
 
 
 
 
Principal amount of convertible notes
 
 
 
 
 
 
 
100,000 
 
 
200,000 
 
 
 
 
 
500,000 
500,000 
 
 
 
 
 
 
606,812 
 
Interest amount of convertible notes
 
 
 
 
 
 
 
6,767 
 
 
16,384 
 
 
 
 
 
 
24,876 
 
2,219,913 
 
 
 
 
 
 
Consideration shares, number of shares repurchased
 
25,000 
 
 
 
 
 
 
 
 
 
 
 
25,000 
 
 
 
 
 
 
 
 
 
 
 
 
Consideration shares, repurchase amount
 
 
 
 
 
 
 
 
 
 
 
 
 
3,520 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in derivative liability
 
(1,257,716)
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible redeemable debentures redemption, description
 
 
 
 
 
 
 
 
 
 
 
 
(i) the issuance and sale of 8.5% Convertible Redeemable Debentures, containing a ten percent (10%) original issuance discount, due April 18, 2018 (the "Debentures") and (ii) the issuance and sale of five-year Common Stock Purchase Warrants to purchase up to 778,750 shares of the Company's common stock, par value $0.001 per share. 
 
The August 2017 Convertible Note Offering consisted of a maximum of $6,000,000 of units of the Company's securities (each, a "Unit" and collectively, the "Units"), with each Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a "Note" and together the "Notes"), convertible into shares of the Company's common stock, par value $.001 per share ("Conversion Shares") at a conversion price of $0.20 per share (the "Conversion Price"), and (b) a five-year warrant (each a "Warrant and together the "Warrants") to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into ("Warrant Shares") at an exercise price of $0.20 per share ("Exercise Price"). The Notes mature on the second (2nd) anniversary of their issuance dates. 
 
 
 
 
 
 
 
 
 
 
Conversion feature of debt instrument
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
247,754 
127,595 
 
 
 
 
 
 
 
 
Placement agent fees
 
49,420 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
66,574 
 
115,994 
 
 
 
 
 
 
Derivative liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
321,231 
 
106,916 
106,916 
 
 
 
 
 
 
 
 
Convertible redeemable debentures, percentage
8.50% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value derivative liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
121,800 
121,800 
 
 
 
 
250,036 
 
 
 
Secured debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
992,177 
992,177 
 
 
 
 
 
 
 
 
Convertible secured promissory note, description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company offered, through a placement agent, $6,000,000 of units of its securities (each, a "Unit" and collectively, the "Units"), with each Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a "Note" and together the "Notes"), convertible into shares of the Company's common stock, par value $.001 per share ("Conversion Shares") at a conversion price of $0.20 per share (the "Conversion Price"), and (b) a five-year warrant ( each a "Warrant and together the "Warrants") to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into ("Warrant Shares") at an exercise price of $0.20 per share ("Exercise Price"). 
 
 
 
 
 
 
 
 
Aggregate principal amount
 
60,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
500,000 
500,000 
 
4,062,009 
 
 
 
 
 
 
Offering discount percentage
 
 
 
 
 
 
 
 
 
 
15.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current default principal amount
 
 
 
 
 
 
 
 
 
 
85,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding principal balance repaid
 
 
 
 
 
 
 
 
 
 
$ 40,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company redeemed the 8.5% Convertible Redeemable Debentures by paying the three accredited investors an aggregate $606,812 representing 117.5% of the principal along with interest.
Related Party Loan (Details) (USD $)
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Sep. 30, 2017
April 25, 2017 [Member]
Sep. 30, 2017
April 25, 2017 [Member]
Sep. 30, 2017
August - September 2017 [Member]
Sep. 30, 2017
August - September 2017 [Member]
Minimum [Member]
Sep. 30, 2017
August - September 2017 [Member]
Maximum [Member]
Related Party Transaction [Line Items]
 
 
 
 
 
 
 
