JERRICK MEDIA HOLDINGS, INC., 10-Q filed on 11/20/2017
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2017
Nov. 14, 2017
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
Jerrick Media Holdings, Inc. 
 
Entity Central Index Key
0001357671 
 
Trading Symbol
JMDA 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Document Type
10-Q 
 
Document Period End Date
Sep. 30, 2017 
 
Document Fiscal Period Focus
Q3 
 
Document Fiscal Year Focus
2017 
 
Entity Filer Category
Smaller Reporting Company 
 
Entity Common Stock, Shares Outstanding
 
39,520,682 
Condensed Consolidated Balance Sheet (USD $)
Sep. 30, 2017
Dec. 31, 2016
Current Assets
 
 
Cash
$ 94,678 
$ 174,494 
Prepaid expenses
   
10,000 
Total Current Assets
94,678 
184,494 
Property and equipment, net
43,618 
71,829 
Security deposit
38,445 
38,445 
Minority investment in business
83,333 
83,333 
Total Assets
260,074 
378,101 
Current Liabilities
 
 
Accounts payable and accrued liabilities
1,318,390 
1,387,068 
Accrued dividends
414,144 
259,170 
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 
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 
Total Current Liabilities
6,050,038 
3,544,996 
Non-current Liabilities:
 
 
Capital lease payables
   
1,208 
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 
Total Liabilities
8,041,156 
3,546,204 
Commitments and contingencies
   
   
Stockholders' Deficit
 
 
Common stock par value $0.001: 300,000,000 shares authorized; 39,520,682 and 33,894,592 issued and outstanding as of September 30, 2017 and December 31, 2016 respectively
39,521 
33,895 
Additional paid in capital
11,379,493 
10,075,941 
Accumulated deficit
(19,200,135)
(13,277,981)
Total stockholders' deficit
(7,781,082)
(3,168,103)
Total Liabilities and Stockholders' Deficit
260,074 
378,101 
Series A Preferred stock
 
 
Stockholders' Deficit
 
 
Preferred stock value
31 
33 
Series B Preferred stock
 
 
Stockholders' Deficit
 
 
Preferred stock value
Series D Preferred stock
 
 
Stockholders' Deficit
 
 
Preferred stock value
    
$ 1 
Condensed Consolidated Balance Sheet (Parenthetical) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
300,000,000 
300,000,000 
Common stock, shares issued
39,520,682 
33,894,592 
Common stock, shares outstanding
39,520,682 
33,894,592 
Series A Preferred stock
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares issued
31,581 
33,314 
Preferred stock, shares outstanding
31,581 
33,314 
Series B Preferred stock
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares issued
8,063 
8,063 
Preferred stock, shares outstanding
8,063 
8,063 
Series D Preferred stock
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares issued
914 
Preferred stock, shares outstanding
914 
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Income Statement [Abstract]
 
 
 
 
Net revenue
$ 11,244 
$ 16,389 
$ 105,345 
$ 201,029 
Cost of revenue
   
   
   
43,321 
Gross margin
11,244 
16,389 
105,345 
157,708 
Operating expenses
 
 
 
 
Compensation
444,675 
391,008 
1,536,082 
1,104,447 
Consulting fees
561,486 
324,985 
903,056 
839,992 
General and administrative
412,226 
233,033 
1,048,979 
780,890 
Total operating expenses
1,418,387 
949,026 
3,488,117 
2,725,329 
Loss from operations
(1,407,143)
(932,637)
(3,382,772)
(2,567,621)
Other income (expenses)
 
 
 
 
Interest expense
(228,120)
(61,382)
(372,825)
(4,458,996)
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 
Other income (expenses), net
(1,502,376)
(106,729)
(2,379,698)
(4,520,317)
Loss before income tax provision
(2,909,519)
(1,039,366)
(5,762,470)
(7,087,938)
Income tax provision
   
   
   
   
Net loss
$ (2,909,519)
$ (1,039,366)
$ (5,762,470)
$ (7,087,938)
Per-share data
 
 
 
 
Basic and diluted loss per share
$ (0.07)
$ (0.03)
$ (0.15)
$ (0.23)
Weighted average number of common shares outstanding
39,469,670 
32,359,841 
38,343,241 
31,489,608 
Consolidated Statements of Cash Flows (Unaudited) (USD $)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
Net loss
$ (5,762,470)
$ (7,087,938)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation
28,211 
31,717 
Accretion of debt issuance costs
234,989 
   
Accretion of debt discount
1,790,495 
95,746 
Share-based compensation
751,215 
360,220 
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)
Security deposit
   
(32,775)
Accounts payable and accrued expenses
489,329 
368,298 
Accrued liquidating damages
   
4,346,490 
Net Cash Used In Operating Activities
(2,476,844)
(1,928,242)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
Cash paid for property and equipment
   
(43,956)
Net Cash Used In Investing Activities
   
(43,956)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
Repayment of loans
   
(107,415)
Net proceeds from issuance of notes
1,141,585 
106,000 
Repayment of notes
(100,000)
   
Net proceeds from issuance of preferred stock
   
344,248 
Proceeds from issuance of demand loan
   
86,866 
Proceeds from issuance of convertible note
1,066,500 
50,000 
Repayment of convertible notes
(477,777)
(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 
Repayment of note payable - related party
(120,000)
   
Proceeds from issuance of line of credit - related party
130,000 
   
Repayment of line of credit
(125,324)
   
Cash paid for debt issuance costs
(151,956)
   
Net Cash Provided By Financing Activities
2,397,028 
1,539,699 
Net Change in Cash
(79,816)
(432,499)
Cash - Beginning of Period
174,494 
438,629 
Cash - End of Period
94,678 
6,130 
Cash Paid During the Year for:
 
 
Income taxes
   
   
Interest
3,534 
   
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
Settlement of vendor liabilities
353,732 
   
Conversion of interest
   
108,843 
Debt discount on convertible note
646,212 
24,425 
Debt discount on related party note payable
13,627 
188,852 
Debt discount on note payable
5,683 
   
Accrued dividends
159,684 
132,545 
Warrants at issuance of debt
1,542,523 
   
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
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.

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

Note 2 - Significant and Critical Accounting Policies and Practices

 

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

 

Basis of Presentation

 

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

 

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

 

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

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

 

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

   

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

 

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

 

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

 

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

 

Actual results could differ from those estimates.

 

Principles of consolidation

 

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

 

As of 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.

Going Concern
Going Concern

Note 3 – Going Concern

 

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

 

As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit at 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.

Property and Equipment
Property and Equipment

Note 4 – Property and Equipment

 

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

 

  

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.

Line of Credit
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. 

Note Payable
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.

Convertible Note Payable
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.

Related Party Loan
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.

Capital Leases Payable
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 
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
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.

Subsequent Events
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.

Significant and Critical Accounting Policies and Practices (Policies)

Basis of Presentation

 

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

 

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

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

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

 

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

   

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

 

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

 

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

 

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

 

Actual results could differ from those estimates.

Principles of consolidation

 

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

 

As of 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  34,419,524   14,735,000 
Convertible notes  13,681,425   - 
Totals  65,850,939   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 (Tables)
Name of combined affiliate State or other jurisdiction of
incorporation or organization
 Company interest 
      
Jerrick Ventures LLC The State of Delaware 100%
  Estimated Useful
Life
(Years)
   
Computer equipment and software 3
Furniture and fixture 5

 

  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)
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
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)
   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 
2017: $3,524  $3,524 
2018:  1,208  $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)
  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
  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  Value  Purpose for Grant
 15,499,990  $681,246  Service Rendered
  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 
  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 
Organization and Operations (Details)
0 Months Ended
Feb. 5, 2016
Kent Campbell [Member]
 
Organization and Operations (Textual)
 
Issuance of common shares for cash
28,500,000 
Cancelled of common stock
781,818 
Jerrick Ventures, Inc. [Member] |
Series A Convertible Preferred Stock [Member]
 
Organization and Operations (Textual)
 
Issuance of common shares for cash
33,415 
Jerrick Ventures, Inc. [Member] |
Series B Convertible Preferred Stock [Member]
 
Organization and Operations (Textual)
 
Issuance of common shares for cash
8,064 
Significant and Critical Accounting Policies and Practices (Details) (Jerrick Ventures LLC [Member])
9 Months Ended
Sep. 30, 2017
Jerrick Ventures LLC [Member]
 
Name of combined affiliate
Jerrick Ventures LLC 
State or other jurisdiction of incorporation or organization
The State of Delaware 
Company interest
100.00% 
Significant and Critical Accounting Policies and Practices (Details 1)
9 Months Ended
Sep. 30, 2017
Computer equipment and software [Member]
 