Convertible notes payable - related parties gross
$ 942,893 
    
    
$ 25,000 
$ 917,893 
 
 
Less: debt discount
(278,436)
   
 
 
 
 
 
Convertible notes unamortized discount premium and debt issuance cost
664,457 
   
 
 
 
 
 
Less: current debt
(25,000)
   
 
 
 
 
 
Total long-term debt
$ 639,457 
   
 
 
 
 
 
Interest rate
 
 
12.00% 
12.00% 
15.00% 
 
 
Maturity date
 
 
Sep. 01, 2017 
Sep. 01, 2017 
 
Aug. 31, 2019 
Sep. 30, 2019 
Warrants quantity
 
 
17,500 
17,500 
4,589,466 
 
 
Warrants exercise price
 
 
$ 0.20 
$ 0.20 
$ 0.20 
 
 
Related Party Loan (Details 1) (USD $)
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
$ 1,659,000 
$ 1,460,000 
Less: debt discount
 
(94,675)
Notes payable - related party
1,659,000 
1,365,325 
May 26, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
1,000,000 
1,000,000 
Interest rate
13.00% 
 
Maturity date
Nov. 26, 2017 
 
Warrants quantity
1,000,000 
 
Warrants exercise price
$ 0.40 
 
September 12, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
 
100,000 
Interest rate
12.00% 
 
Maturity date
Nov. 22, 2017 
 
Warrants quantity
17,500 
 
Warrants exercise price
$ 0.20 
 
September 20, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
 
10,000 
Interest rate
10.00% 
 
Maturity date
Mar. 20, 2017 
 
Warrants quantity
235,000 
 
Warrants exercise price
$ 0.40 
 
October 13, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
50,000 
50,000 
Interest rate
12.00% 
 
Maturity date
Nov. 22, 2017 
 
Warrants quantity
50,000 
 
Warrants exercise price
$ 0.40 
 
October 24, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
15,000 
15,000 
Interest rate
9.00% 
 
Maturity date
Jan. 01, 2018 
 
Warrants quantity
30,000 
 
Warrants exercise price
$ 0.30 
 
October 31, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
 
10,000 
Interest rate
10.00% 
 
Maturity date
Nov. 10, 2016 
 
Warrants quantity
10,000 
 
Warrants exercise price
$ 0.30 
 
November 22, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
225,000 
225,000 
Interest rate
10.00% 
 
Maturity date
Nov. 22, 2017 
 
Warrants quantity
750,000 
 
Warrants exercise price
$ 0.30 
 
December 21, 2016 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
50,000 
50,000 
Interest rate
10.00% 
 
Maturity date
Nov. 22, 2017 
 
Warrants quantity
166,666 
 
Warrants exercise price
$ 0.30 
 
January 25, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Interest rate
10.00% 
 
Maturity date
Jan. 01, 2018 
 
Warrants quantity
50,000 
 
Warrants exercise price
$ 0.30 
 
March 2, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
10,000 
 
Interest rate
10.00% 
 
Maturity date
Jan. 21, 2018 
 
Warrants quantity
10,000 
 
Warrants exercise price
$ 0.30 
 
April 12, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Interest rate
10.00% 
 
Maturity date
Jan. 21, 2018 
 
Warrants quantity
17,500 
 
Warrants exercise price
$ 0.20 
 
April 12, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
10,000 
 
Interest rate
10.00% 
 
Maturity date
Sep. 01, 2017 
 
Warrants quantity
17,500 
 
Warrants exercise price
$ 0.20 
 
May 4, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Interest rate
12.00% 
 
Maturity date
Sep. 01, 2017 
 
Warrants quantity
10,500 
 
Warrants exercise price
$ 0.30 
 
May 11, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
20,000 
 
Interest rate
10.00% 
 
Maturity date
Sep. 30, 2017 
 
Warrants quantity
20,000 
 
Warrants exercise price
$ 0.20 
 
June 26, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
30,000 
 
Interest rate
10.00% 
 
Maturity date
Jan. 21, 2018 
 
Warrants quantity
22,500 
 
Warrants exercise price
$ 0.20 
 
July 6, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
25,000 
 
Interest rate
10.00% 
 
Maturity date
Jul. 21, 2017 
 
Warrants quantity
18,750 
 
Warrants exercise price
$ 0.20 
 
July 6, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
   
   
Interest rate
10.00% 
 
Maturity date
Jul. 21, 2017 
 
Warrants quantity
18,750 
 
Warrants exercise price
$ 0.20 
 
August 24, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Interest rate
12.00% 
 