Property and Equipment, Estimated Useful Life (Years)
3 years 
Furniture and fixture [Member]
 
Property and Equipment, Estimated Useful Life (Years)
5 years 
Significant and Critical Accounting Policies and Practices (Details 2)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
65,888,439 
16,785,000 
Convertible notes [Member]
 
 
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
13,681,425 
   
Options [Member]
 
 
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
17,749,990 
2,050,000 
Warrant [Member]
 
 
Loss Per Share [Line Items]
 
 
Common stock equivalents, total
34,457,024 
14,735,000 
Significant and Critical Accounting Policies and Practices (Details Textual) (USD $)
0 Months Ended 9 Months Ended
Jan. 2, 2013
Sep. 30, 2017
Sep. 30, 2016
Significant and Critical Accounting Policies and Practices (Textual)
 
 
 
Inventory markdown charges
 
$ 0 
$ 0 
Investments minority interest
$ 83,333 
 
 
Description of investments cost method equity method and joint venture
 
 
The Company holds 50% or less of the common stock or in-substance common stock.
Property and Equipment (Details) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 281,456 
$ 281,456 
Less: Accumulated Depreciation
(237,838)
(209,627)
Property and equipment, net
43,618 
71,829 
Computer Equipment [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
219,653 
219,653 
Furniture and Fixtures [Member]
 
 
Property, Plant and Equipment [Line Items]
 
 
Property and equipment, gross
$ 61,803 
$ 61,803 
Property and Equipment (Details Textual) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Property and Equipment (Textual)
 
 
 
 
Depreciation expense
$ 9,507 
$ 10,933 
$ 28,211 
$ 31,717 
Line of Credit (Details) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Line of credit outstanding balances
$ 119,246 
$ 235,141 
March 19, 2009 (Member)
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
Line of credit outstanding balances
119,246 
203,988 
October 4, 2016 (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 $)
1 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended
Aug. 21, 2017
Oct. 4, 2016
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Mar. 19, 2009
Revolving Note (Member)
Sep. 30, 2017
Revolving Note (Member)
Dec. 31, 2016
Revolving Note (Member)
Line of Credit (Textual)
 
 
 
 
 
 
 
 
 
 
 
Line of credit maximum outstanding balance
 
 
 
 
 
 
 
 
$ 200,000 
 
 
Line of credit facility, expiration date
 
 
 
 
 
 
 
 
Mar. 19, 2010 
 
 
Line of credit monthly interest rate during period
 
 
 
 
 
 
3.75% 
4.50% 
 
 
 
Line of credit
 
 
119,246 
 
119,246 
 
235,141 
 
 
119,246 
203,988 
Line of credit balance outstanding on revenue factoring agreement
 
 
 
 
31,153 
 
 
 
 
Company received proceeds from imperial advance, LLC
 
40,000 
 
 
130,000 
   
 
 
 
 
 
Agrees to pay for future receivable
9,368 
52,400 
 
 
125,324 
   
 
 
 
 
 
Gain on settlement of debt
 
 
$ 2,079 
    
$ 2,079 
    
 
 
 
 
 
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 9 Months Ended 1 Months Ended 9 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 9 Months Ended
Sep. 30, 2017
Dec. 15, 2017
Subsequent Event [Member]
Mar. 17, 2017
Subscription Agreements [Member]
Sep. 30, 2017
Subscription Agreements [Member]
Mar. 17, 2017
Private Placement Offering [Member]
Subscription Agreements [Member]
Sep. 30, 2017
Private Placement Offering [Member]
Subscription Agreements [Member]
Aug. 18, 2017
Loan Agreement [Member]
Jul. 21, 2017
Loan Agreement [Member]
Feb. 28, 2017
August 2017 Convertible Note Offering [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering [Member]
Sep. 30, 2017
February 2017 Offering Note [Member]
Feb. 28, 2017
February 2017 Offering Note [Member]
Note Payable (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
Promissory note
$ 60,000 
 
 
 
$ 1,000,000 
 
$ 50,000 
$ 100,000 
 
$ 500,000 
 
 
Maturity date
 
 
 
 
Sep. 01, 2017 
 
Oct. 02, 2017 
 
 
 
Sep. 01, 2017 
 
Interest rate
 
18.00% 
6.00% 
 
6.00% 
 
15.00% 
10.00% 
15.00% 
 
 
15.00% 
Warrants purchase of common stock
 
 
 
 
 
 
 
100,000 
 
 
 
 
Warrant exercisable price per share
 
 
 
 
 
$ 0.20 
 
$ 0.20 
 
$ 0.20 
 
$ 0.20 
Warrant term
 
 
 
 
 
 
 
5 years 0 months 0 days 
 
 
 
 
Aggregate principal amount
 
 
975,511 
 
975,511 
 
 
 
 
 
 
575,511 
Aggregate gross proceeds of common stock
 
 
$ 916,858 
 
$ 916,858 
 
 
 
$ 400,000 
 
 
 
Notes conversion description
 
 
 
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 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.
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 
 
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 3 Months Ended 9 Months Ended 9 Months Ended 0 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Sep. 13, 2017
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Sep. 30, 2017
Three Investor [Member]
Sep. 13, 2017
Three Investor [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 [Member]
Warrants [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering [Member]
Three Investor [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering One [Member]
Convertible Note Payable (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible note
 
 
 
 
 
 
 
 
 
$ 100,000 
$ 400,000 
$ 121,500 
$ 400,000 
 
 
 
 
 
 
 
 
 
 
Interest rate
 
 
 
 
 
 
 
 
 
10.00% 
10.00% 
12.00% 
10.00% 
 
8.50% 
 
 
 
 
15.00% 
 
 
 
Maturity date
 
 
 
 
 
 
 
 
 
Dec. 27, 2017 
Nov. 01, 2017 
Sep. 01, 2017 
Dec. 29, 2017 
 
Apr. 18, 2018 
 
 
 
 
 
 
 
 
Conversion price per share
 
 
 
 
 
 
 
 
 
$ 0.30 
 
 
 
 
 
 
 
 
 
 
 
 
 
Offering of gross proceeds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,954,918 
 
 
 
2,104,938 
Warrant term
 
 
 
 
 
 
 
 
 
5 years 
5 years 
5 years 
5 years 
 
5 years 
 
 
 
 
 
 
 
 
Convertible notes payable outstanding balance
 
(1,940,111)
 
(1,940,111)
 
(500,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less: Debt Discount
 
(177,971)
 
(177,971)
 
(184,398)
52,743 
 
 
 
 
 
 
 
 
 
 
138,180 
138,180 
 
 
 
 
Debt issuance costs
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101,561 
 
 
Warrants issued
 
 
 
2,500,000 
 
 
778,750 
 
 
100,000 
400,000 
102,550 
400,000 
 
245,000 
 
 
 
2,064,466 
 
4,377,826 
2,525,000 
 
Proceeds from issuance of convertible notes
 
 
 
555,000 
   
 
 
 
 
 
 
 
 
 
450,000 
 
 
 
 
 
 
 
 
Warrants issued to purchase shares
 
 
 
 
 
 
13,070,148 
 
 
 
 
 
 
 
778,750 
 
 
579,969 
579,969 
 
 
 
 
Warrants, Exercise Price
 
 
 
 
 
 
 
 
 
$ 0.40 
$ 0.30 
$ 0.20 
$ 0.30 
 
$ 0.20 
 
 
$ 0.20 
$ 0.20 
 
 
 
 
Principal amount of convertible notes
 
 
 
 
 
 
 
606,812 
100,000 
 
 
200,000 
 
 
 
 
 
500,000 
500,000 
 
 
 
 
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. 
 
 
 
 
 
 
 
 
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 August 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 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 
 
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
Related Party Transaction [Line Items]
 
 
Convertible notes payable - related parties gross
$ 942,893 
    
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 
   
April 25, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Convertible notes payable - related parties gross
   
   
Interest Rate
12.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants Quantity
17,500 
 
Warrants Exercise Price
$ 0.20 
 
April 25, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Convertible notes payable - related parties gross
(25,000)
   
Interest Rate
12.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants Quantity
17,500 
 
Warrants Exercise Price
$ 0.20 
 
August - September 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Convertible notes payable - related parties gross
$ (917,893)
 
Interest Rate
15.00% 
 
Warrants Quantity
4,589,466 
 
Warrants Exercise Price
$ 0.20 
 
August - September 2017 [Member] |
Minimum [Member]
 