Maturity date
Nov. 01, 2017 
 
September 8, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
$ 224,000 
 
Maturity date
Sep. 24, 2017 
 
Warrants quantity
1,650,000 
 
Warrants exercise price
$ 0.20 
 
Related Party Loan (Details Textual) (USD $)
0 Months Ended 9 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 0 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 9 Months Ended
May 9, 2017
Sep. 30, 2017
Dec. 31, 2016
Sep. 7, 2017
May 2016 Rosen Loan Agreement [Member]
May 26, 2016
May 2016 Rosen Loan Agreement [Member]
Sep. 12, 2016
September 2016 Rosen Loan Agreement [Member]
Oct. 13, 2016
October 2016 Gordon Loan Agreement [Member]
Oct. 24, 2016
October 2016 Schiller Loan Agreement [Member]
Oct. 31, 2016
October 2016 Rosen Loan Agreement [Member]
Dec. 21, 2016
December 2016 Gordon Loan Agreement [Member]
Jan. 25, 2017
January 2017 Rosen Loan Agreement [Member]
Jan. 26, 2017
January 2017 Gordon Loan Agreement [Member]
Feb. 7, 2017
February 2017 Schiller Loan Agreement [Member]
Apr. 12, 2017
April 2017 Schiller Loan Agreement [Member]
Apr. 12, 2017
April 2017 Rosen Loan Agreement [Member]
May 4, 2017
May 2017 Rosen Loan Agreement [Member]
May 11, 2017
May 2017 Schiller Loan Agreement [Member]
Jun. 26, 2017
June 2017 Schiller Loan Agreement [Member]
Jul. 6, 2017
July 2017 Rosen Loan Agreement [Member]
Jul. 6, 2017
July 2017 Gordon Loan Agreement [Member]
Aug. 24, 2017
August 2017 Rosen Loan Agreement [Member]
Sep. 8, 2017
September 2017 Rosen Loan Agreement [Member]
Apr. 25, 2017
April Rosen Notes [Member]
Apr. 25, 2017
April Gordon Notes [Member]
Sep. 30, 2017
April Gordon Notes [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering [Member]
Feb. 28, 2017
August 2017 Convertible Note Offering [Member]
Jun. 16, 2017
Line of Credit [Member]
May 25, 2017
Line of Credit [Member]
May 22, 2017
Line of Credit [Member]
May 16, 2017
Line of Credit [Member]
May 9, 2017
Line of Credit [Member]
Sep. 12, 2016
Arthur Rosen [Member]
Oct. 31, 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]
Sep. 30, 2017
Investor [Member]
Sep. 30, 2017
Investor [Member]
August 2017 Convertible Note Offering [Member]
Related Party Loan (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured debt
 
 
 
 
$ 1,000,000 
$ 100,000 
$ 50,000 
$ 30,000 
$ 10,000 
$ 275,000 
$ 50,000 
$ 50,000 
$ 10,000 
$ 10,000 
$ 10,000 
$ 15,000 
$ 20,000 
$ 30,000 
$ 25,000 
$ 25,000 
$ 20,000 
$ 224,000 
 
 
 
$ 992,177 
$ 992,177 
 
 
 
 
 
 
$ 100,000 
$ 10,000 
$ 1,000,000 
$ 10,000 
$ 275,000 
$ 50,000 
 
 
Interest rate
 
 
 