 
Related Party Transaction [Line Items]
 
 
Maturity Date
Aug. 31, 2019 
 
August - September 2017 [Member] |
Maximum [Member]
 
 
Related Party Transaction [Line Items]
 
 
Maturity Date
Sep. 30, 2019 
 
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]
 
 
Notes payable - related party, gross
   
   
Interest Rate
10.00% 
 
Maturity Date
Jan. 01, 2018 
 
Warrants Quantity
50,000 
 
Warrants Exercise Price
$ 0.30 
 
March 2, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
10,000 
   
Interest Rate
10.00% 
 
Maturity Date
Jan. 21, 2018 
 
Warrants Quantity
10,000 
 
Warrants Exercise Price
$ 0.30 
 
April 12, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
   
   
Interest Rate
10.00% 
 
Maturity Date
Jan. 21, 2018 
 
Warrants Quantity
17,500 
 
Warrants Exercise Price
$ 0.20 
 
April 12, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
10,000 
   
Interest Rate
10.00% 
 
Maturity Date
Sep. 01, 2017 
 
Warrants Quantity
17,500 
 
Warrants Exercise Price
$ 0.20 
 
May 4, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
   
   
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. 27, 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]
 
 
Notes payable - related party, gross
   
 
Interest Rate
12.00% 
 
Maturity Date
Nov. 01, 2017 
 
Warrants Quantity
   
 
Warrants Exercise Price
   
 
September 8, 2017 [Member]
 
 
Related Party Transaction [Line Items]
 
 
Notes payable - related party, gross
$ 224,000 
 
Interest Rate
   
 
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 0 Months Ended 0 Months Ended 3 Months Ended 9 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. 8, 2017
September 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. 30, 2017
September 2017 Rosen Loan Agreement [Member]
Jun. 16, 2017
Line of Credit [Member]
May 25, 2017
Line of Credit [Member]
May 22, 2017
Line of Credit [Member]
May 16, 2017
Line of Credit [Member]
May 9, 2017
Line of Credit [Member]
Apr. 25, 2017
April Rosen Note [Member]
Apr. 25, 2017
April Gordon Notes [Member]
Sep. 30, 2017
April Gordon Notes [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
Investor [Member]
Sep. 30, 2017
Investor [Member]
August 2017 Convertible Note Offering [Member]
Related Party Loan (Textual)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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% 
 
12.00% 
 
 
 
 
 
 
12.00% 
12.00% 
 
 
 
 
15.00% 
 
 
Convertible notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 25,000 
$ 25,000 
 
 
 
 
 
 
 
Warrants issued
 
2,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,500 
17,500 
 
 
 
2,064,466 
 
778,750 
2,525,000 
Warrant purchase price
 
 
 
 
$ 0.40 
$ 0.20 
$ 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 
 
 
 
Convertible Notes - related party, net of debt discount
 
25,000 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
942,893 
 
 
 
 
 
 
Maturity date, description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net of debt discount
 
(278,436)
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
278,436 
 
 
 
 
 
 
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 
 
 
 
 
 
 
 
 
 
 
 
 
 
992,177 
992,177 
 
 
 
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 
 
 
 
 
 
 
 
Warrants issued to purchase shares
 
 
 
 
1,000,000 
1,650,000 
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 
 
 
 
 
 
 
 
 
 
 
 
579,969 
579,969 
 
13,070,148 
 
Maturity date
 
 
 
 
May 26, 2017 
Sep. 24, 2017 
 
Nov. 22, 2017 
Jan. 01, 2018 
Nov. 10, 2016 
Nov. 22, 2017 
Jan. 01, 2018 
 
 
Jan. 21, 2018 
Jan. 21, 2018 
Sep. 01, 2017 
Sep. 30, 2017 
Jan. 21, 2018 
Jul. 21, 2017 
Jul. 21, 2017 
 
 
 
 
 
 
 
Sep. 01, 2017 
Sep. 01, 2017 
 
 
 
 
 
 
 
Related party notes payable
 
1,659,000 
1,365,325 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt discount
 
 
94,675 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
127,594 
127,594 
 
 
161,552 
Line of credit borrow principal
130,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit interest rate, description
The LOC bears interest at a rate of 18%. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate principal amount
 
60,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,000 
35,000 
6,000 
30,000 
56,000 
 
 
 
 
500,000 
500,000 
 
 
 
Line of credit - related party
 
130,000 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 August 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 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"). 
 
 
 
Derivative liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
106,916 
106,916 
 
 
 
Promissory note
 
450,000 
25,000 
 
 
224,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25,000 
20,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes payable related party
 
$ 1,659,000 
$ 1,460,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Extending the May 2016 Rosen Maturity Date to November 26, 2017.
Capital Leases Payable (Details) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Capital Leases Payable [Abstract]
 
 
Capital lease obligation to a financing company for a term of five (5) years, collateralized by equipment, with interest at 10.0% per annum, with principal and interest due and payable in monthly installments of $383.10
$ 4,732 
$ 4,732 
Less current maturities
(4,732)
(3,524)
Capital lease obligation, net of current maturities
   
1,208 
TOTAL CAPITAL LEASE OBLIGATION
$ 4,732 
$ 4,732 
Capital Leases Payable (Details 1) (USD $)
Sep. 30, 2017
Dec. 31, 2016
Capital Leases Payable [Abstract]
 
 
2017
$ 3,524 
$ 3,524 
2018
$ 1,208 
$ 1,208 
Capital Leases Payable (Details Textual) (USD $)
9 Months Ended
Sep. 30, 2017
Capital Leases Payable (Textual)
 
Capital leases due amount
$ 383.10 
Capital leases interest per annum
10.00% 
Capital lease obligation term
5 years 
Derivative Liabilities (Details)
9 Months Ended
Sep. 30, 2017
Schedule of fair value of the derivative liability and warrant liability [Line Items]
 
Annual dividend rate
0.00% 
Expected life
5 years 
Low [Member] |
Derivative Liabilities [Member]
 
Schedule of fair value of the derivative liability and warrant liability [Line Items]
 
Annual dividend rate
0.00% 
Expected life
0 years 4 months 2 days 
Risk-free interest rate
1.14% 
Expected volatility
65.38% 
High [Member] |
Derivative Liabilities [Member]
 
Schedule of fair value of the derivative liability and warrant liability [Line Items]
 
Annual dividend rate
0.00% 
Expected life
5 years 
Risk-free interest rate
1.93% 
Expected volatility
92.96% 
Derivative Liabilities (Details 1) (USD $)
9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Level 1 [Member]
Sep. 30, 2017
Level 1 [Member]
Sep. 30, 2017
Level 2 [Member]
Sep. 30, 2017
Level 2 [Member]
Sep. 30, 2017
Level 3 [Member]
Dec. 31, 2016
Level 3 [Member]
Schedule of changes in derivative liabilities (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
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Expected dividends
0.00% 
 
Expected life of option
5 years 
 
Stock Options [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Expected dividends
0.00% 
0.00% 
Expected life of option
5 years 0 months 0 days 
 
Stock Options [Member] |
Minimum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.20 
$ 0.25 
Expected volatility
63.72% 
73.44% 
Risk free interest rate
1.74% 
1.00% 
Expected life of option
 
4 years 8 months 5 days 
Stock Options [Member] |
Maximum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.75 
$ 0.40 
Expected volatility
92.14% 
90.05% 
Risk free interest rate
2.10% 
1.39% 
Expected life of option
 
5 years 
Stockholders' Deficit (Details 1) (Stock Option [Member], USD $)
9 Months Ended
Sep. 30, 2017
Stock Option [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Options/Warrant, Outstanding
2,250,000 
Options, Granted
15,499,990 
Options, Exercised
   
Options, Cancelled/Modified
(100,000)
Options/Warrant, Outstanding
17,649,990 
Options, Exercisable
8,983,322 
Outstanding options held by related party
17,549,990 
Exercisable options held by related party
8,983,322 
Weighted Average Exercise Price, Outstanding
$ 0.34 
Weighted Average Exercise Price, Granted
$ 0.43 
Weighted Average Exercise Price, Exercised
   