 
12.50% 
12.00% 
12.00% 
9.00% 
10.00% 
10.00% 
10.00% 
10.00% 
10.00% 
10.00% 
10.00% 
12.00% 
10.00% 
10.00% 
10.00% 
10.00% 
12.00% 
 
12.00% 
12.00% 
 
0.20% 
0.20% 
15.00% 
 
 
 
 
 
12.00% 
10.00% 
12.50% 
10.00% 
10.00% 
12.00% 
 
 
Warrant term
 
 
 
 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
 
5 years 
5 years 
5 years 
 
 
 
 
 
 
 
 
 
5 years 
5 years 
5 years 
5 years 
5 years 
5 years 
 
 
Warrants issued to purchase shares
 
 
 
 
1,000,000 
150,000 
50,000 
15,000 
10,000 
166,666 
50,000 
50,000 
10,000 
10,000 
10,000 
10,500 
20,000 
22,500 
18,750 
18,750 
 
1,650,000 
 
 
 
579,969 
579,969 
 
 
 
 
 
 
150,000 
10,000 
1,000,000 
235,000 
166,666 
50,000 
13,070,148 
 
Warrant purchase price
 
 
 
 
$ 0.40 
$ 0.40 
$ 0.40 
$ 0.30 
$ 0.30 
$ 0.40 
$ 0.30 
$ 0.30 
$ 0.30 
$ 0.30 
$ 0.30 
$ 0.30 
$ 0.20 
$ 0.20 
$ 0.20 
$ 0.20 
 
$ 0.20 
$ 0.20 
$ 0.20 
 
$ 0.20 
$ 0.20 
 
 
 
 
 
 
$ 0.40 
$ 0.30 
$ 0.40 
$ 0.40 
$ 0.40 
$ 0.40 
 
 
Maturity date
 
 
 
 
May 26, 2017 
 
Nov. 22, 2017 
Jan. 01, 2018 
Nov. 10, 2016 
Nov. 22, 2017 
Jan. 01, 2018 
 
 
Jan. 21, 2018 
Jan. 21, 2017 
Sep. 01, 2017 
Sep. 30, 2017 
Jan. 21, 2018 
Jul. 21, 2017 
Jul. 21, 2017 
 
 
Sep. 01, 2017 
Sep. 01, 2017 
 
 
 
 
 
 
 
 
 
Oct. 12, 2016 
Nov. 10, 2016 
May 26, 2017 
Mar. 20, 2017 
Jan. 20, 2017 
Nov. 12, 2016 
 
 
Related party notes payable
 
1,659,000 
1,365,325 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt discount
 
94,675 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
127,594 
127,594 
 
 
 
 
 
 
 
 
 
 
 
 
 
161,552 
Convertible note
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25,000 
25,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants issued
 
2,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,500 
17,500 
 
 
2,064,466 
 
 
 
 
 
 
 
 
 
 
 
 
778,750 
2,525,000 
Aggregate principal amount
 
60,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
500,000 
500,000 
 
3,000 
35,000 
6,000 
30,000 
56,000 
 
 
 
 
 
 
 
 
Unpaid interest
 
 
 
150,127.97 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24,876 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value derivative liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
121,800 
121,800 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liability conversion feature
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
247,754 
127,595 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible secured promissory note, description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company offered, through a placement agent, $6,000,000 of units of its securities (each, a "Unit" and collectively, the "Units"), with each Unit consisting of (a) a 15% Convertible Secured Promissory Note (each a "Note" and together the "Notes"), convertible into shares of the Company's common stock, par value $.001 per share ("Conversion Shares") at a conversion price of $0.20 per share (the "Conversion Price"), and (b) a five-year warrant ( each a "Warrant and together the "Warrants") to purchase common stock equal to one hundred percent (100%) of the shares into which the Notes can be converted into ("Warrant Shares") at an exercise price of $0.20 per share ("Exercise Price"). 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible Notes - related party, net of debt discount
 
25,000 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
942,893 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net of debt discount
 
(278,436)
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
278,436 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturity date, description
 
 
 
 
Extending the May 2016 Rosen Maturity Date to November 26, 2017. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit borrow principal
$ 130,000 
$ 130,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit interest rate, description
The LOC bears interest at a rate of 18%. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Leases Payable (Details) (USD $)
Sep. 30, 2017
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 
$ 4,732 
$ 6,619 
Less current maturities
(4,732)
(3,524)
(3,524)
Capital lease obligation, net of current maturities
   
1,208 
3,095 
TOTAL CAPITAL LEASE OBLIGATION
$ 4,732 
$ 4,732 
$ 6,619 
Capital Leases Payable (Details 1) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Dec. 31, 2015
Capital Leases Payable [Abstract]
 
 
 
2017:
$ 3,524 
$ 1,208 
$ 3,524 
2018:
$ 1,208 
    
$ 1,208 
Capital Leases Payable (Details Textual) (USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Capital Leases Payable (Textual)
 
 
Capital leases due amount
$ 383,100 
$ 383.10 
Capital leases interest per annum
10.00% 
10.00% 
Capital lease obligation term
5 years 
5 years 
Derivative Liabilities (Details)
9 Months Ended
Sep. 30, 2017
Derivative Instruments, Gain (Loss) [Line Items]
 
Annual dividend rate
0.00% 
Expected life
5 years 0 months 0 days 
Low [Member] |
Derivative Liabilities [Member]
 
Derivative Instruments, Gain (Loss) [Line Items]
 
Annual dividend rate
0.00% 
Expected life
0 years 4 months 2 days 
Risk-free interest rate
1.14% 
Expected volatility
65.38% 
High [Member] |
Derivative Liabilities [Member]
 
Derivative Instruments, Gain (Loss) [Line Items]
 
Annual dividend rate
0.00% 
Expected life
5 years 0 months 0 days 
Risk-free interest rate
1.93% 
Expected volatility
92.96% 
Derivative Liabilities (Details 1) (USD $)
9 Months Ended 3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Level 1 [Member]
Sep. 30, 2017
Level 2 [Member]
Sep. 30, 2017
Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
 
Derivative liabilities as January 1, 2017
 
 
   
   
   
Addition
 
 
   
   
3,157,682 
Conversion
 
 
   
   
   
Reclassification of derivative liability to equity
356,288 
   
   
   
(356,288)
Loss on changes in fair value
 
 
   
   
(1,257,716)
Derivative liabilities as September 30, 2017
 
 
    
    
$ 1,543,678 
Derivative Liabilities (Details Textual)
9 Months Ended
Sep. 30, 2017
Derivative Liabilities (Textual)
 
Dividend yield
0.00% 
Stockholders' Deficit (Details)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Dec. 31, 2015
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
 
Expected dividends
0.00% 
 
 
Expected life of warrant
5 years 0 months 0 days 
 
 
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% 
0.00% 
Expected volatility
 
 
69.70% 
Expected volatility, minimum
62.63% 
73.44% 
 
Expected volatility, maximum
92.96% 
91.54% 
 
Risk free interest rate
 
 
1.35% 
Risk free interest rate, minimum
1.64% 
1.13% 
 
Risk free interest rate, maximum
2.03% 
1.39% 
 
Expected life of warrant
5 years 0 months 0 days 
5 years 
5 years 
Warrants [Member] |
Minimum [Member]
 
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
 
Exercise price
$ 0.20 
 
 
Warrants [Member] |
Maximum [Member]
 
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
 
Exercise price
$ 0.30 
 
 
Stockholders' Deficit (Details 1) (Warrants [Member], USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2017
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
15,541,666 
10,750,000 
2,470,000 
Number of Warrants, Granted
18,915,358 
4,791,666 
8,280,000 
Number of Warrants, Exercised
   
   
   
Number of Warrants, Cancelled/Modified
   
   
   