Weighted Average Exercise Price Cancelled/Modified
$ 0.40 
Weighted Average Exercise Price, Outstanding
$ 0.42 
Weighted Average Exercise Price, Exercisable
$ 0.27 
Weighted Average Exercise Price Outstanding options held by related party
$ 0.42 
Weighted Average Exercise Price Exercisable options held by related party
$ 0.27 
Weighted Average Remaining Contractual Life (in years), Outstanding
4 years 4 months 17 days 
Weighted Average Remaining Contractual Life (in years), Granted
4 years 10 months 21 days 
Weighted Average Remaining Contractual Life (in years), Outstanding
4 years 9 months 7 days 
Weighted Average Remaining Contractual Life (in years), Exercisable
4 years 7 months 24 days 
Weighted Average Remaining Contractual Life (in years), Outstanding options held by related party
4 years 9 months 7 days 
Weighted Average Remaining Contractual Life (in years), Exercisable options held by related party
4 years 7 months 24 days 
Stockholders' Deficit (Details 2) (USD $)
9 Months Ended
Sep. 30, 2017
Stockholders' Deficit [Abstract]
 
Options
15,499,990 
Value
$ 681,246 
Purpose for Grant
Service Rendered 
Stockholders' Deficit (Details 3)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Expected dividends
0.00% 
 
Expected life of warrant
5 years 
 
Warrants [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.40 
 
Expected dividends
0.00% 
0.00% 
Expected volatility, minimum
62.63% 
73.44% 
Expected volatility, maximum
92.96% 
91.54% 
Risk free interest rate, minimum
1.64% 
1.13% 
Risk free interest rate, maximum
2.03% 
1.39% 
Expected life of warrant
5 years 
5 years 
Warrants [Member] |
Minimum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.20 
 
Warrants [Member] |
Maximum [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Exercise price
$ 0.30 
 
Stockholders' Deficit (Details 4) (Warrants [Member], USD $)
9 Months Ended
Sep. 30, 2017
Warrants [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
Options/Warrant, Outstanding
15,541,666 
Warrants, Granted
18,915,358 
Warrants, Exercised
   
Warrants, Forfeited/Cancelled
   
Options/Warrant, Outstanding
34,457,024 
Warrants, Exercisable
34,457,024 
Weighted Average Exercise Price, Outstanding
$ 0.36 
Weighted Average Exercise Price, Granted
$ 0.20 
Weighted Average Exercise Price, Exercised
   
Weighted Average Exercise Price, Forfeited/Cancelled
   
Weighted Average Exercise Price, Outstanding
$ 0.27 
Weighted Average Exercise Price, Exercisable
$ 0.27 
Stockholders' Deficit (Details 5) (Warrant [Member], USD $)
9 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Warrant [Member]
 
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
 
 
Warrants Outstanding, Exercise price, Minimum
$ 0.20 
 
Warrants Outstanding, Exercise price, Maximum
$ 0.40 
 
Warrants Outstanding, Number Outstanding
34,457,024 
15,541,666 
Warrants Outstanding, Weighted Average Remaining Contractual Life (in years)
3 years 11 months 19 days 
 
Warrants Outstanding, Weighted Average Exercise Price
$ 0.27 
$ 0.36 
Warrants Exercisable , Number Exercisable
34,457,024 
 
Warrants Exercisable, Weighted Average Exercise Price
$ 0.27 
 
Stockholders' Deficit (Details Textual) (USD $)
9 Months Ended 9 Months Ended 9 Months Ended 0 Months Ended 1 Months Ended 3 Months Ended 0 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended 12 Months Ended 1 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Sep. 30, 2017
Promissory Notes [Member]
Sep. 30, 2017
Promissory Notes [Member]
Placement Agent [Member]
Sep. 30, 2017
Convertible Notes Payable [Member]
Sep. 30, 2017
Convertible Notes Payable [Member]
Placement Agent [Member]
Sep. 30, 2017
Notes Payable Related Party [Member]
Sep. 30, 2017
Convertible notes payable related party [Member]
Feb. 1, 2017
Common Stock [Member]
Feb. 13, 2015
Common Stock [Member]
Jan. 30, 2017
Common Stock [Member]
Sep. 30, 2017
Stock Options [Member]
Sep. 30, 2016
Stock Options [Member]
Feb. 13, 2015
Series A Preferred Stock [Member]
Sep. 30, 2017
Series A Preferred Stock [Member]
Dec. 31, 2015
Series A Preferred Stock [Member]
Dec. 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, 2015
Series B Preferred Stock [Member]
Dec. 31, 2016
Series B Preferred Stock [Member]
Aug. 31, 2016
Series D Convertible Preferred Stock [Member]
Jan. 29, 2016
Series D Convertible Preferred Stock [Member]
Sep. 30, 2017
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 
 
 
 
 
 
Preferred stock, par value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.001 
 