Number of Options/Warrant, Outstanding
34,457,024 
15,541,666 
10,750,000 
Number of Warrants, Exercisable
34,457,024 
14,958,333 
10,750,000 
Weighted Average Exercise Price, Outstanding
$ 0.36 
$ 0.35 
$ 0.35 
Weighted Average Exercise Price, Granted
$ 0.20 
$ 0.40 
$ 0.35 
Weighted Average Exercise Price, Exercised
   
   
   
Weighted Average Exercise Price, Forfeited/Cancelled
   
   
   
Weighted Average Exercise Price, Outstanding
$ 0.27 
$ 0.36 
$ 0.35 
Weighted Average Exercise Price, Exercisable
$ 0.27 
$ 0.36 
$ 0.35 
Stockholders' Deficit (Details 2) (Warrant [Member], USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2017
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
$ 0.20 
$ 0.35 
 
 
Warrants Outstanding, Exercise price, Maximum
$ 0.40 
$ 0.40 
 
 
Warrants Outstanding, Number Outstanding
34,457,024 
15,541,666 
10,750,000 
2,470,000 
Warrants Outstanding, Weighted Average Remaining Contractual Life (in years)
3 years 11 months 19 days 
3 years 9 months 
 
 
Warrants Outstanding, Weighted Average Exercise Price
$ 0.27 
$ 0.36 
$ 0.35 
$ 0.35 
Warrants Exercisable , Number Exercisable
34,457,024 
14,958,333 
10,750,000 
 
Warrants Exercisable, Weighted Average Exercise Price
$ 0.27 
$ 0.36 
$ 0.35 
 
Stockholders' Deficit (Details 3)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Dec. 31, 2015
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
 
Expected dividends
0.00% 
 
 
Expected life of option
5 years 0 months 0 days 
 
 
Stock Option [Member]
 
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
 
Exercise price
 
 
$ 0.35 
Expected dividends
0.00% 
0.00% 
0.00% 
Expected volatility
 
 
69.70% 
Expected volatility, minimum
63.72% 
73.44% 
 
Expected volatility, maximum
92.14% 
90.05% 
 
Risk free interest rate
 
 
1.35% 
Risk free interest rate, minimum
1.74% 
1.00% 
 
Risk free interest rate, maximum
2.10% 
1.39% 
 
Expected life of option
5 years 0 months 0 days 
 
5 years 
Stock Option [Member] |
Minimum [Member]
 
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
 
Exercise price
$ 0.20 
$ 0.25 
 
Expected life of option
 
4 years 8 months 5 days 
 
Stock Option [Member] |
Maximum [Member]
 
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
 
Exercise price
$ 0.75 
$ 0.40 
 
Expected life of option
 
5 years 
 
Stockholders' Deficit (Details 4) (Stock Option [Member], USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2017
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
2,250,000 
500,000 
   
Number of Options, Granted
15,499,990 
1,750,000 
500,000 
Number of Options, Exercised
   
   
   
Number of Options, Cancelled/Modified
(100,000)
   
   
Number of Options/Warrant, Outstanding
17,649,990 
2,250,000 
500,000 
Number of Options, Exercisable
8,983,322 
2,200,000 
500,000 
Outstanding options held by related party
17,549,990 
2,250,000 
500,000 
Exercisable options held by related party
8,983,322 
2,200,000 
500,000 
Weighted Average Exercise Price, Outstanding
$ 0.34 
$ 0.25 
    
Weighted Average Exercise Price, Granted
$ 0.43 
$ 0.36 
$ 0.25 
Weighted Average Exercise Price, Exercised
 
   
 
Weighted Average Exercise Price Cancelled/Modified
$ 0.40 
   
 
Weighted Average Exercise Price, Outstanding
$ 0.42 
$ 0.34 
$ 0.25 
Weighted Average Exercise Price, Exercisable
$ 0.27 
$ 0.34 
$ 0.25 
Weighted Average Exercise Price Outstanding options held by related party
$ 0.42 
$ 0.33 
$ 0.25 
Weighted Average Exercise Price Exercisable options held by related party
$ 0.27 
$ 0.30 
$ 0.25 
Weighted Average Remaining Contractual Life (in years), Outstanding
4 years 4 months 17 days 
4 years 8 months 5 days 
 
Weighted Average Remaining Contractual Life (in years), Granted
4 years 10 months 21 days 
5 years 
5 years 
Weighted Average Remaining Contractual Life (in years), Outstanding
4 years 9 months 7 days 
 
 
Weighted Average Remaining Contractual Life (in years), Exercisable
4 years 7 months 24 days 
 
 
Weighted Average Remaining Contractual Life (in years), Outstanding options held by related party
4 years 9 months 7 days 
4 years 4 months 17 days 
4 years 11 months 4 days 
Weighted Average Remaining Contractual Life (in years), Exercisable options held by related party
4 years 7 months 24 days 
4 years 4 months 17 days 
4 years 11 months 4 days 
Stockholders' Deficit (Details 5) (USD $)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Stockholders' Deficit [Abstract]
 
 
Options
15,499,990 
1,750,000 
Value
$ 681,246 
$ 231,035 
Purpose for Grant
Service Rendered 
Service Rendered 
Stockholders' Deficit (Details Textual) (USD $)
0 Months Ended 9 Months Ended 12 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended 0 Months Ended 1 Months Ended 12 Months Ended 0 Months Ended 9 Months Ended 12 Months Ended 0 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended
Feb. 6, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2016
Director [Member]
Dec. 31, 2016
Promissory Notes [Member]
Sep. 30, 2017
Promissory Notes [Member]
Sep. 30, 2017
Promissory Notes [Member]
Placement Agent [Member]
Dec. 31, 2016
Convertible Notes Payable [Member]
Sep. 30, 2017
Convertible Notes Payable [Member]
Sep. 30, 2017
Convertible Notes Payable [Member]
Placement Agent [Member]
Dec. 31, 2016
Notes Payable Related Party [Member]
Sep. 30, 2017
Notes Payable Related Party [Member]
Sep. 30, 2017
Convertible notes payable related party [Member]
Feb. 13, 2017
Common Stock [Member]
Feb. 1, 2017
Common Stock [Member]
Feb. 5, 2016
Common Stock [Member]
Jan. 30, 2017
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]
Sep. 30, 2017
Stock Options [Member]
Sep. 30, 2016
Stock Options [Member]
Dec. 31, 2016
Stock Incentive Plan [Member]
Dec. 9, 2015
Stock Incentive Plan [Member]
Feb. 13, 2015
Series A Preferred Stock [Member]
Sep. 30, 2017
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]
Sep. 30, 2017
Series A Preferred Stock [Member]
Common Stock [Member]
Dec. 21, 2015
Series B Preferred Stock [Member]
Sep. 30, 2017
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]
Sep. 30, 2017
Series D Convertible Preferred Stock [Member]
Dec. 31, 2016
Series D Convertible Preferred Stock [Member]
Dec. 21, 2015
Series D Convertible Preferred Stock [Member]
Sep. 30, 2017
Preferred Stock [Member]
Stockholders' Deficit (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, shares authorized
 
320,000,000 
 
320,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20,000,000 
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 
$ 0.001 
 
 
$ 100.00 
$ 0.001 
$ 0.001 
$ 0.001 
 
 
 
 
$ 100.00 
 
Preferred stock, shares issued
 
 
 
 
 
20,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31,581 
33,414 
33,314 
 
 
 
8,063 
8,063 
7,000 
 
 
 
 
 
 
Preferred stock, shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31,581 
33,414 
33,314 
 
 
 
8,063 
8,063 
7,000 
 
 
 
 
 
 
Common stock, shares authorized
 
300,000,000 
 
300,000,000 
300,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par value
$ 0.001 
$ 0.001 
 