$ 0.001 
 
$ 100.00 
$ 0.001 
 
$ 0.001 
 
$ 100 
 
 
Preferred stock, shares issued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31,581 
 
33,314 
 
 
8,063 
 
8,063 
 
 
 
0.001 
Preferred stock, shares outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31,581 
 
33,314 
 
 
8,063 
 
8,063 
 
 
 
 
Common stock, shares authorized
300,000,000 
 
300,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par value
$ 0.001 
 
$ 0.001 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares issued
39,520,682 
 
33,894,592 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding
39,520,682 
 
33,894,592 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Convertible notes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 800,000 
 
 
 
 
 
 
 
 
 
 
Convertible preferred stock, Shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100,000 
1,733 
8,914 
 
1,146,307 
20,000 
 
 
 
1,099 
2,100,000 
 
 
Aggregate intrinsic value of options outstanding
 
 
 
 
 
 
 
 
 
 
 
 
220 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate intrinsic value of options exercisable
 
 
 
 
 
 
 
 
 
 
 
 
220 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from the issuance of stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
700,000 
 
 
 
 
 
Stock-based compensation for stock options
 
 
 
 
 
 
 
 
 
 
 
 
560,794 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued for liquidating damages
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants associated value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.25 
 
 
 
 
$ 0.30 
 
 
 
 
$ 0.25 
 
Dividend rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6.00% 
 
 
 
 
6.00% 
 
 
 
 
 
 
Dividend, description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Upon the occurrence of an Event of Default (as defined below) and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series A Stated Value. At the Company's option, such dividend payments may be made in (i) cash (ii) additional shares of Series A valued at the Series A Stated Value thereof, in an amount equal to 150% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series A, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series A Preferred. 
 
 
 
 
Upon the occurrence of an Event of Default as defined below and while such Event of Default is outstanding, such dividend rate shall be increased to 15% per annum on the Series B Stated Value. At the Corporation's option, such dividend payments may be made in (i) cash (ii) additional shares of Series B valued at the Series B Stated Value thereof, in an amount equal to 100% of the cash dividend otherwise payable or (iii) a combination of cash and additional shares of Series B, provided there is not an existing current Event of Default on the date on which a dividend payment is payable, in which event the Holder entitled to receive such dividend may elect to receive such dividends in cash or additional shares of Series B Preferred. 
 
 
 
 
 
 
Beneficial ownership by holder and affiliates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4.99% 
 
 
 
 
4.99% 
 
 
 
 
4.99% 
 
Restricted stock issued during period
 
 
 
 
 
 
 
 
 
800,000 
133,333 
2,946,740 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants to purchase shares of common stock
 
 
 
 
487,756 
 
12,150 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of interest to series B preferred stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of interest to series B preferred stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of common stock to Series D preferred stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
266,325 
 
Warrants issued
 
 
 
5,811,360 
 
7,759,126 
 
255,500 
4,589,466 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants grant date fair value
 
 
 
1,104,731 
 
455,173 
 
23,437 
283,352 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Settlement of vendor liabilities
 
 
 
 
 
 
 
 
 
 
 
353,732 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on settlement of vendor liabilities
110,674 
   
 
 
 
 
 
 
 
 
 
110,674 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sale of preferred stock shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24,400 
 
 
 
 
 
 
 
 
 
 
Proceeds of preferred stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,450,000 
 
 
 
 
 
 
 
 
 
 
Accrued interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 91,400 
 
 
 
 
 
 
 
 
 
 
Subsequent Events (Details Textual) (USD $)
9 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2017
Investor [Member]
Sep. 30, 2017
August 2017 Convertible Note Offering [Member]
Nov. 30, 2017
Subsequent Events [Member]
Settlement Agreement [Member]
Oct. 24, 2017
Subsequent Events [Member]
Settlement Agreement [Member]
Subsequent Events (Textual)
 
 
 
 
 
Warrants issued to purchase shares
 
13,070,148 
579,969 
 
 
Offering of gross proceeds
 
 
$ 1,954,918 
 
 
Warrant exercisable price per share
 
 
$ 0.20 
 
 
Unpaid interest
 
 
24,876 
 
 
Placement agent fees
49,420 
 
66,574 
 
 
Short term debt
 
 
659,112 
 
 
Capital
 
 
 
$ 150,000 
$ 150,000