$ 0.001 
$ 0.001 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.25 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares issued
 
39,520,682 
 
33,894,592 
28,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18,000,000 
 
 
 
 
1,098,933 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding
 
39,520,682 
 
33,894,592 
28,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares sold
2,626,308 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28,500,000 
 
666,666 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 800,000 
 
$ 1,146,307 
 
 
 
 
 
 
 
 
 
 
Convertion preferred stock, Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100,000 
1,733 
 
8,914 
 
 
20,000 
 
 
 
1,099 
2,100,000 
 
 
 
 
Aggregate intrinsic value of options outstanding
 
 
 
47,500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
220 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate intrinsic value of options exercisable
 
 
 
47,500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
220 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
91,400 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from the issuance of stock
2,626 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,450,000 
 
 
 
 
 
700,000 
 
 
 
 
 
 
Compensation expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
375,000 
 
 
 
 
 
 
560,794 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued for liquidating damages
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,318,353 
 
 
 
 
667,313 
 
 
 
 
 
 
 
Warrants associated value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
309,665 
 
 
 
 
51,159 
 
 
 
 
 
 
 
Conversion price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.25 
$ 0.25 
 
 
 
 
$ 0.30 
$ 0.30 
 
 
 
$ 0.25 
$ 0.25 
 
 
Dividend rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.00% 
6.00% 
 
 
 
 
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 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. 
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% 
4.99% 
 
 
 
4.99% 
4.99% 
 
 
Restricted stock issued during period
 
 
 
268,333 
 
 
 
 
 
 
 
 
 
 
 
133,333 
800,000 
 
2,946,740 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sale of shares of common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
666,666 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants to purchase shares of common stock
 
 
 
 
 
 
 
 
487,756 
 
 
12,150 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266,325 
2,013 
 
 
Issuance of common stock for cashless exercise of warrants, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
392,764 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants issued
 
 
 
 
 
 
80,000 
5,811,360 
 
575,000 
7,759,126 
 
226,666 
255,500 
4,589,466 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants grant date fair value
 
 
 
 
 
 
41,633 
1,104,731 
 
255,203 
455,173 
 
255,203 
23,437 
283,352 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 Company, 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 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Settlement of vendor liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
353,732 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on settlement of vendor liabilities
 
$ (110,674)
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 110,674 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 $)
9 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
August 2017 Convertible Note Offering [Member]
Sep. 30, 2017
Investor [Member]
Feb. 7, 2017
Unsecured Debt [Member]
Related Party [Member]
Jan. 25, 2017
Unsecured Debt [Member]
Related Party [Member]
Jan. 26, 2017
Unsecured Debt [Member]
Related Party [Member]
Mar. 17, 2017
Private Placement [Member]
Number
Feb. 22, 2017
Private Placement [Member]
Nov. 30, 2017
Subsequent Event [Member]
Settlement Agreement [Member]
Oct. 24, 2017
Subsequent Event [Member]
Settlement Agreement [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% 
 
 
 
Promissory notes due date
 
 
 
 
Feb. 07, 2018 
Apr. 14, 2017 
Nov. 22, 2017 
Sep. 01, 2017 
 
 
 
Proceeds from issuance of promissory note
555,000 
   
 
 
 
 
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
60,000 
 
 
 
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 
 
 
 
 
 
Capital
 
 
 
 
 
 
 
 
 
150,000 
150,000 
Short term debt
 
 
659,112 
 
 
 
 
 
 
 
 
Placement agent fees
49,420 
 
66,574 
 
 
 
 
 
 
 
 
Unpaid interest
 
 
24,876 
 
 
 
 
 
 
 
 
Warrant exercisable price per share
 
 
$ 0.20 
 
 
 
 
 
 
 
 
Offering of gross proceeds
 
 
$ 1,954,918 
 
 
 
 
 
 
 
 
Warrants issued to purchase shares
 
 
579,969 
13,070,148